Starbucks will Exit Russia, Close 130 Cafes

Published: May 24, 2022
Updated: May 24, 2022
Starbucks will Exit Russia, Close 130 Cafes

Starbucks exits Russia, closes 130 cafes

Starbucks announced its exit from the Russian market on Monday, joining the likes of McDonald’s, ExxonMobil, and Netflix in leaving the nation following its invasion of Ukraine. According to CNBC, the coffee giant has 130 stores in Russia, which account for less than 1% of its yearly revenue.

Starbucks will leave Russia after 15 years in business, joining firms such as McDonald’s, Exxon Mobil, and British American Tobacco in totally exiting the nation.

On Monday, the coffee behemoth declared that it will no longer have a presence in Russia. Starbucks has 130 outlets around the country, accounting for less than 1% of its yearly revenue. The Seattle-based corporation does not operate any of the outlets because they are all licensed.

Starbucks will Exit Russia, Close 130 Cafes

Starbucks has announced that it will pay roughly 2,000 Russian employees for six months and assist them in finding new jobs outside of the company.

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Consumers and investors have pressed Western corporations like Starbucks to terminate connections with Russia in protest of the Kremlin’s war in Ukraine, but licensing agreements take time to unwind. Since March 8, Starbucks has ceased all operations in the country. All Starbucks goods were briefly halted, and locations were temporarily closed.

The financial impact of the suspension of commercial operations was not disclosed in the company’s most recent quarterly results, which were announced in early May. Kevin Johnson, the company’s former CEO, promised to give royalties from the Russian business for humanitarian purposes.

However, it was undoubtedly a smaller financial setback than the one suffered by McDonald’s, which has been in Russia for almost 30 years.

Starbucks will Exit Russia, Close 130 Cafes

The suspension of its large Russian and Ukrainian operations cost the fast-food behemoth $127 million in the first quarter. In 2021, the two markets accounted for 9% of the company’s sales. In Russia, the company had about 850 restaurants, the majority of which were run by the corporation rather than licensees.

McDonald’s stated on Thursday that it will sell those stores to a Siberian franchisee for an undisclosed fee and that they would be rebranded.

Starbucks has 130 locations in Russia, run by its licensee Alshaya Group, and employs over 2,000 people there.

Starbucks’ decision to close its Russian operations differs from those of some other international firms.

Last week, McDonald’s announced that it would sell its restaurants in Russia to local licensee Alexander Govor, who will rebrand them under a new name while keeping the McDonald’s trademarks, and that Renault (RENA.PA) would sell its majority stake in Russia’s largest carmaker with the option to buy it back.

Other Western firms, such as Imperial Brands (IMB.L) and Shell (SHEL.L), are severing links with the Russian market by agreeing to sell or transfer over their holdings in the nation to local managers.

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Following Moscow’s invasion of Ukraine in March, Starbucks closed its locations and ceased all business activities in Russia, including shipments of its products to the nation.

The company stated it will continue to support its employees in Russia, including paying them for six months.

Starbucks did not share financial information regarding the exit. McDonald’s has previously stated that it will incur a non-cash charge of up to $1.4 billion.

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