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McDonald's said on Tuesday it would temporarily close all 847 of its restaurants in Russia, increasing pressure on other global brands to pause operations in the country following Moscow's invasion of Ukraine.
Starbucks followed suit on Tuesday, and PepsiCo and Coca-Cola announced their halt of sales apart from essential goods.
Yum Brands, behind KFC and Pizza Hut, also said it was suspending investment in Russia.
The closure of the McDonald’s restaurants holds particular significance for Russia, where the first shop to open in central Moscow in 1990 became a symbol of flourishing American capitalism as the Soviet Union fell.
McDonald's said it would continue to pay salaries to its 62,000 employees in Russia.
Because of its large size and global reach, the chain is often copied by other companies if it takes a stance on an issue or makes a major operational change.
“If they decide to do something, then probably others will follow,” said international franchise consultant William Edwards.
Major global brands, including McDonald's and Pepsi, have been pressured to pause operations in Russia by bodies including the New York state's pension fund. Russia calls its actions in Ukraine a “special operation".
Coffee company Starbucks said on Tuesday that it is suspending all business activity in Russia, including shipments of its products and cafes run by licencees.
The company said that Kuwait-based Alshaya Group, which operates at least 100 Starbucks cafes in Russia, will "provide support to the nearly 2,000 partners in Russia who depend on Starbucks for their livelihood".
Yum Brands, parent company of fried chicken chain KFC, is pausing investment in Russia, a key market that helped the brand achieve record development last year, the company said.
The company has at least 1,000 KFC and 50 Pizza Hut shops in Russia that are nearly all run by independent franchisees.
It said in a post on its website dated Monday that it had "suspended all investment and restaurant development in Russia while we continue to assess additional options".
Coca-Cola Co and PepsiCo said on Tuesday they were suspending sales of their sodas in Russia.
Coca-Cola said its business in Russia and Ukraine contributed about 1 to 2 per cent of the company's net operating revenue in 2021.
PepsiCo, whose colas were one of the few western products allowed in the Soviet Union before its collapse, said it would continue to sell daily essentials, such as milk and other dairy offerings, baby formula and baby food, in Russia.
McDonald's opened in Pushkin Square 32 years ago as the Soviet Union was collapsing. That new restaurant represented the thawing Cold War tension at a time when some young Russians were desperate to buy blue jeans and other Americana.
“It's impossible to predict when we might be able to reopen our restaurants in Russia,” McDonald's chief executive Chris Kempczinski said in a note sent to staff on Tuesday and posted on the company's website.
“We are experiencing disruptions to our supply chain along with other operational impacts. We will also closely monitor the humanitarian situation.”
Of its nearly 850 Russian shops, 84 per cent are owned by the company and the rest are run mostly by one Moscow-based franchisee, Rosinter Restaurants Holding.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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