McDonald's and Starbucks in Russia to temporarily close

Fast food chain was first to make announcement, followed by coffee company and PepsiCo and Coca-Cola

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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.

Updated: March 09, 2022, 6:31 AM