Starbucks Permanently Pulls Out Of One Major Business Market
Following suit with other western business conglomerates, Starbucks has elected to permanently cease operations in one market.
Starbucks is a worldwide sensation, operating in countries all over the globe. But after 15 years, the coffee company is shutting down its 130 locations in Russia. Starbucks joins other major corporations like McDonald’s, Exxon Mobil, and British American Tobacco, who decided to remove their services after the start of Russia’s invasion of Ukraine.
Even though there are 130 locations in Russia, it only makes up less than 1% of Starbucks’ total revenue. The shutdown of the locations will occur soon, but the employees will be paid out accordingly. The 2,000 employees at the Russian Starbucks locations will be given six months’ pay and direction to other vocational opportunities outside the company. Since the residents of Russia are not responsible for the senseless war, it’s only ethical for a giant company to aid the employees financially as each store transitions to closing.
Major corporations in Western countries have banded together to oppose the Russian attack on Ukraine. Since the war’s inception, investors and shareholders have pressured Starbucks to close down its stores in the Slovac country. Since each store is individually licensed, it will take time for the Starbucks locations to shut down completely. But since the invasion began on March 8th, Starbucks has suspended current business activity with Russia. This suspension also included shipments to Russia of Starbucks products, which created massive delays for the 130 stores in the country.
Starbucks released its latest quarterly earnings this week but didn’t disclose the monetary impact of its business postponement with Russia. Though Russia’s stores make up a small factor of the company’s revenue, most international businesses have been affected negatively by the geopolitical turmoil in the East. It would make sense for Starbucks also to be impacted financially by the senseless war. Starbucks’ former CEO, Kevin Johnson, pledged to give royalties from the Russian Starbucks locations to local humanitarian groups aiding victims of the war.
Large international corporations with extensive ties to the Slovac country have felt a more profound financial impact. McDonald’s, operating in Russia for the past 30 years, decided to close its 800 stores in mid-March. The fast-food chain employs more than 62,000 employees in Russia, and leaving them behind is no easy decision. The employees there will be continually paid until the stores have been sold. Though McDonald’s is closing its stores in Russia for ethical reasons, similar to Starbucks, it will reportedly lose a whopping $127 million from its departure.
For McDonald’s, losing stores in Ukraine and Russia has immensely impacted the company. Those stores accounted for 9% of the fast-food chain’s total revenue. Abandoning those Eastern countries will leave a mark on McDonald’s overall sales in the upcoming quarter. Starbucks and McDonald’s will continue paying their employees until the individually licensed stores are sold to new owners.
As many international corporations remove their stores and headquarters from Russia, further pressure is put on the Russian government to retract their soldiers from Ukrainian territory. Though companies like Starbucks are missing out on valuable customers, executives and investors believe that closing their stores is the ethical thing to do in this geopolitical moment.
