By Elliott Brack
Editor and Publisher, GwinnettForum
May 24, 2022 | The Russian advancement against Ukraine has backfired, in more ways than one. First, it has exposed just how inefficient the Russian military is.
Secondly, it has caused “droves” of western countries, including many American firms, to pull out of their operations in Russia. Recent figures show more than 300 firms have exited Russia.
That includes Atlanta’s Coca Cola and its competitor, Pepsi Cola. Other well-known firm pulling out are giants of commerce such as McDonalds, Disney, Starbucks, Estee Lauder, Ikea, Mars Inc., Spotify, H&M Group, Yum Brands, Warner Bros, Expedia, Boeing, Adidas, Harley-Davidson, 3-M, Papa Johns, General Motors, Ford, Volvo, Daimler Truck Holdings, BP, Apple, Hermes, Chanel, Exxon Mobil, Shell, Caterpillar, Ferrari, Mercedes-Benz, Toyota, Volkswagen, Microsoft, Netflix, Oracle, Google, and the list goes on. The big four accounting firms, Deloitte, EY, KPMG and PwC, are all pulling out of Russia.
These companies have decided that it is too costly for them, perhaps in financial reality and in policy, to continue doing business with the aggressive Russian state.
Take McDonalds as an example.
McDonald’s started operations in Russia in 1990, bringing a major Western brand and logo—the Golden Arches—to Pushkin Square in Moscow. This was shortly after the fall of the Berlin Wall. This was the beginning of the arrival of many other American and worldwide consumer brands to Russia. The coming of these major segments of the Western world to a former communist dictatorship would be another signal of hope that perhaps the Cold War was no more.
Over the years, McDonalds, just as in America, has become a staple in many Russian communities. It had grown to employing 62,000 people in Russia, operating 850 restaurants. (Worldwide, McDonalds has 39,000 restaurants in 100 countries.)
Russia (in green)
While many companies are simply closing down operations, the French carmaker Renault has fashioned another way to limit operations in Russia. This automaker is selling its 68 percent of its operations in Russia to an automotive research institute for reportedly one dollar. Renault reserved the right to at some future date to buy back its stake within six years, presumably for that same dollar.
Renault seems to be saying: “We’re leaving now, but will be happy to return” when Russia either reforms, or perhaps gives up on Ukraine. It’s certainly an unusual and distinctive way for a private company to make a statement about the Ukraine invasion.
Also interesting is that the list of firms leaving Russia includes Pepsi Cola, the first American company to open a plant in Russia before anyone else, way back in 1974.
It all started when Pepsi was eager to enter the Russian market, especially since its key competitor, Coca-Cola, was not active there. It got a boost at a U.S. national exhibition in 1959, when a Pepsi official asked vice president Richard Nixon to help him “get a Pepsi in (Nikita) Khrushchev’s hands.”
The resulting photo was the beginning of a long relationship between Russia and Pepsi. It wasn’t until 1972 that Pepsi became the first capitalistic brand produced in the Soviet Union. It was a costly treat for Russians, used to paying 10 kopecks for bottled drinks, where Pepsi cost 45 kopecks. But you got 10 kopecks back when you returned the bottle.
You wonder if the resulting pullback by Western private companies from Russia was a surprise to President Putin. We bet it was.
- Have a comment? Send to: elliott@brack.net
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