After 15 years of doing business on Russian soil, Starbucks Corporation (NASDAQ: SBUX) will be joining companies like British American Tobacco, Exxon Mobil and McDonald’s in withdrawing from the Russian market.
The coffee conglomerate announced on Monday that it won’t be present in the country any longer. The company has about 130 locations in Russia, which represent no more than one percent of its total annual revenue. All the locations are licensed, meaning Starbucks didn’t have to operate them themselves.
Early year pause of business operations
In March, the company claimed that its licensed partner was willing to pause operations immediately at all the 130 locations in Russia. Now, Starbucks has decided to end all brand presence meaning no more Starbucks coffee in Russia. Starbucks will pay almost 2,000 employees for about half a year and will assist in job transition processes as well.
In March, Kevin Johnson, the former Chief Executive Officer, wrote to colleagues saying:
We condemn the unprovoked, unjust and horrific attacks on Ukraine by Russia, and our hearts go out to all those affected. The invasion and humanitarian impact of this war are devastating and create a ripple effect that is felt throughout the world.
The pressure to cease operations
Both investors and consumers alike pressured many Western-based corporations such as Starbucks to sever their business ties with the soviet nation to show they oppose the unjustified attack on Ukraine. However, it takes time to unwind license deals.
Starbucks had already suspended operations in the country earlier this year. The suspension included temporarily closing cafes and pausing the shipping of Starbucks products.
In the company’s latest quarterly financial results, Starbucks didn’t mention how the suspension financially impacted business operations. Kevin Johnson, former Chief Executive Officer, pledged to donate the royalties received from the Russian market to humanitarian causes.
Starbucks said that the suspension in March led to a loss of about $127 million in the first quarter.
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