Mass leak. The departure of Western companies leaves the country orphaned of fast food companies such as McDonald’s or luxury firms such as Dior
Overall scared. This is the only way to describe the departure of dozens of Western companies from Russia. Every minute that passes, a new name joins a list that mixes luxury brands, such as Louis Vuitton, Chanel or Aston Martin, with others more within the reach of most, such as McDonald’s, H&M or Inditex. It is the toll that the country governed by Vladimir Putin is paying for the invasion of Ukraine. As if, from one week to the next, the Iron Curtain fell on the Russians again.
The boycott is widespread and is a serious blow on several fronts. In the first place is the merely economic, with the loss of investments, services, merchandise and jobs. And that some of the multinationals have assured that they will continue to pay the salaries of their employees. This is the case of LVMH, the largest conglomerate of luxury firms in the world, which last Monday announced that it was ceasing to operate in Russia. It brings together labels such as Louis Vuitton, Celine, Tiffany, Dior, Moêt Chandon… up to 75.
“But for how long? Because one thing is to maintain salaries and infrastructure for a few weeks and another is for the situation to drag on over time,” warns Massimo Certelli, professor of Economics at Deusto Business School. The expert points out another of the consequences of the sudden business flight: «It is a message to the Russian people, who are not receiving information about the conflict, its motives and consequences. If they see companies that have been around for many years leaving, they will realize that something is up. It’s symbolic.”
BY SECTORS OF ACTIVITY:
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Fashion.
Inditex, with 502 stores, employed 9,000 people. Its most popular brand there is Bershka, with 106 stores, followed by Pull&Bear, with 87. -
shipping companies
MSC and Maersk, the largest in the world, only carry food, medicine and humanitarian aid. Ocean Network Express and Hapag-Lloyd also do not operate. -
cars.
The main Western and Asian brands have frozen their production and export to a country where they sold 1.6 million cars in 2021. -
Others.
The flight of companies includes sectors such as technology -Apple, Ericsson or Nokia, for example-, banking and even the toymaker. Lego also says goodbye to Russia.
Two good examples are McDonald’s and Pepsi. The fast-food multinational, which has 62,000 workers in the country who will continue to be paid for the time being, opened its first restaurant in Moscow on January 31, 1990. Those were still Soviet times. It was an absolute apotheosis. 30,000 customers passed through the establishment on the first day. The chronicles say that the Muscovites were so used to the cold treatment of those who dedicated themselves to customer service until then that the friendliness of the McDonald’s staff scared them. So much so that those responsible asked the staff to smile less. In 1993, President Boris Yeltsin attended the opening of the second location.
The time of barter
Regarding Pepsi, which has frozen the activity of the soft drink factories but not the production of food, because it is “essential for citizens”, its presence in Russia goes back further in time. The drink arrived in the country in 1972, when PepsiCo began sending its bottles, as well as equipment to build factories. The first opened two years later in Novorossiysk, on the Black Sea coast. As foreign currency transactions were prohibited, the lots were acquired through barter, a method that was used for many years. In 1989, the multinational and the Soviet Government agreed to an exchange that is quite illustrative of the economic closure that the USSR was experiencing: thousands of liters of the drink arrived in the country in exchange for seventeen submarines and three disused warships, which the company sold as scrap. to get some liquidity in the operation.
Both cases illustrate how complicated it was for Western companies to establish themselves in the old Soviet Union. “The population will wonder why they are leaving now,” says Certelli, convinced that, with the fright of recent days, “Russia returns to the Soviet era.” The objective, therefore, is none other than to stir up the population and provoke social movements against the Kremlin.
The leak affects all sectors and both at the level of physical and online points of sale, something to which the blockade imposed by Visa, Mastercard and American Express contributes. The march of luxury firms is especially striking in a country where the oligarchy spends obscene amounts of money on this type of item. Stamps such as the aforementioned LVMH group -with 3,500 employees-, the Richemont conglomerate, which operates there with Montblanc, Buccellati, Chloé, Van Cleef & Arpels or Cartier, give up annual revenues of 7,000 million euros with their departure. The great Russian fortunes will not be able to buy BMW, Mercedes-Benz, Jaguar Land Rover, Aston Martin or Harley-Davidson vehicles, whose flight joins Toyota, Mitsubishi, Honda, Volkswagen, Renault or Ford, which employs more than 4,000 Russians .
The less buoyant pockets, that is, the bulk of the population, will not have access to Pizza Hut, KFC, or H&M, Mango, Cortefiel or Inditex brands. Nor to Ikea furniture. The Swedish firm paid the payroll to 15,000 people. The list of emporiums saying goodbye to Russia, even temporarily, is huge. Most have promised to maintain salaries or to implement support plans and allocate large amounts of money to help the victims of the invasion of Ukraine, where many of these companies have also had to stop operating. There, of course, for other reasons.
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