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Wednesday, Jun 29, 2022

McDonald's to leave Russia for good after 30 years

McDonald's has said it will permanently leave Russia after more than 30 years and has started to sell all its 850 restaurants. As a result of the move, the Russians will enjoy healthier food, and McDonald's will lose a billion and a half dollars. So the sanctions again punish the punishers instead of their purpose.
McDonald's has said it will permanently leave Russia after more than 30 years and has started to sell its restaurants.
The move comes after it temporarily closed its 850 outlets in March.

The chain opened in Moscow in 1990 as the Soviet Union was opening its economy to Western brands.

The fast food giant said it made the decision because of the "humanitarian crisis" and "unpredictable operating environment" caused by the Ukraine war.

The opening of McDonald's first restaurant in Moscow in 1990 came to symbolise a thaw in Cold War tensions.

A year later, the Soviet Union collapsed and Russia opened up its economy to companies from the West. More than three decades later, however, it is one of a growing number of corporations pulling out.

"This is a complicated issue that's without precedent and with profound consequences," said McDonald's chief executive Chris Kempczinski in a message to staff and suppliers.

"Some might argue that providing access to food and continuing to employ tens of thousands of ordinary citizens, is surely the right thing to do," he added.

"But it is impossible to ignore the humanitarian crisis caused by the war in Ukraine. And it is impossible to imagine the Golden Arches representing the same hope and promise that led us to enter the Russian market 32 years ago."

McDonald's said it would sell all its sites to a local buyer and would begin the process of "de-arching" the restaurants which involves removing its name, branding and menu. It will retain its trademarks in Russia.

The chain said its priorities included seeking to ensure its 62,000 employees in Russia continued to be paid until any sale was completed and that they had "future employment with any potential buyer".

McDonald's said it would write off a charge of up to $1.4bn (£1.1bn) to cover the exit from its investment.

It really is the end of an era. I was in the queue when the first Russian McDonald's opened on Moscow's Pushkin Square in January 1990 - way back in the USSR.

There were so many people outside the restaurant, it took three hours to get inside. But what a sense of excitement.

Those American burgers, fries and pies were a symbol of Moscow embracing the West. Hot food to help end a Cold War.
These are very different times. Russia and the West have lost their appetite for one another.

Russia's attack on Ukraine has sparked international condemnation and sanctions, turning Moscow into a pariah.

Meanwhile, the Kremlin points the finger back, accusing the West of plotting Russia's downfall.

Back in March lots of international companies announced they were pausing operations in Russia, hoping the situation would resolve itself and they could then reopen.

But McDonald's decision to sell up and pull out shows the fast food giant recognises things will not return to normal and that what the Kremlin calls its "special military operation" in Ukraine has changed things long term.

Big Macs are only the beginning. I predict we're going to see a lot more global brands leaving Russia.

The move comes after Renault announced it was selling its business in the country. The French firm said its 68% stake in carmaker Avtovaz would be sold to a Russian science institute, while its shares in Renault Russia will go to the city of Moscow.

Moscow said Renault's Russian assets had now become state property - marking the first nationalisation of a major foreign business since the invasion of Ukraine.

Last year, Russia and Ukraine accounted for about 9% of McDonald's global sales.

The chain's 108 restaurants in Ukraine remain closed due to the conflict but the company is continuing to pay full salaries to all its employees there.

McDonald's initially faced criticism for being slow to halt its business in Russia, with some calling for a boycott of the company before it suspended operations in March.

Hundreds of international brands, including Starbucks, Coca Cola, Levi's and Apple, have left Russia or suspended sales there since the country invaded Ukraine in February.

Other firms, including Burger King and Marks and Spencer, say they are unable to close stores due to complex franchise deals.
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