Russian for the Exits

March 9, 2022

American food companies scramble to get out of Russia.

It seems that some American and other Western food companies have been hit with fallout from Russia’s invasion of Ukraine.

PepsiCo, Coca-Cola, Danone, Yum Brands and Starbucks are among the food & beverage processors and retailers who have cut back on their Russian operations if not curtailed them entirely. Some of these announcements are more impactful than others. McDonald’s is closing, at least temporarily, all of its 847 Russian locations; Yum is closing the 75 KFC locations it owns in Russia, but about a thousand (!) others, owned by franchisees, will keep operating.

Perhaps the company with the most to lose is PepsiCo. Its purchase of Wimm-Bill-Dann, a dairy company, for $5 billion about 10 years ago made it Russia’s biggest food processing company. PepsiCo got $3.4 billion in revenue from Russia in 2021, although to put that in perspective, it was down from $4.9 billion in 2013 – and not much of that is profit.

Nevertheless, PepsiCo is in a pickle, no doubt about it. Its CEO, Ramon Laguarta, emailed staff that he doesn’t want to just shut the Russian operations down because of their tens of thousands of employees, and because Russians need the milk and baby formula that PepsiCo’s operations produce.

While I sympathize with Laguarta and his company up to a point, I can’t help thinking that this is part of the cost of doing business in dictatorships. Dictators have a way of turning their countries into pariahs, sometimes gradually, sometimes faster. As I’ve said before, if you dance with the devil, you’ll smell like brimstone.

And for anyone who does manage to turn a profit in Russia: I hope there are lots of things you want to buy there. You sure won’t be able to use those rubles anywhere else.