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Ukraine Conflict : How Brands are Responding

Global brands including Coca-Cola and McDonald’s have now suspended operations in Russia, while three in four advertisers have reduced or cut ad spend since the war began.

The list of companies refusing to trade in Russia is growing by the day. After facing growing criticism from consumers, many brands, including McDonald’s and Coca-Cola, have this week suspended operations in the country and publicly condemned the attack on Ukraine.

Advertisers are also cutting ad spend in the region. A poll by the World Federation of Advertisers (WFA) of 31 global brand owners representing $43bn (£32.7bn) in global ad spend, shows three in four have reallocated, reduced or cut advertising investment in Russia since the invasion started.

The WFA is now urging brands to “carefully review and reconsider” their media and marketing investments in the country, especially with media outlets that are close to or effectively part of the Russian administration. Russian television network RT is funded and controlled by the state, for example.

“In light of the horrifying events in Ukraine, the global marketing industry must speak out,” says WFA CEO Stephan Loerke.

“Every company will have to make its own decision, but our recommendation is that media investment and marketing in Russia should end for now.”

The WFA says it will continue to work with members and partners in the Global Alliance for Responsible Media (GARM) to ensure advertising investment does not support or monetise misinformation at this time.

FMCG giants P&G and Unilever have already said they will halt all media and advertising spend in Russia across their portfolios of brands.

On Tuesday, Unilever released a statement condemning the war in Ukraine as a “brutal and senseless act by the Russian state” and CEO Alan Jope confirmed the FMCG giant had suspended all imports and exports of its products in and out of Russia.

“We will not invest any further capital into the country nor will we profit from our presence in Russia,” Jope said. “We will continue to supply our everyday essential food and hygiene products made in Russia to people in the country. We will keep this under close review.”

Unilever had already paused operations in Ukraine to focus on the safety of its employees and their families, donating €5m (£4.1m) of essential products to the humanitarian relief effort.

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Likewise, P&G has suspended all media and advertising in Russia, as well as discontinuing all capital investments. It is also “significantly reducing” its product portfolio to focus on basic health, hygiene and personal care items and says it will “continue to adjust” the scale of its Russian operations as necessary.

Jon Moeller, P&G’s president and CEO, said: “Our hearts go out to all people who endure the unspeakable human toll of war and we condemn aggression in any circumstance.”

P&G suspended its operations in Ukraine to help protect its people locally. It is offering evacuation assistance, and financial and logistical support, we well as providing food, shelter and essential products to P&G staff in the country.

Brands urged to suspend Russian operations

At the same time, global brands including Coca-Cola and McDonald’s were facing growing criticism for not pulling out of Russia. The hashtags #BoycottMcDonalds and #BoycottCocaCola were both trending on Twitter at the beginning of week.

On Tuesday, McDonald’s confirmed it would temporarily close its 847 restaurants in Russia in response to the “needless human suffering” taking place in Ukraine.

CEO Chris Kempczinski described the situation as “extraordinarily challenging” for a global brand and said there were many considerations to take into account. The chain employs 62,000 people in Russia, who McDonald’s said have “poured their heart and souls” into the brand, alongside hundreds of local suppliers and partners. The chain has operated in the country for more than 30 years.

McDonald’s said it will continue to pay full salaries for its Ukrainian and Russian employees, and has donated $5m (£3.8m) to its employee assistance fund. The company owns most of its outlets in Russia and combined with Ukraine, these locations account for around 9% of revenue and about 2% of global sales, the BBC reports. All the chain’s 108 Ukrainian restaurants are temporarily closed.

Coca-Cola also came under mounting pressure to take a stand after previously refusing to pull out of Russia. Following calls of a boycott, the drinks giant suspended its business in the region and said its “hearts are with the people who are enduring unconscionable effects from these tragic events in Ukraine”.

At that stage global brands such as Netflix, Apple, Ikea, Levi’s, General Motors and Jaguar Land Rover had already paused operations.

PepsiCo said on Tuesday it too would be suspending the sale of Pepsi and its wider drinks portfolio in Russia. The company said it would also pause all capital investments, advertising and promotional activities in the country.

However, CEO Ramon Laguarta believes PepsiCo has a “humanitarian” responsibility to continue to sell other products in Russia, such as milk, dairy, baby formula and baby food.

“By continuing to operate, we will also continue to support the livelihoods of our 20,000 Russian associates and the 40,000 Russian agricultural workers in our supply chain as they face significant challenges and uncertainty ahead,” he explained.

Brands continue to exit

KFC and Pizza Hut owner Yum! Brands, Starbucks, Heineken, Mothercare, Universal Music Group and tobacco firm Imperial Brands have also cut ties with Russia this week.

Yum! is suspending 70 company-owned KFC restaurants in Russia and is finalising an agreement to suspend all 50 Pizza Hut outlets in partnership with its master franchisee.

The company has 1,000 KFC restaurants in Russia, most of which are run by franchisees. Yum! had already suspended all investment and restaurant development.

Burger King owner Restaurant Brands International (RBI) initially said it was continuing to operate in Russia, but was redirecting all profits to humanitarian efforts, with an immediate donation of $1m (£761,000) to the United Nations refugee agency.

However, it has now suspended operations after Ukraine published a list of 50 global brands that have continued to operate in Russia despite mounting pressure to take a stand against the invasion.

Meanwhile, Heineken has stopped the production and sale of its own-brand beer in Russia, while British babywear chain Mothercare suspended all business in the country, including 120 stores and online. Russia accounts for 20-25% of Mothercare’s worldwide retail sales and was expected to contribute around £500,000 a month to group profit.

Last weekend Inditex, the owner of fashion retailer Zara, shut all 502 stores in the country across its eight brands, including Bershka, Stradivarius and Oysho. H&M, Boohoo and M&S had already made the call to shut their stores.

A number of luxury fashion giants also elected to temporarily close their Russian stores, including LVMH, Hermes, Kering, Chanel and Burberry.

In a LinkedIn post, Chanel said: “Given our increasing concerns about the current situation, the growing uncertainty and the complexity to operate, Chanel decided to temporarily pause its business in Russia.”

In the financial sector, Visa, Mastercard and PayPal have all suspended operations in Russia, with PayPal citing “violent military aggression in Ukraine”.

Visa and Mastercard bank cards issued by Russian banks will continue to operate normally within Russia until they reach their expiry dates. However, cards issued abroad will no longer work at businesses or ATMs in Russia. The two businesses control around 90% of credit and debit payments globally outside China.

Elsewhere, Russia’s biggest smartphone supplier, Samsung, is suspending shipments to the country, while Activision Blizzard is suspending sales of and within its games.

Bowing to pressure

However, one company that initially refused to bow to pressure from consumers was Uniqlo, which stood by its decision to remain trading in Russia.

Despite rivals Zara and H&M pulling out of the country, founder of Uniqlo’s parent company Fast Retailing, Tadashi Yanai, told Japan’s Nikkei newspaper that while there should “never be war”, clothing is a “necessity of life”. He added: “The people of Russia have the same right to live as we do.”

However, the brand has since made a U-turn on its decision and yesterday confirmed it would close its 49 Russian stores.

“It has become clear to us that we can no longer proceed due to a number of difficulties. Therefore, we have decided today to temporarily suspend our operations,” the brand said.

“Fast Retailing [Uniqlo’s parent company] is strongly against any acts of hostility. We condemn all forms of aggression that violate human rights and threaten the peaceful existence of individuals.”

Last week the company made a $10m (£7.6m) donation, plus clothing, to those afflicted by the conflict, while employees in Europe have been helping to deliver clothing to people fleeing Ukraine.

The decision from Uniqlo comes as a survey of UK consumers finds 41% would boycott, or have already boycotted, brands that still do business in Russia.

More than two-thirds (68%) say it is important for brands to take a public stance on the conflict, according to the research by YouGov, and 51% are more likely to buy from a brand that stops doing business with Russia.

Overall, 56% of Britons say they are less likely to buy from a brand that continues doing business in Russia, although that figure rises among older consumers, with 65% of those aged 50 to 64 and 67% of those aged over 65 ready to cut out companies which don’t pull out of Russia. Among those aged 18 to 24, only a third (33%) say they are less likely to buy from brands that do business in Russia.

Initiatives such as donating a portion of income to humanitarian projects in Ukraine also land well with UK consumers, with 51% saying they would be more likely to buy from a company taking such a position. Meanwhile 26% say it would make no difference, 14% weren’t sure and 5% would be less likely to buy.

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