America threw the first imperial hamburger bullet into Russia 32 years ago with McDonald’s. At that time, the Soviet Union had not yet disintegrated. In Moscow, 5,000 people lined up before the doors even opened. On the opening day, 30,000 people were served.
McDonald’s, the representative of American culture, broke a gigantic record that day. Additionally, it had entered enemy lands during the Cold War period. In less than a year, the Soviet Union would disintegrate. Many global brands would flock to the Russian market following this first shot.
Today, 32 years later, the Russians again formed long queues in front of McDonald’s. But this time, not for the opening, but for the last time to have a bite of those hamburgers. Because, McDonald’s, with its 62,000 employees and 850 shops, has decided to temporarily stop its operations in Russia. Just like dozens of global brands reacting to Russia’s invasion of Ukraine…
Global Power: Brands!
For McDonald’s, which derives almost 10% of its total revenue from Russia, this decision to cease operations is significant. This decision impacts the company’s financial performance in several ways.
Of course, it’s more than just a hamburger. The values represented by these brands show a fact. The global urban consumption culture leads to more rapid and permanent changes in different geographies than wars and occupations. These effects are more enduring.
This world order created by global brands has led to similar consumption practices and thus social changes in many countries. From this perspective, the withdrawal of brands such as Visa, Mastercard, Ikea, Apple, Nike, Starbucks, Pepsi, Coca-Cola, and Netflix from Russia is significant. This entrenched consumption culture will evaporate in a few days.
This globalization and global trade situation spreads to all parts of the world like copper wire through brands. However, it does not prevent primitive wars and conflicts. This contradicts some theorists’ claims.
Thomas Friedman, in his 1999 best-selling book The Lexus and the Olive Tree, tried to define the power and existence of global trade. He did this by examining political relations between countries. He asserted that “No two countries that own McDonalds will fight against each other”. Although this has been proven many times to be untrue, this still does not diminish the power of global brands.
Why are brands leaving Russia?
We know that nearly 300 global brands have left the Russian market. It is also useful to talk about the subject in terms of the approaches of the brands. Why are brands making this move, which will have certain financial implications?
This can be defined in three main points. Reputational risk, legal risks, long-term economic losses. All three are issues that lie at the heart of the concept of sustainability.
Perhaps the most critical issue here is reputation risk. Global brands must consider the common sensitivities of their consumers worldwide. They cannot ignore the demands of their consumers all over the world. Therefore, when they make an exit decision from a market, they act by considering their consumers in the remaining geographies. They also consider their income.
In other words, McDonalds has a plan to close the 10% revenue gap left by leaving the Russian market. They aim to achieve this on a much higher scale. The plan includes the effect of this move in other markets. Of course, they also want to create sustainable economic value.
Global brands, on the other hand, are afraid of the sanctions decisions that might be taken by the warring countries. In such an environment where countries draw swords, brands, no matter how big, have no chance to act diplomatically and stay in the middle and continue their business.
The war in the eye of the storm unfortunately destroys everything it touches. Even the dominant trade order of the global world is having a hard time standing as a solution to this primitive phenomenon.
However, just like wars, all brands must act with the basic sustainability discipline in order to prevent other disasters from happening. That is, to move forward with decisions that are not only economic, but also human (and all stakeholders) centered.
For example, McDonald’s has decided to exit Russia temporarily, but has announced that it will continue to pay the wages of 62,000 employees. This is an important and respectable move to at least protect Russian employees who have no sin in this regard.
Is it possible to go back to the past?
It is obvious that such a moving global power will form a front against the fundamental problems of humanity. These problems include wars.
The departure of global brands from the Russian market is an outcome of Putin’s aspiration. He aims to return to the former Soviet Union. The dream of returning to the 1970s, a time away from the rest of the world…
But does the same thing apply to the Russian people who have fully adapted to the global consumption culture? We’ll see! Once the tube is squeezed, it is impossible to put the toothpaste back in the tube!