While the list of major western companies and brands that have suspended operations in the country has grown substantially since the beginning of the war, there remain a multitude of companies in the Russian market that delay or exploit loopholes to stay.
More than 200 companies from the US, EU, and the UK are still operating in the Russian Federation. As a consumer, it’s helpful to stay informed about companies that do business in Russia because they help finance the war against Ukraine through paid taxes.
It also may be surprising to learn that approximately 50% of European-owned companies are still doing business in Russia in 2023, according to Kyiv’s School of Economics.
Taking up a significant proportion of these companies are those from the food and beverage industry. Multinationals, such as Burger King, cite legal and franchise complications as reasons for continued business, contributing to Russian war funds through tax payments.
- What do consumers think?
- Who are these companies that feed the aggressor?
- Why companies won’t leave the Russian market?
- Reputation or profit?
- How can consumers keep updated?
What Do Consumers Think?
A recent PissedConsumer survey asked US consumers what they thought about companies operating in Russia in 2023 and how this scenario affects their purchasing decisions.
In light of this information, the responses from participating consumers identify a definite level of dissatisfaction with those companies that still continue to maintain business in Russia.
In fact, 77.3% of respondents do not support companies doing business in Russia as a result of the war. Additionally, 79.7% of consumers responding to this poll said they would not buy from companies remaining in Russia to do business as they did not want to contribute to the war.
Which Food and Beverage Companies Still Work in Russia?
Food and beverage brands have followed divergent paths in the aftermath of Russia’s invasion of Ukraine in 2022. Some decided to pull out of the Russian market immediately, others stated they had to consolidate leave strategies before finalizing their departure.
In truth, there is a clear proportion of US, EU and UK food and beverage companies continuing to do business in this market who have not taken the decision to leave Russia.
Mondelez: has it really scaled back?
Mondelez, the owner of brands such as Oreo and Cadbury, stated in the primary stages of the invasion that it would “scale back all non-essential activities” in Russia, but will continue operations there. The international conglomerate runs three factories in Russia, but says it is winding down its business before the year end.
The company has recently had to defend its presence in Russia as some of its most prominent customers in Norway began a boycott of its products in June. Norwegian Air and some major Norwegian rail operators have put an end to selling Mondelez products at this time.
In addition, the NACP (National Agency on Corruption Prevention) has officially named Mondelez as an international sponsor of the Russian invasion of Ukraine. Even though some new business operations were suspended, the company has continued to deliver products and work within the Russian economy.
The data speaks for itself. Mondelez paid more than $61 million in taxes to the Russian state, a substantial amount to strengthen the government’s financial position in regards to its war in Ukraine.
Nestle: a complex picture
Post Ukrainian invasion, Nestle reduced its capital investments in Russia but still continued to sell its most well-known products, such as KitKat. As a result, there were protests from a large contingent of its employees and Ukrainian communities in the US.
A particular Ukrainian community in Ohio has openly protested about Nestle’s ongoing presence in Russia, demanding the company to completely stop business there.
Ohio’s Ukrainian community and their stance against Nestle’s Russian operations was even more prescient as the company’s food factory is situated in the state. Local Ukrainian workers demanded that consumers and brands alike across the globe boycotted Nestle until they completely withdraw from Russia. In March 2023, the company stated that it would only sell essential products, such as baby products and medical supplies.
Michael Podolsky, CEO and co-founder of PissedConsumer.com, has given an interview with the Voice of America, where he explained that American consumers have the right to know which companies are still doing business and paying taxes to Russia.
Armed with this information, shoppers can make an informed choice about whether they want to continue buying from such companies or look for alternative options.
PepsiCo persists in Russia
Recent research has confirmed that PepsiCo continues to do business in Russia. The multinational claimed to scale back its commercial operations, but evidence suggests that significant activity has been maintained since the start of the war in 2022.
PepsiCo has commented to say they only sell essential items in Russia in response to the international community’s protestations about food and beverage companies in Russia.
Highlighted in publications during this year, the data confirms that in 2022, the company’s annual revenue in Russia was $4.6bn, demonstrating a 5% growth compared to 2021.
Exact tax receipts derived from this revenue have not been confirmed, but must be considerable and inevitably these will contribute to Russia’s war in Ukraine.
Why Food And Beverage Companies Won’t Leave The Russian Market
With all this international pressure mounting, for many consumers it may seem confusing that US and European companies in Russia are still functioning and to some extent, flourishing.
The billion dollar question is: why are they still doing business in Russia?
The answer is more complex and complicated than it at first appears. The integration of companies into countries around the world takes years to establish, involving many local people and communities that are reliant on these brands.
International companies build interdependence, sourcing raw materials from different locations. It can then be difficult to find similar quality products elsewhere. The latest statistics suggest that tobacco and alcohol firms are at the top of the list when it comes to raking in the revenue while still doing business in Russia.
There are also immense challenges when trying to sell a business locally, as potential buyers will be diminished in number and may be facing similar financial obstacles themselves.
And then there’s revenue and profit. This plays an integral role in the decision making process when it comes to staying or withdrawing from a country, even one where there is a war campaign being waged.
Plus, the Russian government has had some say in companies leaving the country and ceasing their operations. This may have swayed some multinationals as their functionalities are so fully interwoven into the fabric of Russia that it’s challenging to extricate the business cleanly without significant financial and strategic damage.
The Great Decider: Reputation Or Profit?
A conundrum for many companies remaining in Russia is around their reputation. What happens to this when they cooperate with Russia and continue to evolve their business in the country?
As we have seen over the last year, reputational damage on multinationals such as Danone and Mondelez has been considerable and, at times, made a difference to the company’s stance on remaining in Russia.
In terms of ethics, companies have to also consider their employees and subsidiaries in Russia and how a withdrawal would negatively impact their lives. These consequences are rarely discussed in the media, but many brands do try and explain their continued presence in Russia with attention paid to the wellbeing of their existing employees.
Nevertheless, a new Russian law has demanded that international companies operating in Russia enable their Russian employees to mobilize into the army when dictated by the Russian state. An action that can no doubt be seen as facilitating the war effort, if not directly contributing to it. As professor Sonnenfeld from Yale mentioned in his interview “they are providing the blood money.”
How Can Consumers Keep Updated About Brands In Russia?
Many shoppers are keen to understand where their money is going and have ethical concerns about its use to fund illegal activities. One way that consumers can raise their awareness of companies that are still doing business in Russia is to visit the specific brand page on the PissedConsumer site.
Where a company is still operational in Russia, the site has a symbol at the top of the page, alerting consumers to this fact and highlighting the need to be informed about this subject. Consumers often find this kind of advice extremely helpful as it supports them in choosing products sold by companies that align with their values.