Analysts called the consequences of leaving the market of Pepsi, Coca-Cola and Unilever.
PepsiCo has decided to suspend sales of its products in Russia amid a military operation in Ukraine. Earlier, other major consumer goods manufacturers, including Coca-Cola and Unilever, made similar announcements. What these companies produced, how important the Russian market is for them, whether they can resume their work in the future – in the material of Gazeta.Ru.
PepsiCo is suspending sales of its drinks in Russia amid a military operation in Ukraine. The company also decided to temporarily abandon investment and all advertising activities.
“We have been working in Russia for over 60 years. Our products are in many Russian homes. Pepsi-Cola entered the market at the height of the Cold War and helped create common ground between the US and the USSR. However, given the terrible events taking place in Ukraine, we are announcing the suspension in Russia of sales of Pepsi-Cola and our other drinks, including 7Up and Mirinda, ”said PepsiCo CEO Ramon Laguart in a March 8 statement.
However, PepsiCo will continue to produce essential goods such as dairy products and baby food. At the same time, the company promised to support 20,000 Russian employees and 40,000 agricultural workers involved in the supply chain.
PepsiCo is one of the largest food and beverage producers in Russia. The Pepsi-Cola trademark was registered in the USSR in 1938. Now the company produces drinks (Pepsi, 7Up, Mirinda, Adrenaline Rush, Russian Gift, etc.), chips and snacks (Lay’s, Cheetos, Khrusteam). Also – juices and nectars (“I”, “Fruit Garden”, J7, “Beloved”, etc.), dairy products (“House in the Village”, “Merry Milkman”, “Miracle”, BioMax, “Imunele”, etc. .) and baby food (“Agusha” and “Miracle kids”).
In addition – bottled water (“Aqua Minerale”, “Springs of Russia”). PepsiCo is Russia’s largest industrial potato processor and one of the largest raw milk processors. The company employs 19 thousand employees.
At the end of 2021, PepsiCo’s revenue in Russia amounted to $3.4 billion (or RUB 252.4 billion). In the company’s total revenue, Russia accounts for 4.3%, RBC notes. The company has more than 20 enterprises in the country, in which more than $10 billion has been invested, writes Forbes. The Russian market is third in terms of revenue for PepsiCo after the US and Mexico.
Earlier, Coca-Cola announced the suspension of activities in Russia. In addition to Coca-Cola, the company owns the brands Fanta, Sprite. The concern at the same time said that Russia and Ukraine accounted for 1% to 2% of the company’s net operating revenue in 2021, writes Reuters. Coca-Cola noted that they will monitor the situation and evaluate it as events unfold.
The Coca-Cola Russia website states that the company employs 7,000 people. At the same time, each workplace in the company creates up to 8.7 jobs for suppliers and customers. In total, this is 66 thousand additional jobs. In 2018, the contribution to the Russian economy amounted to 0.2% of GDP – more than 195 billion rubles, the report says. Coca-Cola entered the Russian market in 1979.
Another major manufacturer of everyday goods – the British company Unilever – has decided to stop exporting and importing products to and from Russia, to stop investing and investing in advertising. Unilever manufactures a large number of everyday goods. In particular, household chemicals (Domestos, Cif) and hygiene products (Dove, Rexona, AX, Camay, Clear, Pure Line, Forest Balsam, Velvet Handles, Black Pearl). In addition, food (Inmarko ice cream, Lipton tea, Brooke Bond). The company, however, clarified that the supply of goods that were produced in Russia will continue. As reported on the Unilever website, it has been present in Russia for over 30 years. The company employs 3.5 thousand Russian employees.
Is there any hope for the reopening of companies
The departure of the world’s giants from the market is, of course, a big loss, said Stanislav Kaufman, founder of the Kaufman marketing agency. And it will be difficult to replace these products with some domestic analogues. For example, there were attempts to promote the Russian Bistro under Yuri Luzhkov, but nothing came of it, he added.
However, Kaufman believes that companies will eventually return to Russia – when the situation stabilizes. Even during the Cold War, PepsiCo came to the USSR: “business is business,” Kaufman added. Russia is a colossal territory, a great loyalty of the population to products, to the same Pepsi or food from McDonald’s, he noted. In addition, companies have invested heavily in the country, opened many factories and retail outlets.
“This is a huge market that no one wants to lose. On the other hand, they are now guided by public opinion, not business interests. Therefore, if they do not react, they will simply be “trampled” and boycotted. Their damage will be much greater. Reputational losses will be followed by financial ones,” the expert said in an interview with Gazeta.Ru.
How quickly a company can return to the Russian market depends on the type of business, he added. At the same time, no one can say yet when the situation will really stabilize, but “everyone is interested in this.”
“This is a really difficult period, but I have no doubt that it will end,” the expert concluded.
The departure and return of large companies will depend on the political situation, Mark Sherman, managing partner of the communications agency Svoboda Agency, also emphasized. The termination of their activities will lead to a reduction in jobs, as well as the withdrawal of well-known brands from the Russian market. In this case, Russian products will take their place, and, apparently, Chinese and other Asian brands, he believes. A “giant niche” will be vacated, which will be occupied by competing companies.
“At the same time, you need to understand that this process will take some time. Including due to the fact that the consumer himself must reorient himself to other brands, wean from long-term habits, ”he said.
Pavel Sigal, First Vice President of Opora Rossii, considers it unlikely that large companies will leave Russia completely. In his opinion, it is unprofitable for them to lose such a market share.
“On the one hand, we will see that the shelves with goods will be somewhat empty. But in general, this will not affect the Russians, since we also have the production of essential goods. As for food, there is also no expected shortage. In addition to manufacturers that have left the market, we have brands that will replace those who have left. Therefore, an acute shortage in these categories is not expected, ”Segal assures.