When McDonald’s leaves Russia, China, Turkey, Brazil and India step in

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US fast-food giant McDonald’s confirmed earlier this week that it will leave Russia permanently, ending its more than 30-year stint in the country.

The move is not only of great symbolic importance, but comes at a time when Russia is courting Eastern and Latin American brands to replace the list of Western companies that are temporarily or permanently closing stores.

The opening of the first McDonald’s on Moscow’s Pushkin Square in January 1990 became a symbol of the Cold War thaw, and just a year later the Soviet Union collapsed and Russia opened its economy to Western companies.

But more than three decades later, dozens of retail and F&B companies have temporarily closed their stores or announced their permanent departure from Russia, prompting the country to try to attract brands from Turkey, China, Brazil and India.

These markets have – for now – remained largely neutral to Russia’s invasion of Ukraine, and desperate Russian malls are hoping they can fill the huge void left by western brands with new operators.

The worst-case scenario for Russian shopping centers could result in up to 30-40% of stores being vacant, confirmed Bulat Shakirov, president of the Russian Council of Shopping Centers (RCSC) – the organization representing shopping center owners and retailers – in March that its representatives had visited Turkey with the aim of attracting more than 200 brands, with a similar mission planned for China.

Amid the exodus, Indian retailers have also spied an opportunity. Companies such as home furnishings retailer Maspar and fashion retailer Killer Jeans are understood to be looking to open in Russia, while at least four companies have already secured franchise deals in Russia, and another dozen are expected to follow.

India has maintained a neutral stance in the conflict and, for the time being, has continued to do business with Russia despite mounting evidence of war crimes in Ukraine, citing crucial defense, oil and food supply needs.

The RCSC said it is negotiating with its respective representatives in the four countries to find alternatives to Western brands.

“A list of foreign companies that have temporarily ceased operations in Russia has been sent to them so that suitable equivalents can be found,” the RCSC website said in a statement. “Over time, this will help complement or completely replace merchandise from the defunct brands with ones of similar quality and design.”

Domestic fashion companies are also increasing their growth plans and opening new locations, including Detsky Mir, Sportmaster and Gloria Jeans.

McDonald’s exits the Russian market

McDonald’s is leaving the company after temporarily closing its 850 stores in March, and the fast-food giant said Monday its decision followed the “humanitarian crisis” and “unpredictable operating environment” caused by the Ukraine war .

In a message to employees and suppliers, McDonald’s CEO Chris Kempczinski said, “This is a complicated issue that is unprecedented and has profound consequences. Some may argue that access to food and continue to employ tens of thousands of ordinary citizens is certainly the right thing. But it is impossible to ignore the humanitarian crisis… And it is impossible to imagine that the Golden Arches represent the same hope and promise that led us to enter the Russian market 32 ​​years ago.”

McDonald’s said it would sell all of its locations to a local buyer and begin the process of “de-arching” the restaurants, removing its name, branding and menu. It retains its trademarks in Russia.

McDonald’s will write off a fee of up to $1.4 billion to cover the exit, and said its priorities include ensuring its 62,000 employees in Russia continue to be paid until a sale is complete and that they have “future employment with any potential buyer.”

Western retailers face difficult Russian choices

The move raises the question of what will happen to other Western retailers and F&B brands operating in Russia if, for example, furniture and homewares giant IKEA sits atop a number of IKEA-anchored malls.

Back in March, under public pressure, numerous international companies announced that they were ceasing operations in Russia, hoping that the situation would resolve and they could reopen. International brands including Starbucks

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Coca-Cola, Levi’s and Apple

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have left Russia or suspended sales, while some companies, such as Burger King and British retailer Marks and Spencer, claim they are unable to close stores due to complicated franchise agreements.

Regardless, the prospects for Western retailers reopening in Russia seem increasingly bleak, and Russia’s malls are already looking east for redemption.

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