McDonald's Corporation announces its exit from the Russian market

McDonald's Corporation announces its exit from the Russian market

 According to a company statement published Monday on the PR Newswire website. "After more than 30 years of operation in the country, McDonald's Corporation announced it will exit the Russian market and has started the process of selling its Russian business. This follows McDonald's announcement on March 8, 2022, that it has temporarily closed its restaurants in Russia. and cease operations in the market," the statement said. According to the report, "As part of McDonald's decision to exit, the Company is pursuing the sale of its entire portfolio of McDonald's restaurants in Russia to local buyers. 

The Company intends to begin the process of "de-Arching" the restaurant, which means it will no longer use the McDonald's name, logo, brand and menu, although the Company will continue to maintain its trademark in Russia. that the employee has a future job with any potential buyer." A source at McDonald's told TASS the restaurant will open in Russia with a new brand in mid-June, while jobs, most of the suppliers and menus will be preserved. After Russia launched special military operations in Ukraine, a number of foreign companies stopped activities in Russia. Meanwhile, the French car brand, Renault, had a worse fate after being nationalized. Renault will not have the option to buy back its Moscow plant, Deputy Mayor Maksim Liksutov said on Moskva-24 television. 

"It's important that when we get the factory, we don't give Renault an option to buy it back," Liksutov said. "That is the principle position of the mayor Sergey Sobyanin." Future factories will use mostly Russian-made auto parts, he said. The city of Moscow is ready to place orders for the plant, he said. Sobyanin previously said the factory would make Moskvitch cars. Truck maker Kamaz will be a technology partner, the mayor said on his blog. The Russian Ministry of Trade and Industry expects the former Russian Renault factory to start producing Moskvitch cars later this year. 

Earlier, Russian leader Vladimir Putin said he was taking firm action against foreign companies closing operations in Russia because of pressure from their home countries to oppose Russia's invasion of Ukraine. Putin said the Russian government would nationalize the assets of these foreign companies. Nearly 200 major foreign companies announced that they were either suspending their work in Russia or leaving the country. Among them are technology companies in the energy, automotive, clothing, shoe and cosmetic retailer sectors, as well as financial services.
However, foreign businesses will not be able to withdraw their capital from Vladimir Putin's country. 

On March 1, a presidential decree came into effect practically preventing foreign investors from withdrawing Russian assets. According to Finam's Yaroslav Kabakov, many companies have frozen investments, but will continue to function in Russia. According to him, as a consequence, Russia's GDP could slow down to negative 5% every year. "The main obstacle to the rapid replacement of imports, strange as it may sound, is the high integration of many Western companies into the Russian economy, none of which will give up easily. The second reason is the sharp decline in investment resources," the expert said as reported by the news agency. Russia, TASS. 

Western companies may have to pay a heavy price to leave Russia, said Eldar Murtazin, a leading analyst with the Mobile Research Group. According to preliminary estimates, compensation for fired employees, bonuses for partners, and other payments could cost Apple about $6 billion and Microsoft could spend $6.6 billion on this, not to mention lower profits and reduced investment in partnership projects. Western investors in the energy sector, such as Uniper, announced that they were pulling out of Russian assets. According to Natalya Malykh of Finam, this is not important for the Russian market because their shares can be bought by Chinese investors. 

While Western companies are suspending their activities, Russian companies are hoping to take advantage of this situation and increase their market share. For example, clothing manufacturers rely on increased demand. I Am Studio owner Oleg Voronin told Izvestia that this situation was an opportunity for domestic businesses. According to him, people are interested in buying new things while Russian brands know how to produce quality products with unique designs. According to a retail chain employee, if Samsung and Apple left the market completely, their niche would be filled by cheap Chinese smartphones. He added that the same would happen with tablets and other electronics. 

Deputy head of new car sales at Avilon Alexey Starikov told Izvestia that steadily increasing demand is expected for Chinese car brands that are actively developing in Russia. The international agencies Moody's, S&P and Fitch one after another downgraded Russia's sovereign credit rating from investment grade to pre-default level. The lowest C rating in foreign currency was assigned by Fitch on March 8.
Earlier, S&P cut Russia's credit rating eight notches at once - from BB+ to CCC- with a negative outlook, while Moody's downgraded it six notches, from B3 to Ca with a negative outlook. Russia hasn't had a rating like this since 1998. The main intrigue at the moment is around the fulfillment of foreign currency obligations as part of Russia's national debt. The Central Bank can't use its money because of the sanctions, said Vladimir Bragin, director of financial markets and macroeconomic analysis at Alfa Capital. 

Another issue is whether foreign investors will be willing to open a C account to receive payments, Elena Kozhukhova, an analyst with Veles Capital, pointed out. Head of Macroeconomic Analysis at Finam Olga Belenkaya thinks that now, compared to the 1998 default, Russia has all the economic and financial conditions to handle its debts without problems. However, due to the sanctions, the Ministry of Finance was unable to attract new external loans to refinance existing loans while most of the Central Bank's reserves were blocked while sanctions closed international transactions for many of Russia's largest banks.

Next Post Previous Post
Update cookies preferences