Big brands face timing of Russian departures

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The list of multinational brands announcing their departure from Russia is literally growing by the hour, with the cumulative cost to companies to “do the right thing” rising along with it.

For McDonald’s, the figure is $50 million a month.

Adidas has set the preliminary cost of leaving Russia at the equivalent of $275 million.

On Thursday March 10, Shell indexed its departure-related impairments to $400 million.

And so on.

While Russia’s revenue suspension is typically a single-digit success for most multinationals, these costs pale in comparison to two other factors threatening businesses at this time “a broader global economic downturn and, in very limited cases , the infinite cost of public condemnation for companies that have decided to stay put, at least for now.

A big name on that front, Uniqlo – Fast Retailing’s Tokyo-based clothing brand – announced an about-face Thursday morning after a week of criticism and the cold, hard truth that keeping the lights on in 50 stores in Russia wasn’t worth the hit it was taking in 1,100 stores worldwide.

“While continuing our UNIQLO business in Russia, it has become clear to us that we can no longer continue due to a number of difficulties,” read a statement from the company without giving monetary value to its decision. . “Therefore, we have decided today to temporarily suspend our operations.”

And now?

Certainly, the flow of Russia-related business news has been rapid over the past two weeks, as individual consumers and business executives have been keen to hear the latest information on who’s doing what.

To track this flow, the Yale University School of Management maintains a tally of company decisions that it would update hourly. Its latest version, dated March 10, set the number at more than 300 companies withdraw from Russiaa number he says has gone from dozens to hundreds in just eight days.

At the same time, the list of companies that remain in Russia – or have not yet made a statement on the matter – is shrinking, but still includes major American players in the fields of food, pharmaceuticals, advertising, hotels, energy and raw materials.

For those who have officially exited, the focus will now be on managing the over 90% of their business that remains while facing another macroeconomic headwind in the form of rapidly rising inflation, particularly at the fuel pump.

As it stands, the last government inflation data for February, which doesn’t even include the war-induced spike in energy prices over the past two weeks, hit a new multigenerational high of 7.9% on Thursday.

The most common solution adopted by most companies will be to increase prices. While some will attempt to mask higher selling prices in the form of smaller portions or packages – a process often referred to as “Shrinkflation” – other retail brands simply raise prices when and how they want. hear.

“One of the great things about running a big D2C business is flexibility in pricing,” Adidas chief financial officer Harm Ohlmeyer told investors on Wednesday’s earnings call. society. “We can adjust prices quickly on a weekly basis and we have already used this flexibility and increased our prices by more than 20% over the past two weeks to at least partially offset the sharp devaluation of the rouble,” he said. he adds.

That said, previous periods of high inflation and reduced consumer purchasing power have also historically been opportunities for retailers and brands to gain market share and attract customers by not raising prices. or by not offering other promotions to customers who should be bargain-hunting like never before.

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