The ‘Soft’ Dilemma: Coca-Cola and Many Companies Stall on Leaving Russia

The ‘Soft’ Dilemma: Coca-Cola and Many Companies Stall on Leaving Russia

The ‘Soft’ Dilemma: Coca-Cola and Many Companies Stall on Leaving Russia (Source: depositphotos)

Even after two years, one could easily find Coca-Cola’s distinctive red logo in grocery stores across the nation

Coca-Cola was one of the first international companies to announce that it would leave Russia after Vladimir Putin’s army crossed the Ukraine border in February 2022. Coke had instructed its partners in the Kremlin to stop producing its drinks, pull its cans and bottles away from the stores, and stop supplying syrup to soda foundations to avoid the unavoidable problems of complying with anticipated Western sanctions against the Kremlin.   

Even after two years, one could easily find Coca-Cola’s distinctive red logo in grocery stores and eateries across the nation. And even with the entry of a new competitor named Dobry Cola- sold in cans with an incredibly recognizable red hue and a taste, few could tell apart from the original. Coke is, however, by some measures, the top producer of carbonated drinks in Russia.  

This is mainly due to the fact that Coca-Cola HBC, a separate, London-listed business in which the US parent firm owns a 21% ownership, owns Multon Partners, the nation’s bottler of Coke. Following the invasion, HBC discontinued producing Coca-Cola; Multon then launched Dobry Cola. According to researcher Prodazhi.rf, it has grown to be the most popular soda in the region, holding 13% of the market. Garret Nelson, CFRA Research analyst mentions that Cocoa-Cola HBC has simply taken market share through the success of Dobry, and the profits from selling Cola in Russia have shifted.

Furthermore, Coca-Cola is still extensively accessible and is imported from Kazakhstan and Georgia, two neighboring countries. Russia enacted a law permitting the sale of branded items without the owner’s approval after the invasion. When Russians have a craving for the ‘real thing’, they may still have it, thanks to the trucks that are transporting cases across the border.      According to Prodazhi, those imports alone have made Coke Russia’s third-most popular drink, holding 6% of the market.

Not that Coke hasn’t suffered, mind you. According to HBC, its sales in Russia increased by 12% in the previous year, but they were still over 33% less than in 2021, when Coke held a 26% market share and was the best-selling soft drink. Even while Coca-Cola benefits from Dobry’s widespread appeal and Multon’s dominant position in the juice market, the Atlanta-based company claims it has stepped back from overseeing the business.

Coca-Cola is by no means the only company leaving Russia with some remaining. PepsiCo Inc. announced in September 2022 that it was ceasing production and sales of Pepsi, Mountain Dew, and 7Up in the region. As a result, its market share plummeted. However, Pepsi quickly increased production of Frustyle, a fruity Mirinda substitute, at its half-dozen plants around the nation and introduced a new cola called Evervess.

According to the Russian unit’s submissions to local tax authorities, its beverage sales increased by 12% last year to 209 billion rubles ($2.3 billion). Additionally, its dairy and infant food divisions had a 10% increase in revenue last year, reaching 129 billion rubles.

According to a study from the Yale School of Management, more than 1,000 international corporations have stated that they are reducing their presence in Russia since 2022. However, a large number have persisted. Large industrial facilities there made Unilever Plc and Nestlé SA unwilling to sell at the steep discount the Kremlin requested as an exit fee.

French grocery operator Auchan, apparel retailer Benetton Group, and food franchises Subway and TGI Fridays continue to operate in Russia.

It is difficult for businesses that are still in the nation to oust earnings since they need to obtain difficult-to-get approval to do so. However, the earnings are considerable. Russia’s economy grew 3.6% last year, driven by war expenditures, which contributed to the historic low 2.6% jobless rate and a strong increase in wages.

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