On Irsal Street in Ramallah, the West Bank city where the American capital has ventured the most, a dozen meters separate three fast-food outlets. KFC and Pizza Hut stand on a sidewalk; in the other, right up front, Popeyes. The Palestinian Ahmed Mashal leaves the latter with a bag and rushes over so that the fried chicken (very popular in the Arab world) reaches his wife and children hot. He chose not by taste, but by politics: KFC and Pizza Hut are among the American multinational chains – such as Starbucks, McDonald's, Burger King or Coca-Cola – that consumers in the Middle East and other Muslim countries are boycotting due to climate change. The support of the United States for Israel has already increased and their profit and loss statements have already had an impact, as the top managers of several of these companies noted in their conferences with analysts and investors. “I don't want my money to end up going to the bombs that are killing children in Gaza.” Nothing American has come into my house in four months. Not even a few Pringles,” he emphasizes.
His case shows how the war in Gaza has put geopolitics back on the table of corporate executives, while the shock of the invasion of Ukraine, which caused major multinationals to withdraw from Russia, has not yet subsided. The boycott promotes general punishment of Western and especially American brands, even as it shines a spotlight on companies that have made a name for themselves (sometimes due to ineptitude, misunderstandings or local initiatives). Popeyes, for example, is just as much a franchise and just as American as KFC, but there is a rumor in Ramallah that the money doesn't reach headquarters. In Egypt, a campaign to support Palestine highlights banned brands and local alternatives on large murals.
Several companies in the region have benefited from changing consumer behavior. Jordanian coffee chain Astrolabe's sales have skyrocketed following the Starbucks boycott. The same thing happened in Egypt with the historic local soft drink brand Spiro Spathis.
Affected companies provided little information about the impact of the boycotts. They sometimes resorted to generalities or euphemisms and rarely quantified the losses. The first companies to face boycott calls were McDonald's and Starbucks.
The McDonald's franchisee in Israel offered free meals to the army and discounts to soldiers and security officers. Up to 50% as indicated on the illuminated signs, in line with the policy adopted by other chains and cafes in the country in times of war. From that moment on, other countries in the region began calling for boycotts and even attacks on some of their restaurants. The entire brand has become a target, despite criticism of the Israeli decision and support for Gaza expressed by other franchisees or licensees from, for example, Oman, Lebanon, Turkey, Saudi Arabia or Kuwait.
A McDonald's in Tel Aviv announced a 50% discount for soldiers last November. Alvaro Garcia
The company's CEO, Chris Kempczinski, acknowledged that “the war and the misinformation surrounding it” were hurting the company in the Middle East. Recently, McDonald's released its results and admitted that “as of the fourth quarter of 2023, the company's systemwide sales and revenue were negatively impacted by the war in the Middle East.” “The company is monitoring the evolving situation and expects it to continue to have a negative impact on system-wide sales and revenue as the war continues,” he added.
In a conference call with analysts, Kempczinski and the company's other directors declined to provide details but acknowledged the impact was “significant.” Several videos can be seen on the social network TikTok in countries such as Malaysia, Indonesia, Turkey and Saudi Arabia, in which the user first shows an almost empty McDonald's and a few meters away people in a queue in another restaurant. Order, mostly local. In his letter a few weeks ago on Linkedin, Kempczinski stressed that McDonald's franchises in Muslim countries that have faced calls for boycotts are “owned by local operators who work tirelessly to serve their communities while employing thousands of his fellow citizens.” The manager also condemned “Violence” and “incitement to hatred”.
In the case of Starbucks, the boycott was triggered by a lawsuit against Workers United, the union that organizes its workers, after that organization's social media account posted a pro-Palestinian message in the wake of the conflict in Gaza. The company claimed the lawsuit was due to misuse of its name and avoidance of political positions.
Following calls for a boycott, Narasimhan published an open letter to employees in December in which he said Starbucks condemned “violence against the innocent, hatred and armed speech, and lies.” “We are a company with a mission and promises based on humanity and giving. We hate hate. “We firmly reject violence against innocent people,” he emphasized.
protests
This letter did nothing to calm tempers, and some Starbucks cafes became the target of protests across the United States. Days later, Narashiman posted a new message denouncing the “misrepresentation” of his position. “I worry about the state of the world we live in. There are conflicts in many places. There has been violence against the innocent, hatred and weaponized speech and lies that we all condemn. Protests have increased in cities around the world, including here in North America. Vandalism occurred in many of our branches. We see protesters influenced by the misrepresentation of what we represent on social media. We have been working with local authorities to ensure the safety of our partners and customers. There is nothing more important. Our position is clear. We defend humanity,” he said.
Narasimhan admitted in a conference call with analysts that boycott calls against the coffee chain had a “negative impact” on its operations in the Middle East, which in turn “had an impact on the United States due to miscalculation.”
In fact, the worst affected is an Arab company, Americana Restaurants, listed on the Riyadh Stock Exchange. American restaurant chains such as KFC, Pizza Hut, Hardee's, Krispy Kreme and TGI Friday's have operated in the region for half a century. The company has provided the most comprehensive information about the impact of the boycotts. Comparable sales had grown at full speed in 2023. In October they fell by 9.4%; 29.3% in November and 26.6% in December, according to analysts who estimate the impact at $128 million.
The Saudi group has classified the countries where it operates based on the strength of boycotts. They had the greatest impact in Egypt, Oman and Jordan. This is followed by Lebanon, Kuwait, Qatar, Bahrain and Morocco. It has received the least attention in the countries where it occurs, namely Saudi Arabia, the Emirates, Iraq and Kazakhstan. At the chain level, the impact on comparable sales was similar across brands: 22.6% at KFC and Hardee's; 22.4% at Pizza Hut and 21.7% at Krispy Kreme Donuts.
In the United States, Yum Brands, the owner of the KFC and Pizza Hut brands, was less clear. “Sales were impacted by the conflict in the Middle East, with varying degrees of impact across the Middle East, Malaysia and Indonesia markets.” This was a low single-digit setback [del 1% al 5%] Share of Yum!'s overall revenue growth at the same locations in the fourth quarter. “This trend has continued in the first quarter and we expect the impact on revenue to diminish throughout 2024,” CEO David Gibbs told analysts, who assured him of the security of his franchises and Priority is given to employees in the region.
recoil
Other affected companies also did not provide further details about the impact of a boycott, which was carried out primarily by young people and amplified through social networks. Joshua Kobza, CEO of Restaurant Brands, which owns Burger King, admitted that sales had been hit by “the impact of the conflict in the Middle East in more than a dozen countries.” “We estimate that the conflict resulted in a 1.5-point decline in comparable sales and a three-point traffic impact this quarter.” We will not speculate on the duration of this impact. “In the affected countries, our full attention is focused on the safety of our team members and our partners.”
James Quincey, president of Coca-Cola, America's most famous consumer brand, made a brief statement. “In the Middle East, tensions have led to some changes in consumer behavior that have impacted our business,” he told investors. Chief Financial Officer John Murphy was a little more blunt: “We estimate that the ongoing conflict in the Middle East had about a one-point impact on volume growth in the fourth quarter of 2023. It is unclear how strong this influence will last,” he explained. Pepsico, for its part, didn't even reference the Middle East in its results, but its sales disappointed the market in the fourth quarter.
Coca-Cola and Pepsico are not among the targets of the organization Boycott, Divestment, Sanctions (BDS), which calls for the sabotage of companies that allegedly work with Israel. Spain's CAF is on its major blacklist for its contract for the Jerusalem light rail line, which runs through occupied Palestinian territories. In general, the impact on non-consumer goods companies is smaller.
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