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The Guardian - AU
The Guardian - AU
World
Jonathan Yerushalmy

Bean counters: how Russia’s wealthy profited from exit of western brands

People take photographs of a newly opened Stars Coffee outlet.
Former Starbucks outlets have reopened in Russia under a new name, Stars Coffee. Photograph: Maxim Shemetov/Reuters

In the weeks after the invasion of Ukraine began, western companies in Russia were faced with a costly conundrum. Facing pressure from their customers and western governments to end all operations in Russia, brands from Coca-Cola to Levi’s to Ikea all announced they would pull out.

So as ordinary Russians found their access to Apple services limited and their Netflix cut off, many western brands with a significant physical presence in the country found themselves taking huge financial hits for their decision to “self-sanction”.

In the aftermath of the western retreat, some Russians have found unique opportunities to obtain hugely valuable assets at knockdown prices.

In early 2022, Starbucks had 130 stores in Russia, mostly operated through franchises. After initially pausing operations in March 2022, the company announced that May it would sell up and leave entirely, with a promise to support its 2,000 employees for a few months.

Just a few months later Stars Coffee was unveiled – a new brand operating from most of Starbucks’ old sites that bears more than a passing resemblance to its predecessor.

Starbucks shops reopen in Russia under new name “Stars Coffee”
Starbucks shops reopen in Russia under new name Stars Coffee. Photograph: Maxim Shemetov/Reuters

The business is co-owned by the Russian rapper Timati and the restaurateur Anton Pinskiy, who told the state media agency Tass in an interview published on Tuesday that they acquired all of Starbucks’ assets in Russia for just 500m roubles (£4.7m).

Pinskiy told Tass that the acquisition of those assets was a chance that “could not be missed”. In 2021, Starbucks’ Russian parent company reported revenue of more than $60m (£47m), according to the news agency Interfax.

Asked whether the sale price constituted a discount, Pinskiy told Tass: “It depends on what you mean with this word. We bought a closed business that was not bringing in profit.”

Timati has been a vocal supporter of Vladimir Putin and described himself as a friend of the Chechen leader Ramzan Kadyrov. In 2015, the rapper released a song entitled My Best Friend is Vladimir Putin and he was also behind a pro-government song called Moscow, in which he boasted the Russian capital “doesn’t hold gay parades”.

Timati and Pinskiy are just two of a number of high net worth individuals who have benefited from the exit of western brands from Russia by snapping up US and European businesses at potentially discounted prices.

In May 2022, just two months after McDonald’s said it was temporarily closing its outlets across Russia, the company reached a deal to sell all its restaurants. It said staying in the country was not “consistent with McDonald’s values”.

An employee holds a food order on a tray in the Russian version of a former McDonald’s, “Vkusno i Tochka”
An employee holds a food order on a tray in the Russian version of a former McDonald’s, “Vkusno i Tochka” Photograph: Kirill Kudryavtsev/AFP/Getty Images

The buyer was Alexander Govor, a businessperson who immediately went from running a franchise operation of 25 McDonald’s in Siberia, to owning more than 800 restaurants with 62,000 staff.

Overnight, McDonald’s disappeared, to be replaced by Govor’s new brand, Vkusno & tochka, or “Tasty & that’s it”. Big Macs were now Big Hits, Happy Meals were Kids Combos and fries briefly disappeared from the menu during national potato shortages.

At the time of the sale, Govor said he had paid “far lower than market price”, describing the final amount as a “symbolic” figure. McDonald’s has not commented, but said the write-off from exiting Russia would be in the region of $1.2bn to $1.4bn. The company has retained an option to buy back its restaurants within 15 years, according to Russian officials.

Govor’s interests stretch far beyond fast food. He is the co-owner of Neftekhimservis, a construction investor that owns an oil refinery in Siberia. He also holds a 50% stake in a forestry company and 25% of a fishing and hunting business, according to Russian media.

Since acquiring the Russian operations of McDonald’s, he has also bought a Finnish company that produces food and drink packaging after it announced it was leaving Russia.

The opening of the first McDonald’s in the Soviet Union in 1990
The opening of the first McDonald’s in the Soviet Union in 1990. Photograph: Vitaly Armand/AFP/Getty Images

Krunchy Dream and World of Cubes, which replace Krispy Kreme and Lego, are among the other brands to have emerged on the sites of former western brands. Arkady Novikov, a Russian businessperson who operates a number of luxury restaurants around the world, was reported to have taken over the 30 Krispy Kreme restaurants in Russia.

The chief executive of McDonald’s, Chris Kempczinski, has said it is “impossible to predict” when the company will return to Russia, but that its exit carried not just economic consequences, but a profound symbolic weight as well.

When the first Golden Arches opened in Moscow in 1990, thousands waited in line to taste what was then a slice of history.

If the temperature of relations between Moscow and the west can be traced in the fortunes of brands like McDonald’s and Starbucks, that opening represented a warming in relations, a sign that the Soviet economy was opening up and a symbol of US capitalism.

More than 32 years later, Vkusno & tochka unveiled its first outlet at the site of that first McDonald’s in Pushkin Square, this time to vastly diminished crowds.

Reuters contributed to this report

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