The world's second-largest bottler of Coca-Cola drinks has become the latest company to be hit by the escalating standoff between Russia and the west, along with the sportswear maker Adidas.
Coca-Cola HBC, which bottles and distributes the US company's drinks in 28 countries, said volumes would fall for the rest of the year, citing a sudden deterioration in Russia, its biggest market.
Russia responded to western sanctions by banning a number of western foodstuffs for a year on Thursday.
Financial markets were quick to react. Moscow's main two share indices extended Wednesday's sharp declines, with retail and banking shares among the biggest fallers. The RTS index lost 1.9%, and the rouble-denominated Micex fell 1.5%.
The rouble weakened to its lowest level in three months against the dollar-euro basket, and yields on benchmark government bonds hit their highest levels since 2009. Yields on Russia's 10-year treasury bonds reached 9.87%, a rise of 150 basis points since July.
The price Russian companies have to pay to borrow money on the international markets also shot up. The yield, or interest rate, on Russian corporate bonds surged to 7.2%, compared with 5.2% for corporate bonds across emerging markets as a whole, the widest spread yet.
Analysts said the ban on food imports would drive inflation even higher, which could undermine the Russian central bank's monetary strategy. Russia's Alfa Bank said: "The ban on food imports … calls for revisiting the short-term and medium-term inflation outlook, which has deteriorated significantly in recent months."
Coca-Cola HBC said volumes in Russia dropped by a low single digit percentage in the second quarter, the first decline in 11 quarters. The company said the escalation of the crisis in Russia and Ukraine had affected consumer spending in the region. It also blamed the sharp devaluation in the rouble and Ukrainian hryvnia against the euro since the start of the Ukraine crisis.
The Adidas boss, Herbert Hainer, echoed those comments. The German company has also been hit by the weaker rouble, which along with a poor performance at its golf business forced it to cut its profit outlook for this year. Adidas drastically scaled back store openings in Russia, to 80 for both this year and next, compared with a planned 150 each year. Russia is its third-biggest market, where it runs more than 1,000 shops, and Adidas also sells its products through third-party retailers.
BP warned last week that it would suffer if fresh sanctions were imposed on Russia. BP is closely involved in Russia, and owns almost 20% of Rosneft, one of the country's largest oil producers.
