GAZA (Dispatches) – Boycotts of Western food and drinks brands in Muslim countries are hitting the revenues of multinationals and their franchise operators, exacerbating the impact of a global consumer slowdown on their bottom line.
From Egypt to Indonesia and Saudi Arabia to Pakistan, consumers are shunning goods produced by companies such as Coca-Cola, KFC, Starbucks, Mondelez and Pizza Hut, in protest against their support for the Zionist regime in the war in Gaza, The Financial Times reported.
“This event is unprecedented. The length of this conflict is unprecedented. The intensity is unprecedented,” said Amarpal Sandhu, chief executive of Americana Restaurants, which operates brands such as KFC, Pizza Hut and Krispy Kreme across West Asia and Kazakhstan, on an earnings call on Thursday.
The boycott is the most widespread in recent memory, promulgated through social media and spurred on by governments and Boycott, Divestment, and Sanctions (BDS) movements — underscoring how social campaigns can flare up suddenly and sting corporate behemoths.
During second-quarter earnings updates, many multinationals were hesitant to address the issue head on, referring vaguely to geopolitical tensions, while a few attempted to directly quantify the impact.
Luca Zaramella, chief financial officer of snack maker Mondelez, said the boycotts “remained a headwind”, weighing down West Asia sales growth by 2 percent in the second quarter. Beauty group L’Oréal equally said the boycotts had a 2 percentage point drag on growth in the first half of the year.
“The overarching strategy that many of these companies have undertaken is to suppress the noise around the boycotts,” said Danilo Gargiulo, an analyst at Bernstein, adding, “The last thing you want to do is reveal the impact, and potentially bring further action against their brands.”
While multinationals are able to absorb the hit to sales as a result of their geographic and category spread, their franchise operators in countries where boycotts are rife are getting off less lightly.
Americana Restaurants, which is owned by the Saudi sovereign wealth fund and Dubai-based investor Mohamed Alabbar, said its second-quarter profits were down 40 percent compared with the same period last year, despite opening 81 restaurants in the first half of this year.
“The impact varies across geographies, but we would say the boycott is still there,” Sandhu told analysts. KFC and Pizza Hut did not immediately respond to requests for comment.
Western brands that have spoken out on the boycotts have strongly rejected the perception that they support a particular side in the conflict. Chris Kempczinski, chief executive of McDonald’s, who said at half-year earnings that the war was still “negatively impacting” the business, has previously denounced “misinformation” that was hitting its local operators.
In Pakistan, home of the world’s second-largest Muslim population after Indonesia, the government in July promised to form a committee to identify and boycott products of companies that “directly or indirectly” support Israel or its army.
The move came after thousands of activists last month shut down a thoroughfare near the capital of Islamabad for a week to demand that the government ban all products tied to Israel.