Despite the boycott, brands continue to profit from Russia

The boycott of Russia gained brand buy-in faster than perhaps any other boycott campaign in history. Immediately after the invasion in February 2022, brands began shutting up shop in Russia. To date over 1,300 brands have curtailed operations in Russia, from Airbnb to Blackrock and Sainsbury’s. 

The inevitability of brands jumping ship

Ending their operations in Russia wasn’t an easy step for many brands. For example, Russia accounted for 7% of McDonald’s global revenue, and initially it had no plans to vacate the region – but after public pressure mounted, including a Yale professor criticising McDonald’s on CNBC, the company announced it would join the mass exodus of brands leaving the country.

Public pressure was significant, including in the UK. A month after the invasion three-quarters of Britons wanted companies to stop doing business in Russia and 41% had considered or were boycotting brands that hadn’t left.

According to Yale, by May 2022 equity markets were rewarding companies that left Russia and “punishing those that remain behind, with divergent stock performance generally corresponding with the degree of Russian exit”.

Companies that dragged their feet and didn’t leave Russia quickly now face an additional problem – the risk of takeover. In April 2023, Putin signed a decree allowing the state to take “temporary” control of assets of companies or individuals from “unfriendly” countries. Russia then took over the subsidiaries of German energy giant Uniper SE and Finland’s state-owned utilities company Fortum.

Danish beer manufacturer Carlsberg A/S had been preparing a sale of the company for a year, with its Russia unit worth almost 10% of Carlsberg’s global revenue, but by July 2023 Putin had signed a decree to seize control of the business by transferring their shares to the government for “temporary management”. “There’s no way around the fact that they have stolen our business in Russia,” said Carlsberg CEO Jacob Aarup-Andersen.

According to Stephanie Baker, author of Punishing Putin, the takeovers showed that “Staying put had gone from a game of Russian roulette to an almost certain corporate death.”

Some brands continue to face criticism for continuing or deepening operations in Russia (such as BT Group, Diesel and Veolia). But on the whole, demands from campaigners calling on international companies to end direct operations in Russia have been overwhelmingly successful, with perhaps no other boycott call worldwide seeing the same level of commitment from global brands. 

Parallel imports – brands are still available in Russia

But ending direct operations in Russia doesn’t always mean the relationship between Russia and brands has ended.

Putin introduced legislation in March 2022 making “parallel imports” possible. This is when branded products are shipped to Russia via an intermediary. This appears to have enabled many major brands to keep profiting from the Russian market, albeit through intermediaries who take a cut.

In April 2024 Al Jazeera published a report showing that brands such as Coca-cola, Lipton, Lindt and Pringles continue to be readily available in Russian supermarkets despite having officially claimed to have left the country.

One feature of parallel imports is that products can be imported to Russia without the permission of the trademark owner. This means that for example Apple products continue being sold in Russia, but instead of being sourced directly from Apple they’re bought through intermediates in, for example, China or Dubai.

Russia claims that in 2022 the value of imports dropped by 8%, whereas independent researchers have estimated a 15-16% drop. But if we trust Russia, (and theoretically more reputable sources like the International Monetary Fund (IMF) which has been accused of having ‘parroted Putin’s fake statistics’,) then Russia’s import value quickly returned to normal. By 2023, Russia claimed import value had reached 99.7% of pre-war levels.

Some commentators argue that Russia has suffered financially, though these comments are seemingly inferred rather than based on financial data.

For example, Tina Casey argued in Triple Pundit that the boycott is “having a demonstrable impact on Russia’s financial ability to wage war”, but her main piece of evidence for this claim seems to be the idea that Russia wouldn’t seize international subsidiaries if it wasn’t struggling financially.

The jury’s out on how much of an impact the consumer boycotts and brand exodus has had on Russia’s economy, and without independent data on its finances it seems we’re left with just speculation.

But what does seem increasingly apparent is that (i) Russia’s economy hasn’t collapsed and (ii) for many brands, the exit from Russia wasn’t a full exit.

Olesya Shmagun from Al Jazeera says “Before the war, Russian subsidiaries of Apple, Samsung and Electrolux were almost exclusively responsible for importing their products. But since February 2022, only about 1 percent of shipments have gone through these official channels, according to customs data.”

Therefore products have found another way to flow into the Russian market, and perhaps that could help shine a light on a new avenue for campaigning.

Could brands be doing more?

Whether campaigners want to weaken Russia’s economy through brands withdrawing from the region or simply keep the invasion in the public eye, Al Jazeera’s report presents a way that campaign demands could be updated to respond to the new problem of parallel imports.

It’s reasonable to assume that many big brands know where their produce is being sold. While we can only speculate, it wouldn’t be surprising if brands knew which of their suppliers are buying in order to sell on to Russia.

So what if, in a new twist for this boycott call, campaigners demanded more than brands just leaving the country officially and called on them to clamp down on intermediaries selling their products to Russia too?