Category: Coffee & Tea

KANSAS CITY, MO. – Add PepsiCo Inc., Coca-Cola Co., McDonald’s Corp., Starbucks Corp., Yum! Brands Inc. and Papa John’s International Inc. to the growing list of companies suspending some operations in Russia over that country’s invasion of Ukraine.

Ramon Laguarta, chief executive officer of PepsiCo Inc., Purchase, NY, said in an email to employees on March 8 that the company would suspend the sale of beverages like Pepsi Cola, 7UP and Mirinda as well as capital investments and all advertising in Russia.

“As a food and beverage company, now more than ever we must stay true to the humanitarian aspect of our business,” Laguarta wrote. “That means we have a responsibility to continue to offer our other products in Russia, including daily essentials such as milk and other dairy offerings, baby formula and baby food. By continuing to operate, we will also continue to support the livelihoods of our 20,000 Russian associates and the 40,000 Russian agricultural workers in our supply chain as they face significant challenges and uncertainty ahead.”

Laguarta added that PepsiCo has suspended operations in Ukraine and is working to provide aid to Ukrainian refugees in neighboring countries through donations to aid agencies and the ramping up of production at other PepsiCo manufacturing plants in Europe.

The Coca-Cola Co., Atlanta, released a brief statement March 8 that it was “suspending its businesses” in Russia, but did not provide details.

McDonald’s temporarily will close all its restaurants in Russia and pause all operations in that market, according to an email sent March 8 by Chris Kempczinski, CEO, to employees and franchises.

On the same day, Kevin Johnson, president and CEO of Starbucks, wrote employees saying the company was suspending all business activity in Russia. The company has approximately 130 locations in the country.

“Our licensed partner has agreed to immediately pause store operations and will provide support to the nearly 2,000 partners in Russia who depend on Starbucks for their livelihood,” he wrote.

Russia’s invasion of Ukraine also drew a reaction from Yum! Brands. The owner of the KFC, Pizza Hut and Taco Bell brands suspended all investment and restaurant development in Russia.

In Russia, McDonald’s at the end of 2021 had 847 restaurants with 84% operated by the company. The chain had 108 in Ukraine, all operated by the company. The two countries accounted for 2% of McDonald’s systemwide sales in 2021.

“We understand the impact this will have on our Russian colleagues and partners, which is why we are prepared to support all three legs of the stool in Ukraine and Russia,” Kempczinksi said of restaurants closing in Russia. “This includes salary continuation for all McDonald’s employees in Russia.”

Chicago-based McDonald’s also is paying full salaries to Ukrainian employees, has donated $5 million to an employee assistance fund and is supporting relief efforts by the International Red Cross.

“Across the rest of Europe, we will stay focused on how McDonald’s can best help those in need, both now and in the future,” Kempczinski said. “We have already seen extraordinary leadership by our Ukrainian and Russian teams, and I know the rest of the McDonald’s system stands ready to support the large number of refugees who have been displaced by this conflict.

“As we move forward, McDonald’s will continue to assess the situation and determine if any additional measures are required. At this juncture, it’s impossible to predict when we might be able to reopen our restaurants in Russia. We are experiencing disruptions to our supply chain along with other operational impacts. We will also closely monitor the humanitarian situation.”

Louisville, Ky.-based Yum! has about 1,000 KFC restaurants and 50 Pizza Hut locations in Russia. Independent operators run nearly all the restaurants under license or franchise agreements. Yum! is donating $1 million to the Red Cross, is activating a disaster relief fund to support Ukrainian franchise employees and is matching donations from employees to charities providing relief in Ukraine.

“McDonald’s and other fast-food outlets are under pressure to withdraw from the Russian market,” said Ramsey Baghdadi, a consumer analyst for GlobalData, March 8. “However, this is easier said than done for the fast-food industry. Russia represents approximately 0.7% of the global fast-food restaurant’s value in 2020. Such a small proportion of value generation in Russia tells us that fears of losing sales is not the main factor at play here.

“The challenge that foodservice providers have is the very nature of their business model. Fast-food chains such as McDonald’s and KFC often have complicated agreements with their outlets as a large proportion of them are franchises and are not enterprises. So, it becomes a much more challenging negotiation to completely stop operations compared to other industries.”

A GlobalData consumer survey released in March showed consumer concern for social causes, however.

“As 72% of consumer purchases are driven by a brand’s ethics or support shown toward a social cause, it becomes difficult for these companies to balance consumer expectations and their operational needs, putting pressure on international fast-food restaurants,” Baghdadi said.

On March 9, Louisville, Ky.-based Papa John’s International added itself to the list of corporations suspending operations in Russia. 

The brand committed to providing aid and is actively supporting humanitarian efforts through financial contributions and the donation of dry goods and ingredients to feed refugees in Eastern Europe through a partnership with World Central Kitchen.

Papa John’s suspended all corporate operations in Russia and stopped all operational, marketing and business support to, and engagement with, the Russian market. Papa John’s International does not own or operate any restaurants in Russia. Its Russian restaurants are all owned by independent franchisees, and a master franchisee who controls operations and provides all supplies and ingredients for the restaurants through a supply chain that it owns and operates.

Papa John’s International is not currently receiving any royalties from these franchised stores in Russia. 

Like much of the world, Papa John’s condemns aggression and violence and hopes for a peaceful resolution to the crisis in Ukraine, the company said.

SEATTLE — Starbucks Corp. pulled its new breakfast chicken sandwich less than a week after launching the item nationwide. The company issued a voluntary stop sell for its chicken, maple butter and egg sandwich on June 26, saying it failed to meet quality standards.

Employees were instructed not to donate, sell or allow anyone to eat any of the product, according to the company. The product debuted on menus across the country on June 21.

“We issued a voluntary stop sell and discard on the chicken, maple butter and egg sandwich because the product didn’t meet Starbucks quality standards,” a Starbucks spokesperson told Food Business News the sister publication of MEAT+POULTRY. “We are committed to a high level of quality in the products that we serve and always act with an abundance of caution whenever a product or quality issue is raised.”

Unverified reports that the sandwich made employees and customers feel ill have circulated on social media. Starbucks said claims the item caused specific illness are false.

“This is not an FDA issued recall nor is it related to Salmonella or Listeria contamination,” the spokesperson said. “The quality issue that was identified by Starbucks would not lead to foodborne illness and any reports linking the stop sale to illness are inaccurate.”

The chicken sandwich was part of a broader push to improve food sales for the Seattle-based company. Increasing orders that couple food with drinks is one way Starbucks aims to improve its average ticket size. Food sales in the second quarter ended March 31 grew 25% year-over-year, contributing to a 7% increase in average ticket.

NEW YORK — Growing Starbucks’ food business has long been a goal for many of the company’s past chief executive officers. But as the company’s business has diversified through the surge in drive-thru, mobile and delivery sales, growing the food business has become a priority for new CEO Laxman Narasimhan.

Speaking Dec. 5 at the Morgan Stanley Global Consumer & Retail Conference, Narasimhan identified some of the challenges and opportunities he faces to grow the company’s $6 billion food segment.

“If you look at the US business, what you now have is a business that through COVID has evolved enormously,” Narasimhan said. “I mean it’s got a digital footprint that is much larger than it was. There’s a delivery business that didn’t exist.

“And I think we’re just tapping the surface of it. If you just look at the different occasions when our stores aren’t open and the demand that we have, and we know this through things that we’ve looked at and pilots that we run, there is, in fact, further potential, which we haven’t fully tapped into.”

Food application opportunities for Starbucks include all-day breakfast and snacking, particularly in the afternoon.

“I think there’s a real play in the afternoon that we haven’t fully tapped into yet, and that’s going to require innovation,” Narasimhan said. “It’s going to require digital, it’s going to require customization, it’s going to require attack, and we have the capacity and the ability to do it. It’s an area for us that will be a big growth opportunity for us going forward.”

Speaking Nov. 2 at Starbucks’ “reinvention update,” Brady Brewer, vice president and chief marketing officer, added, “snacking, it turns out, is one of the fastest-growing macro consumer trends in the US, reaching now a $110 billion market segment. We know our customers are looking for snacks and particularly wholesome and premium snacks. So, in addition to new grab-and-go food products, we’ll also offer a widening snack selection.”

Helping the company achieve its food goals, Narasimhan said, are improved warming ovens and implementation of Starbucks’ Siren System. Siren is intended to simplify tasks in both the company’s beverage and food platforms. With the system, the time it takes to make a mocha Frappuccino is reduced to 35 seconds from 83 seconds, according to the company, and the time to warm a breakfast sandwich or egg bite also is reduced. A key to speeding the food warming process is the food is warmed and served in the same packaging.

But despite the emphasis on food, Narasimhan also emphasized that beverages are the heart of Starbucks’ strategy.

“It (food) will always be an attach business for us,” he said. “We’re always beverage first.”

SEATTLE — Brian Niccol will take over as the chief executive officer of Starbucks Corp. on Sept. 9. He will replace Laxman Narasimhan, who is stepping down as CEO “effective immediately,” according to the company.

Rachel Ruggeri, chief financial officer, will serve as interim CEO until Niccol starts.

Niccol is currently the chairman and CEO of Chipotle.

“We are thrilled to welcome Brian to Starbucks,” said Mellody Hobson, Starbucks board chair. “His phenomenal career speaks for itself. Brian is a culture carrier who brings a wealth of experience and a proven track record of driving innovation and growth. Like all of us at Starbucks, he understands that a remarkable customer experience is rooted in an exceptional partner experience. Our board believes he will be a transformative leader for our company, our people, and everyone we serve around the world.”

Starbucks has been challenged as same-store sales have declined. During the third quarter of fiscal 2024, Starbucks’ global comparable same-store sales fell 3%, driven by a 5% decline in comparable transactions that partially was offset by a 2% increase in average ticket. In addition to the 2% same-store sales decline in the United States, the company experienced a 14% decline in China.

For the quarter ended June 30, Starbucks earned $1.05 billion, equal to 93¢ per share on the common stock, and down from the same period of the year before when the company earned $1.14 billion, or 99¢ per share.

Quarterly sales ticked down to $7.52 billion from $7.56 billion the year before.

Brian Niccol joined Chipotle as CEO in February 2018.

Niccol established his career at Procter & Gamble, where he spent a decade in several brand management roles. In 2005, he moved to Yum! Brands, taking on leadership positions at Pizza Hut and Taco Bell. He became Taco Bell’s president in 2013 and was promoted to CEO in 2015. Under his leadership, Taco Bell introduced several product innovations, including breakfast, and launched a digital platform featuring mobile ordering and payment.