I have a genuine question that maybe somebody with more economic knowledge can educate me in:
How is continuing the sale in Russia helping Russia? As I understand Russia is gaining money on the sales taxes, etc. but the rest of the earnings will go to the US parent company, which cannot be taxed directly by Russia. If Pepsi backs out, wouldn’t operations just be replaced by a rebranded russian company, where all of the earnings would be under russian “sphere of influence”?
I genuinely do not understand why Pepsi backing out is considered bad for Russia. I thought countries generally prefer national companies over foreign ones.
Because Pepsi doesn’t just manifest out of nowhere in Russia. They are brining need for supplies, transportation, repair, maintenance etc.
In other words economic movement and income for the country.
Could some other fully Russian company take over the same thing? Maybe, but not without startup investment and knowledge. All of that isn’t free, and if an economy is unstable, no-one is going to commit money into it.
Maybe, but not without startup investment and knowledge. All of that isn’t free, and if an economy is unstable, no-one is going to commit money into it.
At least the knowledge is already there. Pepsi is not going to take the workers in Russia away with them. And as far as I know the investment is mostly the cost of buying the assets from the western company. For example the russian McDonalds branch just reopened with a new name at the same locations.
Not all the knowledge is there. Some ingredients are imported, in order to protect trade secrets and ensure global consistency.
After Russia took over McDonald’s, customers did notice a change in how the food tasted.
If they imported some ingredients before and then had to switch to local suppliers after the pullout … doesn’t this also benefit Russia, since now all of the production is national and they require less imports?
It is not like making food or soft drinks is really high tech. At worst, it is just going to taste a bit different if the ingredients are different. Or other, already local companies might gain market share.
That depends on if they can keep their customer base.
If your local McDonald’s left town and a place named Burgers-R-Us took its place, would the new restaurant sell as many burgers as the McDonalds did? I doubt it. McDonald’s devotes vast resources to build its brand and get customers into their restaurants. Smaller companies don’t have those resources.
Good point. Thanks for your insights.
Your question is basically “why are embargoes effective”
Collectively shunning an economy cripples it, and it’s most effective when widely adopted.
Pepsi should be ashamed of their actions.
My question was more specific than that. I absolutely understand why it is important to sanction high-tech products and stop Russia from exporting their goods.
But western companies selling non-critical goods inside Russia felt more like russian economic dependancy to western companies to me, which (for me as a layman when it comes to economy) seemed preferable to Russia having an independent economy. Thats where my question came from.
Now I realized that rather than “dependant economy” or “independant economy” the intended goal in this case is “no economy”, although i am doubtful whether that will really work.
