Widespread boycotts in Muslim countries hammer Western brands

In response to the ongoing conflict in Gaza, there has been a significant rise in boycotts of Western food and beverage brands across Muslim-majority countries, impacting the revenues of multinational companies and their local franchise operators. This wave of protest, fueled by widespread discontent over perceived support for Israel, has led to substantial declines in sales for companies such as Coca-Cola, KFC, Starbucks, Mondelez, and Pizza Hut.

The boycott, which has reached unprecedented levels, is being driven by grassroots campaigns on social media and supported by governments and the Boycott, Divestment, and Sanctions (BDS) movement. This highlights how swiftly social and political campaigns can escalate, affecting even the largest global corporations.

Amarpal Sandhu, CEO of Americana Restaurants, which manages KFC, Pizza Hut, and Krispy Kreme in the Middle East and Kazakhstan, acknowledged the unprecedented nature of this conflict and its effects on business. Despite opening 81 new restaurants in the first half of this year, Americana’s profits for the second quarter plummeted by 40% compared to the previous year.

Luca Zaramella, CFO of Mondelez, confirmed that the boycotts had negatively impacted sales growth in the Middle East by 2% in the second quarter. Similarly, L’Oreal reported a 2 percentage point reduction in growth due to the boycott. Many multinationals have been reluctant to discuss the issue directly, opting instead to downplay the impact or address it vaguely.

Despite their financial resilience, these corporations are not immune to the backlash. Franchise operators in boycotting countries are experiencing severe financial strain. For instance, Coca-Cola Icecek in Pakistan saw a nearly 25% drop in sales volumes in the first quarter of 2024. Similarly, Starbucks’ local operator in Malaysia reported a second consecutive quarterly loss, with revenue down 48% due to the boycott.

The impact of these boycotts extends beyond direct sales losses. In Pakistan, the government has pledged to form a committee to identify and boycott products from companies perceived as supporting Israel. In Turkey, anti-Western sentiment led to a mob attack on a Starbucks location following the assassination of Hamas leader Ismail Haniyeh.

Even in Egypt, PepsiCo faced backlash from an ill-received ad campaign and has been criticized for its perceived insensitivity. The ongoing war in Gaza, combined with a severe economic crisis in Egypt, has exacerbated the decline in sales for many Western brands, with some consumers opting for local alternatives.

As multinational companies navigate these turbulent waters, it is clear that the global boycott movement is reshaping consumer behavior and challenging the dominance of Western brands in the region. The shift towards local and national brands reflects a growing sentiment against perceived Western complicity in the Gaza conflict and underscores the significant impact of geopolitical tensions on global business operations.