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US Sanctions May Result In Coke, Pepsi & Other American Brands Banned From Russia

By Mushvig Mehdiyev August 10, 2017

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According to official Coca-Cola data, people in Russia consumed 73 of eight-fluid-ounce (over 17 liters) Coca-Cola Company beverages per capita in 2011 / Coca-Cola HBC Russia

Famous American brands like Coca-Cola and sugary snacks made by Mars Corporation could soon disappear from the shelves of Russian grocery stores if a proposal by one Russian lawmaker gains traction.

Sergey Mironov, head of the center-left “A Just Russia” political party, believes Russia should retaliate against the Countering America’s Adversaries Through Sanctions Act, which passed both houses of the US Congress with overwhelming majorities and was signed into law last week by US President Donald Trump.

The core of Mironov’s idea is an official boycott of American brands in favor of going local.

"Our shop shelves are heaped with foreign brands. Why do we need PepsiCo, Coca-Cola and Mars corporations' products, crammed with God knows what, here in Russia?” Mironov said in a statement issued Tuesday.

Mironov’s party, established in 2006, is in alliance with the ruling United Russia party and has supported President Vladimir Putin’s policies firmly since 2012.

Coca-Cola steadily grew in popularity in Russia over the years. Russians consumed 73 eight-fluid-ounce (or over 17 liters) of Coca-Cola Company beverages per person in 2011, nearly three times higher than in 2001 and seventy times higher than in 1991, according to data provided by the company.

Its success may be due to Coca-Cola’s business acumen. After the collapse of the Soviet Union in 1991, the company launched a long-term investment strategy in what is now the world’s seventh largest economy and the Caspian region’s first. Between 1994 and 1998, the Coca Cola Company opened production plants in five different cities across Russia, including in Moscow. 

In 2001, Europe’s largest bottler, Coca‑Cola Hellenic Bottling Company (Coca‑Cola HBC) acquired all of Coca‑Cola’s plants in Russia as well as its bottling rights. To date, Coca-Cola HBC Russia has invested $5.7 billion in an economy worth $1.268 trillion in GDP. The company currently operates ten plants in Russia, including Eastern Europe’s largest juice production plant, Schelkovo Multon, based in Moscow.  

The Coca-Cola Company, one of the main targets in Mironov’s plan, became a leader in the fast-moving consumer goods (FMCG) market in Russia in 2016 with its iconic soft drink Coke, and was ranked as the world’s third most valuable brand according to Interbrand's 2016 Best Global Brands rankings.

First introduced to Russia in 1979 during the Soviet era, Coca Cola may soon be going the way of communism itself, though.

Mironov believes the ban on American brands would not jeopardize Russia’s consumer market, as domestic producers and manufacturers are expected to fill the gaps, and empty shelves, with local alternatives. 

“Home producers of non-alcoholic drinks, dairy, snacks, confectionery will happily fill the Russian market with their products," Mironov said. 

But not everyone agrees.

Oleg Kouzmin, an economist at Renaissance Capital in Moscow, dismissed Mironov’s proposal and any possibility of Russia fully pushing out American brands that are now global.

“I believe these steps are unlikely. The world is becoming too global to try to abandon the biggest global brands,” Kouzmin told Caspian News. “All of these products are manufactured in Russia, meaning that Russian citizens are employed by these companies and the Russian government’s budget depends on tax revenues from the companies.”

“We can listen to various proposals and steps to be taken as the sanctions story plays out, but these steps are unrealistic,” Kouzmin said.

Mironov’s idea for Russia to hit the US back for sanctions by means like cutting Coke is not a first.

In August 2014, Moscow banned the importation of meat, fish, fruit, vegetables and milk products from the US, Canada, Australia, Norway and the 28-member European Union for a year. The move was retaliation for Western sanctions imposed on Russia, which had been accused of providing weaponry and other support to pro-Russian rebels in eastern Ukraine.

While the economic stand-off did not see Western products disappear from Russia completely, it did reduce the popularity of American brands among Russians. American consumer-product companies announced they were having trouble with sales amidst what was rapidly deteriorating relations with the West, caused in part also by Moscow ordering the annexation of the Crimean peninsula from Ukraine in March 2014.

A poll by SuperJob's Research Center in 2014 revealed that 62 percent of Russian respondents were in favor of the closure of all McDonald’s across the country. The survey was followed McDonald's decision in April of the same year to close three restaurants in Crimea after it was absorbed by Russia.