Home News Global Economic Boycotts Are Profoundly Impacting Corporate Earnings

Global Economic Boycotts Are Profoundly Impacting Corporate Earnings

by internationalbanker

By Cary Springfield, International Banker


In early February, McDonald’s announced that sales growth for the fast-food chain’s operations in the Middle East, China and India during last year’s final quarter reached 0.7 percent, well below market expectations of 5.5 percent. The underwhelming performance can be directly attributed to the condemnations from these regions of the global fast-food chain’s decision to provide thousands of free meals to the Israeli military amidst a brutal military assault being carried out in the Palestinian territories to this day. And with several Western companies now firmly in the crosshairs of economic boycott movements worldwide, corporate earnings may remain subdued for as long as the bombardment continues.

Indeed, McDonald’s slump came in the wake of customer calls for boycotts that have echoed across Muslim countries in response to its perceived support for Israel’s military campaign in Gaza, which has claimed the lives of around 30,000 civilians to date, including 12,000 children, and which shows little sign of ending soon. Chief Executive Officer Chris John Kempczinski confirmed on a conference call that the conflict had had a “disheartening” impact on company sales in Middle Eastern countries and other Muslim-majority nations, including Malaysia and Indonesia. “So long as this conflict, this war, is going on…we’re not expecting to see any significant improvement in this,” Kempczinski acknowledged. “It’s a human tragedy, what’s going on, and I think that does weigh on brands like ours.”

McDonald’s is not the only Western brand to suffer from its political leanings tied to this particular conflict. Indeed, its mediocre sales announcement came hot on the heels of similarly disappointing results from Starbucks, which saw boycotts of its products in the Middle East and the United States drag down its yearly sales forecasts and cause it to miss market expectations soundly. The world’s biggest coffee chain told investors on January 30 that there was a “significant impact on traffic and sales” in the Middle East due to the war in Gaza. Starbucks’s figures for the first three months of the 2024 financial year also came in below analysts’ expectations. Instead of revenue increasing by 10 percent to 12 percent as per its November projections, its forecast was slashed to 7 percent to 10 percent, while Starbucks also confirmed that global outlets that had been open for at least a year would not grow at the previously expected rate.

During the three weeks after November 16, Starbucks confirmed it had lost more than 9 percent of its market value—or $11 billion—as part of the coffee chain’s longest streak of stock declines since its 1992 initial public offering (IPO). This was partly explained by the resulting boycotts after it sued its labor union, Starbucks Workers United, in October over a social-media post that expressed support for Palestinians, which, in turn, prompted a worldwide backlash against the coffee firm across social-media platforms. “Amid an ongoing boycott due to the Israeli occupation’s aggression against the Gaza strip, the undercurrent of discontent signals a challenging brew for the company’s future,” an industry analyst told the Economic Times on December 7.

Most significantly, it is in the same region as the hostilities themselves that the most fervent societal actions against Western corporations seem to be taking place, with both McDonald’s and Starbucks facing dwindling customer demand in Lebanon, Saudi Arabia, Morocco, Turkey and Jordan, as well as in other key Muslim-majority markets, such as Malaysia and Indonesia. However, these two popular companies are not the only ones facing financial consequences from global boycott movements. On the contrary, they are just two of a growing list of companies being targeted due to evidence that they or—in the case of US companies in particular—their governments are actively supporting Israel, including tech giants Google, Amazon and Dell; fizzy-drink manufacturers Coca-Cola and Pepsi; and popular food companies Domino’s, KFC (Kentucky Fried Chicken), Pizza Hut and Burger King. Attacks and vandalism on chain stores across the world have also been recorded.

Will the boycott movements achieve the permanent changes they seek? There already appears to be a considerable amount of clarification, backtracking and statements issued by the companies that have been materially impacted. “While I am grateful for so much, I am concerned about the state of the world we live in,” Laxman Narasimhan, chief executive of Starbucks, wrote in an end-of-year letter to employees. “There are conflicts in many parts. It has unleashed violence against the innocent, hate and weaponized speech, and lies—all of which we condemn. Cities worldwide—including North America—have seen escalating protests.”

The company’s vice president and chief partner officer, Sara Kelly, also said on October 18, “As a leadership team, we want to again express our deepest sympathy for those who have been killed, wounded, displaced and impacted following the heinous acts of terror, escalating violence and hate against the innocent in Israel and Gaza this week.”

McDonald’s franchises in Saudi Arabia, Oman, Kuwait, the United Arab Emirates (UAE), Jordan, Egypt, Bahrain and Turkey, meanwhile, have been quick to distance themselves from the company’s Israeli operation and collectively pledged more than $3 million in support of Palestinians. “Let us all combine our efforts and support the community in Gaza with everything we can,” McDonald’s Oman franchise, which donated $100,000 towards humanitarian relief efforts in Gaza, posted on X. “We ask God Almighty to protect our beloved country and all Arab and Muslim countries from all the evil and hate.”

As for realising more permanent change, protest movements such as the Palestinian-led Boycott, Divestment and Sanctions (BDS) continue to organise demonstrations all around the world. BDS itself draws from the lessons learnt during the global boycott movement against South Africa, where a system of apartheid—racial segregation of the African and other non-white populations of South Africa by white settlers—was in place between 1948 and 1994. Beginning in 1959, the Boycott Movement persuaded customers not to purchase apartheid goods and pressed for an international boycott of South African products. By the 1980s, the movement targeted UK fashion chains, including Marks & Spencer, Next and Austin Reed, ultimately leading to several firms refusing to sell South African goods and imports of South African goods plummeting.

“Inspired by the South African anti-apartheid movement, the BDS call urges action to pressure Israel to comply with international law,” BDS explains on its website. “BDS is now a vibrant global movement made up of unions, academic associations, churches and grassroots movements across the world. Since its launch in 2005, BDS is having a major impact and is effectively challenging international support for Israeli apartheid and settler-colonialism.”

BDS continues to engage in economic and cultural boycotts against Israel, financial divestment from the state and government sanctions as part of a maximum-pressure campaign on Israel’s government “to abide by international law and end its controversial policies toward Palestinians—policies now described by some human rights experts and legal scholars as apartheid”. With the Israeli economy especially dependent on international trade and investment, moreover, protest movements also seek to establish international economic boycotts by pressuring private companies to end their business ties to Israel. “Many international companies such as G4S and HP profit from helping Israel to maintain its system of apartheid and settler colonialism,” BDS has also noted. “Campaigns against and divestment from international companies increases the pressure on them to end their complicity with Israel’s oppression of Palestinians.”

Among BDS’s most successful endeavours has been the significant divestment from weapons manufacturers, such as Elbit Systems (the primary arms supplier to the Israel Defense Forces [IDF]), by companies, investment funds and public institutions that the movement has lobbied in recent months, including Norway’s largest pension fund, KLP (Kommunal Landspensjonskasse Gjensidig Forsikringsselskap); New Zealand Superannuation Fund (NZSF); Dutch and Danish pension funds; HSBC; and AXA.

In November, the Australian Royal Melbourne Institute of Technology (RMIT) university confirmed that it no longer had any partnerships with Elbit, having previously announced partnership projects in 2019 and 2022. “This is a significant victory for the Boycott, Divestment and Sanctions movement in Australia,” Hilmi Dabbagh of BDS Australia stated after the confirmation. “Australian universities have been put on notice that they will be targeted if they partner with any Israeli company or institution complicit in human rights abuses and attacks on Palestinians.”

Whether such actions can lead to any material improvements in what has been one of the world’s most fractious situations over several decades remains to be seen. Nonetheless, there are signs that important stakeholders are more wary of supporting potentially malign actors than before the war broke out. While the specific impacts of boycotts are “very hard to verify or quantify…it is definitely something that investors are thinking about these days”, Danilo Gargiulo, senior research analyst at AB Bernstein, recently told the Financial Times. “Typically, [boycotts] are fairly limited in terms of geographical reach and duration. But I will put a caveat here, because we are living in a different day and age today compared to even a few years ago, given the rising geopolitical tension we are seeing worldwide.”


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