Businesses are profiting from the vacuum created by departing companies
Starbucks’ outlets were purchased by a group of local businessmen, including famous Russian rapper Timati, and have since reopened as Stars Coffee. The logo still features a mermaid, but she now wears a Russian headdress instead of a crown.
“They ask for your name to write on the cup, they shout out your name. Everyone who works there is the same,” says Jonny Tickle, a British man living in Moscow.
Nearly 1,500 Western companies have either fully exited or are in the process of leaving Russia, according to the Kyiv School of Economics.
But their goods, although sold through entirely separate entities, are still widely present in daily life. Some are imported while others are attempted blatant copies. Either way, Russians have moved quickly to profit in their wake.
“Most products and services, or suitable alternatives, remain, even if at higher prices and worse quality,” says Tim Symington, who runs an investigative newsletter on Russia.
Russian businessman Alexander Gorov bought McDonald’s outlets and has rebranded them as “Vkusno i Tochka”, which translates to “Tasty, Full-Stop”. Instead of a Big Mac, it sells a “Big Hit”.
Philip Arkwright, another Moscow resident, says the quality has deteriorated. “There is a small segment of people who refuse to visit the new ‘Russian’ McDonald’s,” he says. But the restaurants are busy.
Yum! Brands, the parent company of KFC, sold its Russian KFC business to Smart Service, a Russian company led by Konstantin Yurievich Kotov and Audrey Eduardovich Oskolkov.
It is now rebranding the restaurants as Rostik’s. “The dishes we make are completely the same as KFC,” Kotov told RBC news.
Rostik’s branding is also red, black and white, in the same style as KFC. An opening event at one outlet featured a giant cake in the shape of a popcorn chicken bucket.
There is a surreal parallel with the mass privatisation of state assets in the 1990s following the demise of the Soviet Union.
Just as the new oligarchs accumulated wealth by taking over state property, Russian businessmen are now rapidly acquiring Western assets, supply chains, customer bases and business networks at cheap prices.
Russians have acquired assets from 110 Western companies which have left the country.
Their total value, as defined by their net assets at the end of 2022, was around €35bn (£30bn), according to analysis by Novaya Gazeta Europe – the long-established Russian opposition newspaper which closed in Moscow in March 2022 and relaunched in Latvia.
These purchases have typically taken place at large discounts. In some cases, factory assets have been sold for the symbolic price of €1. According to Novaya-Europe, Vladimir Potanin, Russia’s richest businessman, who is sanctioned by the UK and the US, has acquired assets worth around €16bn.
But even if brands have not sold their assets, companies are moving in to fill the gap they have left behind.
“Shops are realising that companies may have pulled out, but people still want (their goods). Capitalism is the winner. It’s just someone else taking a cut in the middle,” says Tickle.
Adverts for Mamba, a Russian dating app, can be seen at bus stops in the wake of Tinder’s exit. “That’s been around forever but it’s not cool. Nobody used it after Tinder rocked up. I guess now they are trying to make it cool,” says Tickle.
The Swedish furniture shop Ikea has left Russia for good, but Russians can now buy flatpack furniture from Belarussian company Swed House, which brands itself in the iconic yellow and blue.
An Ikea spokesman said: “IKEA has nothing to do with ‘Swed House’. What we can see is that they are trying to leap in and serve IKEA customers, and that they are clearly inspired by IKEA.
Inter IKEA Systems B.V., which is the owner of IKEA’s intellectual property, is looking into “potential actions” to ensure its trademark rights are honoured.
Even Barbie-mania hit Moscow. Bars and clubs across the city have had themed nights encouraging pink fancy dress, says Tickle.
The recent film will not be released in Russia, but local voiceover company Red Head Sound has announced it will dub the movie. “There is a strange quirk in Russia that when actors star in their first movie, they get given a voice – one voice actor normally works with a Western actor for their whole career,” says Tickle.
Margot Robbie’s Russian voice double is called Tatiana Shitova.
Weirdly, as shops have changed their supply chains, some new Western products have appeared for the first time. “There is actually some stuff here now that was never here before. I had never seen a Wispa chocolate bar before. Now they are everywhere,” says Tickle.
Mondelez, the parent company of Cadbury, which makes Wispa bars, has continued operations in Russia, arguing that its operations would simply be taken over by another party. Its aim is to make its Russian business a stand-alone entity before the end of the year.
The company said Wispa bars are made in the UK and not exported to Russia, but make it into the country ‘via a third party which unfortunately is beyond our control”.
Last year, Putin introduced the parallel imports programme, which allows the import of goods, such as warships and consumer goods, that were originally sold into other markets.
Because of the free trade agreement across the Eurasian Economic Union, Russians can get hold of goods via countries such as Armenia and Kazakhstan, regardless of whether Western manufacturers have consented.
Coca-Cola has also exited Russia. However, Coca-Cola HBC – a bottling company – is still in the country, but has renamed its Russian division Multon Partners and has switched to making a different local soft drink called Dobry Cola (“Good” Cola), which is for sale in shops.
But often, Russian residents can still get the originals. “You go into a shop and you will see this Dobry Cola, but next to it there will be some of the proper stuff from Kazakhstan,” says Tickle.
Imports are coming from the likes of Georgia, Armenia and Azerbaijan. “There is also coke with labels written in Arabic,” says Tickle.
A Coca-Cola spokesman said: “We have not authorised imports of Coca-Cola brands into Russia. Our actions to prevent any unauthorised imports are limited by regulatory factors linked primarily to free trade within the Eurasian Economic Union.”
By December last year, Russia’s Federal Customs Service estimated $20bn of goods had been imported via parallel imports since March 2022.
Data shows a sea change in Russia’s trading routes.
Tatiana Orlova, lead emerging markets economist at Oxford Economics says the dollar value of exports from the UK, the US, France, Germany to Russia between January and May were down by 44.6pc, 73.2pc, 46pc and 42.7pc year-on-year respectively.
Exports from China, India and Turkey rose by 70.1pc, 65.7pc and 129.4pc across the same period. Exports from Armenia were up by 234pc.
But the costs have become prohibitive. “These imported versions of Coca-Cola cost two or three times more than they used to,” says Arkwright.
Some people are turning to private import services, paying people to drive in used cars from Europe, as this is cheaper than purchasing new cars from dealerships, says Arkwright
But even this tactic cannot offset the toll of the weak currency. “Two years ago, one could purchase a good used BMW SUV for about RUB 3m, but these days the price has doubled,” says Arkwright.