Anti-Israel boycotts hit McDonald’s, KFC in West Asia and Europe
US fast-food brands including McDonald’s and KFC are facing a challenging business environment in West Asia and some parts of Europe, which are reeling from calls to boycott their brands over alleged ties to Israel during the Gaza conflict.
The situation has fueled tensions in West Asia, leading to an outpouring of support for the Palestinians. Many Muslims in the region have changed their consumption habits since the start of the war, reducing demand for fast food from American retailers.
McDonald’s became the target of boycotts after photos and videos on social media showed its franchise stores in Israel distributing meals to the country’s soldiers following the October 7 attack. Afterwards, the brand’s Saudi franchisee issued statements expressing sympathy for the Palestinians and donated 2 million Saudi riyals ($533,248) to the relief efforts in Gaza. Franchisees in other countries with large Muslim populations followed suit, with several companies making public statements to emphasize their political neutrality.
“Everyone was affected, this is something not many people realized, not just Western brands, everyone was affected by the conflict after October 7,” said Brandon Guthrie, co-founder and general partner at Shatranj Capital Partners, in a podcast with Bloomberg Intelligence Senior Analyst Michael Halen. Still, the impact on McDonald’s and Starbucks was significantly greater because they were more exposed to Egypt, Jordan and Morocco, Guthrie said.
Although McDonald’s did not reveal how much these boycotts cost the company in the fourth quarter, CEO Chris Kempczinski said during an earnings call in February that “the most pronounced impact” occurred in West Asia, as well as in Muslim countries like Indonesia and Malaysia. Some KFC franchises in Southeast Asia have also not been spared from the boycotts. More than a hundred KFC branches in Malaysia had to close temporarily.
Malaysian operator QSR Brands (M) Holdings Bhd. appealed to its large Muslim consumer base that it has more than 18,000 team members in the country, of which about 85 percent are Muslim.
In Pakistan, local water and soft drink brands are being given prominent shelf space and preference at some supermarkets over Coca-Cola and Pepsi, which have been popular drinks in the country for decades. Several posters circulated among Pakistani citizens labeling major multinational companies, including both American beverage brands, as having products linked to Israel.
The can maker for Pepsi and Coca-Cola saw its sales fall 11 percent in the quarter ended March 31, partly due to “dampened domestic demand” due to responses to unrest in West Asia, according to Pakistan Aluminum Beverage Cans in its quarterly report.
As in Asia and West Asia, North Africa has also been a stage of boycotts with visible consequences. According to a report in Arab News, KFC’s debut store in Algeria was temporarily closed in April due to nationwide protests.
In Europe, the impact of boycotts is more difficult to determine. Warsaw-listed AmRest Holdings SE, one of Europe’s largest fast-food companies, said in its first-quarter report that the war in West Asia “could affect consumer confidence and change their propensity to consume.
– Many Muslims in West Asia have changed their consumption habits
First print: May 25, 2024 | 12:41 pm IST