By Justina T. Lee, Omer Tamo, and Chloe Mele

US fast food brands including McDonald’s and KFC are facing a challenging operating environment in parts of West Asia and Europe, where there are calls to boycott their brands over their alleged links with Israel during the conflict in Gaza.

The situation has further fuelled 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 war began, leading to a drop in demand for fast food from US retailers.

McDonald’s became the target of a boycott after photos and videos appeared on social media showing that its franchise stores in Israel were feeding the country’s soldiers after the Oct. 7 attack. After that, the brand’s Saudi Arabian franchise issued statements expressing sympathy for the Palestinians and donated 2 million Saudi riyals ($533,248) to Gaza relief efforts. Franchises in other countries with large Muslim populations followed suit, and many companies issued public statements to emphasize their political neutrality.

“Everybody was affected, this is something a lot of people didn’t realize, not just Western brands, everybody was affected by the conflict after October 7,” Brandon Guthrie, co-founder and general partner at Chess Capital Partners, said in a podcast with Bloomberg Intelligence senior analyst Michael Hellen. Still, the impact on McDonald’s and Starbucks was disproportionate because they were more involved in Egypt, Jordan and Morocco, Guthrie said.

McDonald’s did not disclose how much the boycott cost the company in the fourth quarter, but its CEO Chris Kempczinski said on an earnings call in February that the “biggest impact” was in the Middle East and in predominantly Muslim countries such as Indonesia and Malaysia. Some KFC franchises in Southeast Asia were also not spared by the boycott. More than 100 KFC outlets in Malaysia had to temporarily close.

Malaysian operator QSR Brands (M) Holdings Bhd appealed to its large Muslim consumer base with more than 18,000 team members in the country, about 85 per cent of whom are Muslim.

In Pakistan, local water and soft drink brands are being given prime shelf space and preference at some grocery stores over Coca-Cola and Pepsi, which have been popular drinks in the country for decades. Several posters have been circulated among Pakistani citizens labeling large multinational companies, including both American beverage brands, as products linked to Israel.

In its quarterly report, the maker of Pepsi and Coca-Cola cans said its sales fell 11 per cent in the quarter ended March 31, partly due to “subdued domestic demand” because of unrest in West Asia.

Just like in Asia and the Middle East, North Africa has also seen a wave of boycotts, with the results evident. According to a report by Arab News, KFC’s first store in Algeria was temporarily closed amid nationwide protests in April.

The impact of the boycott in Europe is harder to ascertain. Warsaw-listed AmRest Holdings SE, one of Europe’s largest fast food operators, said in its first quarter report that the war in West Asia “may affect consumer confidence, which may change their consumption trends.”

bear the brunt

– The company became the target of a boycott after photos on social media showed McDonald’s stores serving meals to Israeli soldiers.

– In Southeast Asia, over 100 KFC outlets in Malaysia forced to temporarily close

– Pepsi and Coca-Cola can maker’s sales fell 11% in the quarter ended March 31

– Many Muslims in West Asia have changed their consumption habits

first published: 25 May 2024 | 12:41 am First

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