Never Can Say Goodbye. Despite Corporate Boycotts, Western Luxury Brands Are Still for Sale in Russia

In April 2022, the Russian Ministry of Industry and Trade compiled a list of goods the Kremlin deemed too in-demand to keep out of Russia. It included furniture, cosmetics, clothing and footwear, cars and spare parts, industrial equipment, medicines, electronics, household appliances, musical instruments, even weapons. And even though officials warned at the time about the possible risks associated with this workaround solution to the boycotts – among them are the likelihood of an increase in the share of counterfeits and forgeries, problems with warranty and service, as well as logistics problems – quite a number of the name brands that were meant to disappear from the Russian marketplace are still in plentiful supply. Last year, data shows, $20 billion of goods were imported into Russia through parallel imports.

Cars

Luxury car manufacturers Mercedes, BMW, Audi, and Land Rover were among the first in the global automotive industry to announce their withdrawal from Russia shortly after the full-scale invasion of Ukraine. At first, these companies talked about suspending the export of cars to Russia and suspending production in the country; later, one after another, they began to pack up and sell their factories in Russia. This year, German automakers even announced restrictions on access to software for Russian car dealers.

Nevertheless, foreign cars can still be found in Russian dealerships, albeit at hugely inflated prices owing in large point to the collapse of the ruble.

Models from different years, including 2022-2023, are for sale across the country, in particular, via the Avtodom dealership network. For example, for about $155,844, a Russian buyer can acquire a new 2023 BMW X5 crossover from this dealer (the same car costs about $85,000 in neighboring Finland). According to a manager The Insider spoke to as a prospective buyer, the car is “the most current model, which has just been updated,” in stock and available for viewing or test driving on the same day. Though the manager couldn’t guarantee it would remain in the Avtodom inventory for long, owing to high demand.

Today, the manager told The Insider, BMW “feels better than other manufacturers” in terms of spare parts and service. This year, the German car company expanded its “warehouse and storage” activities in Russia, establishing new supply lines of its spare parts and providing warranty service to Russian customers, in spite of the fact that BMW has had no official deliveries into Russia since March 2022.

The mileage on the X5 The Insider inquired about is about 111 miles, which these days qualifies as brand new because smugglers need to show the car is somewhat used to get it across the border.

Last year, 12% of new passenger cars sold in Russia were brought into the country through parallel imports, according to the industry analytic service Avtostat.

Alcohol

Last year, the Bermuda-based alcohol manufacturer Bacardi announced that, in solidarity with Ukraine, it was suspending the export of its products to Russia and freezing all advertising in the country. However, this announcement of a boycott has quietly disappeared from the pro-Ukraine statement still visible on the Bacardi website. And plenty of the company’s alcohol brands – including not only its signature rum but also whiskey, gin, and tequila products - can still be found in Russian stores.

Moreover, Bacardi is hiring new employees in Russia and, as of June 30, has imported products worth $169 million. Last year, the company’s revenue, according to the SPARK-Interfax, commercial database increased by 8.5% to almost $350 million. Bacardi’s net profit tripled and exceeded $50 million.

Bacardi paid Russia more than $12.8 million in taxes last year According to Ukraine’s National Agency on Corruption Prevention. Kyiv has since added the alcohol brand to its list of international war sponsors.

Meanwhile, Bacardi's competitor, the Campari Group, also continues to import alcohol into Russia, in spite of a similar announcement after the invasion declaring it had stopped all investments, advertising, and promotion in the country and had reduced its business to the minimum necessary to pay salaries to employees. (There are 122 in Russia).

Even companies that have kept their promise not to turn a profit in Russia can still find their items on Russian store shelves. Guinness stout, Baileys liqueur, and Johnnie Walker whiskey are all products of British multinational Diageo. Supplies continue via the parallel import scheme, against the will of the manufacturer.

Foods and Household Goods

The Italian-owned Lavazza Group, which produces coffee and coffee machines, announced that it was suspending its activities in Russia in April 2022. Yet Lavazza coffee is still in the catalogs of retailers operating in Russia.

Similarly, PepsiCo announced that it was suspending the sale of Pepsi-Cola and 7Up soft drinks in March 2022, while still allowing other products, such as infant formula and baby food to be sold, in order, as the company put it, “stay true to the humanitarian aspect of its business.” Yet the banned items are still easily purchasable in Russian supermarkets. In fact, PepsiCo's revenue in Russia grew by 16% in the last year, and its profit quadrupled. However, according to a Pepsi representative, the company has introduced restrictions on the transfer of money to Russia and its withdrawal from Russia.

The American Coca-Cola Company announced the suspension of operations in Russia in March of last year and later stated that it would leave the Russian market completely. Yet Coca-Cola has never engaged in direct sales of its many products in Russia; rather, it has sold Coke concentrate to a third-party distributor, the Swiss-Greek company Coca-Cola HBC, which has the exclusive right to sell Coca-Cola in Russia.

Coca-Cola HBC announced on August 5 that as a result of the U.S. manufacturer’s boycott, it would not be able to continue to use the Coca-Cola brand and products, and the Russian business would be carried out by an entity called Multon Partners. The company will focus on the production and sale of local brands Dobry, Rich, and Moya Semya, using locally produced raw materials.

Multon Partners produces cola under a new brand, Dobry Cola, but based on a different concentrate. Experts attribute this to the fact that the concentrate recipe is one of the Coca-Cola company’s best-kept secrets, as well as logistical difficulties. In December, a source in the beverage market told RBC News that the concentrate with which the original Coca-Cola was produced had run out and there were no new supplies. There were rumors that Coca-Cola continued to supply concentrate to Russia. For example, in November, the Primorye company Millennium issued a customs declaration for the import of concentrates from China. But there is no evidence that the company actually imported the concentrate.

You can still find Coca-Cola under the original brand name in Russia even though the soft drink was not included in the list for parallel imports. Since last fall, all of the company’s products sold in Russia have been imported from various countries, including Iran, the United Arab Emirates, Azerbaijan, Turkey, and Afghanistan, as well as members of the European Union. The peculiarity of the supply of the drink is that prices vary depending on the export country. Thus, there are known cases in which Coca-Cola is sold at different prices in the same store.

American food behemoth Mars, which sells Bounty chocolate bars and Pedigree dog food, has decided to minimize its activities in Russia. Yet both Bounty and Pedigree continue to be stocked across the country and last year Mars increased its sales in Russia by 14%, and its profit increased by almost 60%, to about $290 million.

In March 2022, Unilever announced that it had suspended all imports and exports of products to and from Russia, and also stopped investing in the Russian market and earning profits from its presence there. The company also stopped spending on advertising in Russia. At the same time, Unilever decided to continue supplying essential and hygiene products produced in Russia. The company's net profit last year, according to SPARK-Interfax, almost doubled - to 9.2 billion rubles (almost $100 million).

For that reason, in July, Ukraine added Unilever to its list of “war sponsors.”

Clothing and Cosmetics

In the summer of 2022, Spanish clothing manufacturer Mango said it was abandoning direct sales in Russia and transferring all its stores to franchise partners. However, Russians can still find Mango-branded stores in shopping centers because Mango, unlike other brands, did not prohibit its partners from using its label or purchasing the company’s products.

The German concern Hugo Boss also has its clothes on sale in Russia, despite the fact that the company closed its stores in the country last year. Ditto the Spanish-owned Zara, evidently owing to stocks that pre-date the invasion of Ukraine and remained in Russia when the company suspended operations last year. Zara goods can also be bought online via the parallel import scheme. Russian online retailers Yandex.Market, Ozon, and Wildberries openly boast of the fact that they allow the sale of goods imported in this way on their websites.

The French skincare brand L’Occitane officially left Russia in May last year and later sold the local business to local management. But as early as June 2022, the stores resumed operations under a very familiar name: Локситан, which is just L’Occitane spelled with Russian letters. Furthermore, the company reported that the same goods as before will be available, and new products will continue to arrive in stores. The same luxury items are still for sale; the company simply operates as a separate legal entity under a barely altered new name.