Anti-Israel boycotts hurt KFC and McDonald’s in Asia and Middle East

McDonald’s became a target of boycotts after photos and videos on social media showed its franchised stores in Israel giving meals to the nation’s soldiers following the October 7 attack.

US fast food brands, including McDonald’s and KFC, are facing a challenging operating environment in Asia, the Middle East and some parts of Europe weighed by calls to boycott their products due to perceived links to Israel amid the conflict in Gaza.

Many people in the Middle East changed their consumption habits since the war started, slashing demand for fast food from American retailers.

McDonald’s became a target of boycotts after photos and videos on social media showed its franchised stores in Israel giving meals to the nation’s soldiers following the October 7 attack. 

“Everybody got impacted, this is something not many people realised, not just western brands, everybody got impacted by the conflict post October 7,” Brandon Guthrie, co-founder and general partner at Shatranj Capital Partners, said. Still, the impact to McDonald’s and Starbucks was significantly higher as they were more exposed to Egypt, Jordan and Morocco, Mr Guthrie said.

While McDonald’s did not reveal how much these boycotts cost the company during the fourth quarter, its chief executive Chris Kempczinski said in February that “the most pronounced impact” was in the Middle East, and also saw a hit in Muslim countries like Indonesia and Malaysia.

Some franchises of KFC in southeast Asia have also not been spared from the boycotts. More than 100 KFC outlets in Malaysia were forced to close temporarily.  

In Pakistan, local water and soft drink brands at some grocery stores are being given prominent shelf space and preference instead of Coca-Cola and Pepsi. Multiple posters circulated among Pakistani citizens that label large multinational companies, including both the US beverage brands, as Israeli-linked products.

Can maker for Pepsi and Coca-Cola saw its sales drop 11% in the quarter ended March 31 partly due to “dampened domestic demand” from reactions to the Middle East unrest, Pakistan Aluminum Beverage Cans has said. 

North Africa has also been a stage of boycotts with visible consequences. KFC’s debut store in Algeria was temporarily closed amid nationwide protests in April. In Europe, where public opinion is less homogenous, the impact of boycotts is harder to ascertain. 

Warsaw-listed AmRest Holdings, one of the largest fast food operators in Europe with brands including Burger King, KFC and Pizza Hut, said in its first-quarter report that the war in the Middle East can “affect consumer confidence, changing their propensity to consume and the way they consume” though it stopped short of quantifying how this uncertainty has so far impinged on performance.

One European country where the impact is “meaningful” is France, according to Mr  Kempczinski at McDonald’s. While “everybody is on a trendline that is recovering”, McDonald’s and Starbucks may take until the end of the year to recover as the setback was bigger for them, Mr Guthrie said. 

Bloomberg