How has the FMCG sector’s response to the Ukraine war shaped its reputation?
A clear correlation can be found between the immediate reaction of big FMCG firms to the Russian invasion of Ukraine and their standing with stakeholders in the early months of the crisis. And these impacts could easily translate to sectors beyond FMCG, offering a salutary lesson to other industries of what stakeholders expect
In the wake of Russia’s invasion of Ukraine in February 2022, the imposition of international sanctions against the aggressor, alongside pressure from stakeholders to take action, saw more than 1,000 global companies curtailing business activities in the country. The degree to which they abandoned Russia, however, varied in its scope.
And there was a direct impact on the reputations of those organisations choosing a partial withdrawal. As more companies pulled out, those continuing operations in Russia became newsworthy, and attracted stakeholder backlash – including calls for boycotts.
This pattern is demonstrated by the decisions taken by, and subsequent sentiment towards, some of the world’s largest fast-moving consumer goods (FMCG) companies. In July 2022, alva published insights into the reputational impacts of the Russia-Ukraine war on the FMCG sector, highlighting key factors driving consumer, shareholder and employee opinions and activism.
The reputational impact of the Ukraine conflict on FMCG companies
alva’s analysis of the reputational currency of seven leading FMCG firms over the first six months of the war reveals rapid responses to Russian aggression sparking an uptick in positive reporting around the companies involved. Conversely, the failure of others to cease selling to Russia saw a steep downswing in attitudes towards them.
Both action and inaction had reputational consequences for FMCG firms. When the shock of the invasion first resonated around the word, some were quick to react, ending the majority of their Russian operations. Among them were AB InBev and Heineken, which withdrew from the country at the start of March – the latter sustaining losses of €400m as a result. This move engendered reputational credit that was maintained throughout the crisis, thanks to the positive reporting and high visibility of the companies’ actions.
By contrast, FMCG giants that delayed withdrawal from Russia, including Nestle, Danone and Coca-Cola, faced a decline in sentiment as hostilities escalated, with NGOs, politicians, trade unions and consumers all expressing disapproval. Meanwhile, PepsiCo faced criticism over its decision to supply potato seeds to Russian farmers.
Despite maintaining that they had a responsibility to provide essential items including baby and pet food to Russian citizens, pressure mounted on these firms to withdraw, including a scathing Tweet aimed at Nestle from Ukrainian prime minister Denys Shmyhal. Eventually, boycotts by celebrities, consumers and Ukrainian supermarkets, spearheaded in Twitter campaigns using the hashtags #BoycottNestle, #BoycottCocaCola and #BoycottPepsiCo, forced suspension of many Russian operations by targeted firms.
Mitigating reputational risk through ESG activity
Following downshifts in sentiment towards FMCG companies continuing to operate in Russia, efforts to mitigate reputational damage through positive ESG campaigns had some success. PepsiCo cancelled the potato seed deal, while Danone and Nestle, although continuing to products to Russia, redirected profits from sales of non-essential goods to relief organisations working in Ukraine.
Other FMCG firms employed alternative tactics, alleviating the plight of employees whose livelihoods were threatened by the war and cessation of trade with Russia. AB InBev guaranteed the salaries of 1,812 staff in Ukraine, while Heineken continued to pay 1,800 Russian workers affected by the withdrawal of its operations.
Community support efforts were also undertaken, with Coca-Cola, Danone and PepsiCo donating millions to humanitarian missions supporting Ukrainian communities impacted by the conflict. alva’s analysis reveals that such employee and social initiatives had an impact, with sentiment around Coca-Cola improving to pre-invasion levels following its announcement; Heineken and AB InBev receiving a sharp boost in positive reporting; and reputational redemption occurring across the entire sector in April.
Corporate behaviours shaping stakeholder perspectives
Stakeholder opinion, and subsequently corporate reputation, is in part moulded by the level of visibility surrounding particular issues. In FMCG companies’ response to the Russian invasion of Ukraine, the high visibility of certain topics across print, broadcast and social media channels – notably continued operations, withdrawals and boycotts – had a marked impact on overall sentiment towards the sector, and on individual companies.
The six most discussed issues around the FMCG sector and the Ukraine crisis attracted both positive and adverse reporting, the balance of which skewed towards the negative:
- Continued operations: Companies that persisted in doing business in Russia following the invasion attracted the most visibility, and universally negative sentiment. Those that quickly withdrew received positive coverage, but had less visibility.
- Customer boycotts: Campaigns to boycott specific FMCG companies by consumers, Ukrainian supermarkets, celebrities and politicians attracted high exposure and overwhelmingly negative sentiment.
- Withdrawal or suspension: This issue saw an even split in stakeholder sentiment, with positive reporting of decisions to suspend operations in Russia, but negative reactions among shareholders to the financial cost of doing so.
- Supply constraints: Cost pressures being transferred to consumers in the wake of price rises on raw materials and supply chain restrictions were negatively reported.
- Employee safety: Support for employees affected by the conflict attracted universally positive reviews.
- Community support: Companies that donated to relief efforts were able to mitigate some reputational damage, garnering positive stakeholder reactions.
Lessons in reputation management from the FMCG sector
These drivers are not unique to the FMCG sector. The underlying issues shaping stakeholder sentiment around the crisis in Ukraine translate to other industries. Businesses looking to minimise reputation risk in relation to the conflict would be well advised to note the influence that specific activities have had on the companies highlighted in alva’s FMCG research.
By analysing millions of pieces of content from across more than 150 countries and 100 languages, alva’s Reputation Intelligence solution tracks issues throughout their reporting lifecycle, including mentions in traditional and online media, social posts and government reports. By using machine learning and topic modelling to categorise issues, and natural language processing to score them for sentiment, Reputation Intelligence highlights the direct impact of specific issues on corporate reputation, surfacing current and future reputational risks and opportunities.
By tracking the rapid fall and hard-won recovery of firms within the FMCG sector, alva’s reporting offers a cautionary tale for other sectors looking to insulate themselves from the fallout of future political and economic crises.
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