Ukraine-Russia: reputational damage and inflation are key risks for brands

By

Sandra Halliday

Published
Mar 18, 2022

Consumers are likely to boycott beauty brands not being seen to do the right thing in the face of the Ukraine-Russia crisis, a report claimed on Friday. It came at the same time as John Lewis’s boss said the UK could face double-digit inflation due to the crisis and M&S was criticised for its franchised stores in Russia remaining open.

Numerous Western fashion and beauty players have pulled out of Russia due to the ongoing conflict with Ukraine, despite Russia being an important market. And more brands are likely to follow suit “pressured by consumer expectations and faced with an increasingly challenging and uncertain environment”, GlobalData said. 

According to the data and analytics company, 41% of global consumers have said they will boycott a brand if it does not align with their personal beliefs or values and with feelings running very high about Russia, that’s likely to result in action at the checkout.

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“[Beauty] brands taking a firm stance will be favoured by consumers who are willing to boycott those that do not align with their values. LVMH, for example, is exiting the Russian market despite it being estimated to have provided 6.6% of its 2020 cosmetics and toiletries sales, equivalent to over $300 million”, GlobalData said based on its own estimates.

Lia Neophytou, Senior Health & Beauty Analyst at the firm, called exiting Russia “a drastic but necessary move when considering not only the evolving complications of doing business in the market, but also the potential backlash from consumers around the globe if this decision was not made”.

Meanwhile, in a radio interview, John Lewis Partnership Chair Sharon White said Britain could see double-digit inflation as the effects of the war add to already-soaring prices. Higher costs for retailers will lead to price hikes on their store shelves.

UK inflation is already at 5.5% — its highest for three decades — and is predicted to reach nearly 8% by next month. But the John Lewis chief is worried that the current inflation round isn’t as temporary as some think it will be.

White, an economist  and former second permanent secretary at the Treasury, said “we are seeing inflation we haven’t seen in 30 years. Everything you can see in terms of energy prices from the impact of the Ukraine war suggests that we might well end up with double-digit inflation. My big worry is that it ends out being more enduring than anyone expects. So I think inflation is the big macroeconomic washout.”

Finally, a Conservative MP has called on retailer M&S to do more to make sure its stores in Russia are closed. Alicia Kearns said any money generated in the Russian economy is being funnelled into the war in Ukraine. 

The problem for M&S is that it doesn’t operate its stores directly in the country. Like many other businesses, the 48 stores are owned and run by a franchise partner — in this case one based in Turkey — and M&S can’t order it to close them. Cosmetics and personal care company Lush is in a similar situation, with the stores entitled to stay open even though, like M&S, the brand has stopped supplying the outlets.