Why Russia Still Has Rum

Initially pausing, Bacardi is back to sending its rum to Russia.

One beverage analyst suggested that Bacardi is taking advantage of the departure of leading alcohol brands. The diminished competition boosted its annual revenue and profits in Russia.

Bacardi is not the only one that remains.

The Russian Boycott

Like he grades students, Yale’s Professor Jeffrey Sonnenfeld has given an A to F to describe the extent to which a long list of companies has withdrawn from Russia since the Ukraine invasion. Tracking more than 1,500 companies, he says that over 1,000 had curtailed operations.

This is the country breakdown:

Meanwhile, others like Bacardi, continue to operate there. The 220 companies that are “Digging In” got an “F” and the 179 that are “Buying Time” have a “D.” Many backtracked after an initial indication they would leave.

Grade: F

Some of the following “Digging In” examples are rather familiar:

• Benetton remains in Russia.
• Clarins continues to sell online in Russia.
• De Cecco has been selling consumer staples.
• Guess increased its presence in Russia by reacquiring local partners.
• Lacoste is still operating.

Grade: D

Including Bacardi, the following are among the 179 companies in the “Buying Time” list:

• Heineken says it is awaiting Russian approval of a sale that will facilitate an exit.
• Mondelez said it is trying to establish a stand-alone business.
• Philip Morris’s CEO said he cannot find any buyers.
• WeWork continues to book workspace.
• Unilever and Nestle say they are selling “essential product.” (but Dr. Sonnenfeld disagrees.)

Our Bottom Line: Command Economic Systems

An East German joke:

“Why aren’t there more robberies in East Germany?”

“Well, you would have to wait for the getaway car for 13 years.’”

When the East German government tried to replicate Levi’s jeans, they couldn’t get it right. The texture reputedly felt like a wood panel. With waists that were too wide and lengths too short, they fit no normal person. In addition, the social side was calamitous. No one wanted to be caught wearing them.

East German jeans reflect the constraints of a command economy. When incentive is tethered by someone telling you what you have to do (and no credit for anything better), so too are quality and creativity. For that reason, even today, we have no demand for Russian cars or fashion or appliances. And, even today, Russia needs its western imports.

Levi’s is among the companies that maintained the Russian boycott as are all of the companies in this graphic:

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My sources and more: Today’s post was inspired by this WSJ article. Closely related, this Yale list of companies observing the Russian boycott had more of the details as did this article from The Washington Post. Please note that parts of “Our Bottom Line” were in a previous econlife post.