The widespread grassroots boycott campaigns against products and brands supporting Israel in its war on Gaza are starting to show effects as the financial results for the last quarter of 2023 are about to be announced.
Shares of McDonald's fell for the second straight session last Friday, losing 1.83% over the last two sessions, while Starbucks Group's stock also slipped 0.6% in the week's final trading session.
Chris Kempczinski, CEO of McDonald's, stated on Thursday that a number of markets in the Middle East and some outside the region are experiencing a "significant impact on business"; due to Israel's war on Gaza, alongside what he described as "misleading information" about the brand, alluding to the impact of the boycott campaigns.
In a post on LinkedIn, Kempczinski wrote: "In every country we operate, including Islamic nations, McDonald's is proudly represented by local owners, working tirelessly to serve and support their communities, employing thousands of their citizens."
McDonald's found itself a primary target after the company's branch in Israel announced it had provided thousands of free meals to the Israeli military, which sparked outrage among the Arab public.
Acknowledgement
Analysts confirmed to Al Jazeera Net that statements from McDonald's officials about their operations in the Middle East are evidence of the financial impact the boycott has had on their financial results and those of other companies supporting Israel.
Mustafa Fahmi, CEO of Strategy and Emerging Markets at Fortress Investment Group, stated that "these statements are a clear acknowledgment of the boycott’s adverse reflection on McDonald's and other companies like Starbucks."
He added that this could preempt any shock that might emerge when annual financial results for McDonald's and other companies are announced, given the clear and direct impact of the boycott.
Decline
Fahmi pointed out that any negative financial results in terms of revenue, profits, and distributions would lead to a decline in the company's share value.
Following the CEO's remarks, McDonald's shares fell about 1% to close at $291.74 in Thursday's session.
The stock continued to lose value, falling to $289.04 at the end of Friday's session, ranking among the weakest performance stocks at the close with a similar decline of about 1%.
Since the launch of the "Operation Al Aqsa Flood" on October 7, 2023, through Friday, January 5, McDonald's stock has lost in 25 trading sessions and recorded its lowest level during this period on October 12, 2023, when it reached $245.88.
Fahmi expects that the performance of regional branches and franchisees of companies affected by the boycott may have been impacted by at least 70%, given the war and boycott lasting more than 90 days, approximately a full financial quarter.
He expressed his conviction that the effects would extend to the operational strength, employment, and wages of these companies and anticipated these negative impacts to include "at least the first quarter of 2024".
McDonald's stands as one of the world's most famous brands, closely linked to the United States, though the vast majority of its restaurants are owned by individuals or local companies under a franchise system.
By the fiscal year 2022, the company had granted franchise and operating rights for about 40,275 McDonald's restaurants in over 100 countries.
The fast-food chain achieved a total annual revenue of $23.18 billion the year before last.
In a similar vein, shares of Starbucks decreased by 0.6% last Friday, closing at $92.99, which is the lowest level since the November 1st session.
From the launch of "Operation Al Aqsa Flood" to last Friday's session, Starbucks shares have declined in 37 sessions while recovering in another 26 sessions.
The global coffee company's market capitalization lost billions of dollars due to the impact of the boycott, workers' strikes for wage updates, and failed marketing campaigns.
Support for Local Products
While the boycott has affected brands supporting Israel, it has also presented an opportunity to support local alternative products.
There has been increased demand for several local products in Arab countries, with calls to sustain and develop these products to compete in terms of quality and cost.
Some Western brands have felt the impact of the boycott in countries like Egypt, Jordan, and others, which has now spread to some non-Arab nations, including Malaysia.
Walid Faqih, Investment Manager at Al Ahli Brokerage, believes that the boycott campaigns could provide an opportunity for Arab local companies and products, especially if these circumstances are utilized and similar products to those offered by major foreign companies are introduced.
Speaking to Al Jazeera Net, Faqih suggested that similar experiences in Russia, when large global companies like McDonald's and Starbucks withdrew following the war on Ukraine as a form of sanctions, led to the replacement with local products of identical form and style.
Faqih did not rule out the possibility that Arab markets could reach a "replacement" phase of foreign products with domestic ones but emphasized that this requires offering a product of similar quality at a lower price.
He saw that providing an alternative product would enhance the chance of successful boycott campaigns against brands supporting Israel.
