Beauty joins the ‘Great Business Retreat’ from Russia

Beauty joins the ‘Great Business Retreat’ from Russia

Most major beauty conglomerates have joined more than 300 companies suspending their business in Russia due to the invasion of Ukraine. 

Led by Estée Lauder Companies on March 7, companies including L’Oréal Group, Coty, Shiseido Group, Beiersdorf, Unilever and Procter & Gamble have subsequently suspended all or some of their business in Russia over the past week. Responding to global public pressure and government-led sanctions, many of the companies announced their withdrawals after initially offering humanitarian support in the previous week. Those that have not fully suspended exports to Russia are leaving open the possibility of more action in the future.  

While ELC’s business suspension included a halt to all business activities as well as shipments to retailers, others are taking a more limited approach to withdrawal. 

L’Oréal Group, for example, is temporarily closing all of its own stores and directly-operated beauty counters, suspending all industrial and national media investments, and closing its brands’ e-commerce sites in Russia, according to a statement released on March 8. Shipments to retailers were not mentioned. 

On March 9, Coty announced it had “suspended investment of any further capital in Russia” and “paused all brand initiatives, as well as media and advertisement.” The company said it does not operate stores, sales counters, e-commerce sites or industrial sites in Russia. It did not state if it is halting exports. Kylie Skin was the latest Coty-owned brand to publicly announce entry into the Russia market, launching in beauty retailer Gold Apple a year ago.

Shiseido Group, one of the brands tagged in a Vogue Ukraine post calling for brands to cut ties with Russia, announced on March 9 via its LinkedIn account that it will “immediately suspend export shipments of our products to Russia from Europe, which is our export hub of all products going into Russia. We will also suspend new investments in Russia such as advertising and promotion.”

Beiersdorf announced on March 9 that it had “suspended our commercial activities of La Prairie in Russia,” as of March 6. In addition, “Effective immediately, [Beiersdorf subsidiary] Tesa will suspend its business in Russia until further notice. We further stopped all advertising in Russia. For the time being, Beiersdorf will only offer essential skin and personal care products to Russian consumers.”

Puig, also tagged by Vogue Ukraine, released a statement on March 8 that it is “making donations to support humanitarian organizations,” but it has not announced a withdrawal of its business from Russia.

On March 14, Kao Corporation announced that it “will suspend export sales to Russia and advertising activities in Russia.” But it will “continue to sell products that can maintain a minimum hygienic life for children and women only,” including diapers and female hygiene products, “to support these most vulnerable groups of society.”

Johnson & Johnson announced on March 4 that it will be undertaking humanitarian efforts including donations of money and products. The company said it is “committed to providing access to our essential medical products in the countries where we operate, in compliance with current international sanctions,” and did not mention any plans for beauty brands in its portfolio.

All companies stated they are continuing to track and assess the situation. 

Sephora stores in Moscow are now listed as “temporarily closed” on Google Maps, following LVMH’s announcement that it will close all stores there, along with other major luxury fashion giants. 

Some Moscow-based stores for the beauty chain Ile de Beauté, which was acquired by LVMH in 2016 and rebranded as Sephora stores, are still listed as open on Google Maps. Others are listed as temporarily closed. LVMH and Sephora did not reply to requests for confirmation.

Unilever and Procter & Gamble announced partial suspensions of their businesses while still making available essential and hygiene products. Unilever has “suspended all imports and exports of our products into and out of Russia,” and is halting media and ad spending and investment. It will continue to domestically produce essential food and hygiene products, it said in a statement. 

Heavy sanctions and a partial ban on Russian banks using SWIFT, the messaging network used for most international money transfers, means that even brands trying to stay in the market may eventually need to pull out of Russia for practical reasons.  

“It will be virtually impossible to take payments if major credit cards no longer operate or to transfer funds [because] Russian banks are disconnected from SWIFT,” said Luca Solca, a senior research analyst for global luxury goods at Bernstein. “Add to this the legal risk of falling on the wrong side of sanctions — maybe just because you accepted a payment in the wrong currency — or becoming a target of retaliation.”

There is also concerted public pressure to withdraw from Russia, especially with the world’s largest consumer brands such as Apple and Nike leading the way. According to survey data from intelligence company Morning Consult, 75% of Americans support brands cutting business ties with Russia. A comprehensive list of which brands are staying is being regularly updated by Yale professor Jeffrey Sonnenfeld, who coined the phrase “Great Business Retreat” in a March 7 Fortune op-ed calling on brands to pull out of the market. He argued that the 1980s withdrawal of over 200 corporations from South Africa in protest of apartheid should serve as an example for action to be taken against Russia. 

On March 9, Ukraine’s government tweeted a list of 50 brands still active in Russia, with Coty and Johnson & Johnson among those named.

Companies that have suspended their operations to varying degrees, including L’Oréal Group, Coty, Shiseido Group, Beiersdorf and Procter & Gamble, have all pledged to continue paying Russian employees. 

Beiersdorf’s announcement said that it is providing “financial and psychological care” to both its Russia and Ukraine employees, stating, “This war is not the choice of the Russian people.”

“We are seriously concerned about the ongoing war in Ukraine and are undertaking our utmost humanitarian efforts to support and protect our Ukrainian employees and their families everywhere as best as possible under these terrible circumstances. That is our priority. This commitment also applies to our employees and their families in Russia. We do our best to take care of them,” read the statement.

However, some proponents of cutting business ties are arguing that this should also extend to Russian employees’ livelihoods.

“The loyalty of employees to their workers is honorable, but on the list of the hierarchy of responsibilities, that’s not No. 1,” said Sonnenfeld in a recent CNBC appearance. “They need to focus right now on peace in the world. And they’re protecting those employees from not suffering violence right now. Suffering some economic distress is a lot better than being bombed.” 

Sonnenfeld also stated, “The idea of these sanctions is to put pain onto the economy. We’re not trying to figure out how to advance the Russian economy right now.” The sanctions are “for the general population to feel enough distress that the economy fails and the government fails,” he added.

Companies have also used varying language when it comes to taking a stance on Russia’s invasion. Some have overtly criticized Russia for the invasion. “We strongly condemn the Russian invasion and the war in Ukraine, which is causing so much suffering to the Ukrainian people,” said L’Oréal Group’s statement. Unilever stated, “We continue to condemn the war in Ukraine as a brutal and senseless act by the Russian state.” ELC stated that it “continues to be devastated by the tragic invasion of Ukraine.” 

Others have opted not to explicitly call out Russia’s invasion in their statements. Coty stated that it “stands firmly with the millions of people impacted by the war in Ukraine and joins all those calling for peace.” 

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Some speculated that making a controversial statement was a calculated ploy to drum up publicity for the new show. 

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Caroline Calloway’s Snake Oil skin care turns out to be … snake oil?
If you don’t know who this is, honestly, you can just keep scrolling. But if you’re already in too deep on the saga that is Caroline Calloway, Vice has the next chapter: A majority of customers claim they have yet to receive the $75 homemade skin-care product — and it has FTC and FDA complaints. Vice even sent it to a lab for analysis after “the sterility of the product was also questionable, given that there was a visible cat hair in one of the product shots Calloway posted to Instagram.” (The lab test found no dangerous microbes.)

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