Sharp dip in Starbucks and McDonald’s sales amid anti-Israel boycott

Fewer people are buying McDonald’s, which has faced boycott calls sparked by its franchises providing free meals to Israeli soldiers amid Tel Aviv’s genocidal war on Gaza.

In a report released on July 29, the fast-food giant announced that its global sales had dipped for the first time since the final quarter of 2020, during Covid-19 lockdowns.

The report revealed that the net income of McDonald’s decreased 12 percent to a little over $2 billion in the second quarter of the year (April-June).

Although the losses were attributed in part to falling “guest counts” due to “strategic menu price increases”, McDonald’s has recognised the impact boycott calls have had on their sales. In a Linkedin post published at the beginning of the year, McDonald’s CEO Chris Kempczinski warned of the “meaningful business impact” the war had on the Middle East and some other markets.

On July 29, during an earning calls for recent quarterly results where top executives speak to securities analysts, Kempczinski confirmed that the negative impact was persistent.

“In several markets, we also continue to be negatively impacted by the war in the Middle East,” Kempczinski said.

The McDonald's CEO indicated that those “external pressures” negatively affected their quarterly performance, leading to declines in comparable sales globally and in each segment.

“France is one of the markets that has a higher Muslim population. And so when you think about the Middle East, the impact that we're seeing in France has been more than maybe in other markets because of that population,” Kempczinski added.

McDonald’s first drew boycott calls when the brand’s Israeli franchises provided free meals for Israeli soldiers at the onset of Israel’s genocidal war on Palestine’s Gaza, which has so far killed almost 40,000 Palestinians.

The Palestinian Boycott, Divestment, Sanctions (BDS) movement had called for the boycott of the brand in January.

On July 30, the movement celebrated the latest news of the sales drop in a post on X.

BDS movement is a global campaign that advocates for economic and political pressure on Israel to address human rights violations and injustices against Palestinians.

Founded in 2005, the movement calls for boycotts, divestments, and sanctions against Israeli entities to exert pressure on the Israeli government to comply with international law and human rights standards.

Starbucks sees ‘headwinds’ due to ‘misperceptions’

Starbucks is another major chain whose sales has borne the brunt of the pro-Palestine boycott calls.

The Seattle-based coffee giant’s sales in North America and the rest of the world fell by 2 percent and 7 percent respectively in the April-June quarter, with a 23 percent decline in total international profits, according to a recent announcement.

Although economic pressures, market conditions and operational costs were mentioned among the reasons behind the decline, Starbucks has also hinted at the impact of boycott calls had on its sales in the Middle East.

“Headwinds persist in the Middle East, Southeast Asia, parts of Europe driven by widely discussed misperceptions of our brand,” Starbucks CEO Laxman Narasimhan said in a quarterly call on July 30.

Narasimhan had signaled these challenges as early as January 2024, three months into the onslaught in Gaza, while the company was grappling with protests in and outside its stores worldwide.

At the time, he pointed to a negative impact on its sales in the Middle East in an earnings call, adding “events in the Middle East had repercussions in the US, driven by misperceptions about our position.”

The coffee giant has long faced criticism in the Middle East, Southeast Asia and parts of Europe, exacerbated since October 2023, when it sued its union, Workers United, for posting “Solidarity with Palestine!” on X.

Starbucks, in a statement, accused its union of “reflecting their support for violence perpetrated by Hamas,” under its “name, logo and intellectual property” and damaging its reputation.

The union then countersued Starbucks, accusing the company of defaming the union by “implying that it supports terrorism and violence.”

Pro-Palestine activists have long argued that former Starbucks CEO Howard Schultz, the largest private shareholder in the company, is a significant investor in Israel. Starbucks dismissed those claims.

The lawsuit intensified the existing stigma surrounding the coffee giant’s image, prompting widespread calls from pro-Palestinian groups to stop buying from the chain.