Starbucks has demanded it is impartial, but it has faced a backlash from Palestinian supporters since Israel punished for the 7 October attack by Hamas.
The franchise owner of Starbucks in the Middle East, AlShaya Group, has announced plans for significant job losses, totaling around 2,000 positions, amidst a consumer boycott related to Israel’s conflict with Hamas.
Job Losses Announcement
According to sources cited by Reuters, AlShaya Group intends to lay off approximately 4% of its workforce, which amounts to 50,000 employees across the Middle East and North Africa (MENA) region.
The majority of these job cuts are expected to affect the Starbucks franchise business operated by AlShaya.
In a statement, AlShaya acknowledged the challenging trading conditions over the past six months and described the decision to reduce the workforce as “sad and very difficult.”
Impact of Boycott on Business
The boycotts associated with the conflict have not only affected AlShaya’s operations but have also impacted Starbucks itself due to decreased royalty payments.
These boycotts have led to protests outside Starbucks locations, particularly in the United States, with some customers boycotting the brand over perceived pro-Israel bias.
Starbucks has consistently denied allegations of bias, maintaining that it remains impartial.
However, the chain has faced scrutiny and criticism, particularly after taking legal action against a staff group seeking union rights called Workers United. This action led to further backlash and boycotts, with some customers withdrawing their support.
Financial Impact and Sales Decline
The repercussions of the boycotts were evident in Starbucks’ financial performance, as the company reported missing market expectations for its first-quarter results.
The decline in sales was attributed to the boycotts and protests, which affected the company’s revenue and profitability.
Background and Franchise Ownership
AlShaya Group has held the rights to operate Starbucks coffee shops in the Middle East since 1999.
Despite its long-standing partnership with Starbucks, the franchise owner has been forced to make difficult decisions in response to the ongoing boycotts and challenging market conditions.
Conclusion
The announcement of job cuts at Starbucks locations in the Middle East underscores the broader impact of geopolitical conflicts on businesses and employment.
As the situation continues to evolve, both AlShaya Group and Starbucks will need to navigate the challenges posed by consumer sentiment and market dynamics.