Department of International Business

University of Dhaka
International Financial Management
Course code: IB 308
Assignment on Ukraine Russia war impact of performance of MNC

Prepared for
Dr. Suborna Barua
Professor
Department of International Business
University of Dhaka

Prepared by
Md. Masud Rana
ID: 170
Section: B
IB 13th batch

Date of submission: 03-05-2023

Introduction
Although the conflict in Ukraine is a personal tragedy for the Ukrainian people, its economic
effects are felt worldwide. Because of the war and the sanctions that followed, both direct supply
lines between Russia and Ukraine and supply networks that go through Russia to reach Asia
have broken down. As a result, the prices of many raw materials, energy, secondary goods, and
transportation services have gone up by a lot. As the price of raw materials and shipping went
up, businesses had to raise their prices to cover the costs. GlobalData says that the Russia-
Ukraine conflict is putting at risk parts of the income of 130 multinational corporations (MNCs).
As the military onslaught has taken a greater toll on Ukraine, Russia's attack on its neighbor has
prompted unprecedented sanctions and worldwide condemnation.

Effect on food and beverage sector

The war now taking place in Ukraine, which is generally recognized as Europe's breadbasket,
will have an influence on the availability and price of wheat and other grains. According to the
Food and Agriculture Organization (FAO) of the United Nations, Russia provides roughly 20%
of the world's wheat exports and Ukraine about 10%. They produce around 13% of the world's
wheat output as a whole. supply will be further impacted by sanctions on Russia, and Russia may
take countermeasures to cut off supply to the west.
The food and beverage industries in both nations may be significantly impacted by the current
war between Russia and Ukraine. The major effects are
1. Trade restrictions
2. Economic sanctions
3. Disruption of supply chain
4. Decrease in tourism
Due to the aforementioned effects, the financial performance of food and beverage industries
such as Nestle and PepsiCo changes significantly. To reflect the rising costs of the conflict for
western brands that had considered eastern Europe as a growing market, PepsiCo has absorbed
roughly $500 million in charges relating to the effect of Russia's war against Ukraine on its
drinks and snacks operations in the area.
The New York-based consumer products giant, which employs 20,000 people, said in March that
it would stop selling Pepsi and 7Up in Russia but insisted that it had a duty to continue supplying
milk and baby food due to humanitarian reasons. The corporation said that sales of Pepsi-Cola,
7Up, and Mirinda will be suspended. Other items were still being produced by the corporation in
Russia. Additionally, it halts all commercial ventures as well as all advertising and marketing in
Russia. The manufacturing of Pepsi, 7UP, and Mountain Dew in Russia was discontinued in
September 2022, almost six months after PepsiCo Inc. said it would halt sales and production
after Moscow committed tens of thousands of soldiers into Ukraine. Since the war's start 11
months ago, the firm hasn't made any obvious attempts to leave Russia and has kept on selling
chips and dairy goods there.
After Mexico, Russia is the second-largest foreign market for Pepsi. Russia is a crucial market,
which Causes PepsiCo Stock to Fall In 2021, the business earned $3.4 billion in Russia, or
around 4% of its $79 billion in sales. PepsiCo's 2022 annual net income was $8.91 billion, up
16.96% from 2021. In 2021, PepsiCo's yearly net income was $7.618 billion, up 6.99% from the
previous year. We are seeing PepsiCo net income is increased from previous year.

PepsiCo withdrew from Russia as did the majority of other Western companies in response to the
invasion of Ukraine. The Lay's and 7Up manufacturer used to make 4% of all its sales in Russia,
so even if the company still markets certain food items there, the consequences are becoming
more apparent.
The US corporation cites direct expenses of 241 million dollars (230 million euros), which
include lost inventory and factory closures. But on top of that, Russian brand value has
decreased. PepsiCo has recorded costs of 482 million dollars (450 million euros).

Price effect for Russia Ukraine war

After PepsiCo increased prices to reflect persistent inflationary pressures, its first-quarter profits
above Wall Street forecasts. Since the supply chains were disrupted by the pandemic and made
worse by the Russia-Ukraine war, global consumer goods corporations have hiked prices to
combat the skyrocketing costs of everything from aluminum cans to labor and shipping.
Contrary to its earlier this year decision to stop, the Frito-Lay manufacturer also intends to hike
prices in certain areas In the first quarter, Pepsi's average pricing increased 16% while organic
volume fell 2%. As prices rose and consumers paid more for its Doritos chips and Gatorade
drinks on Tuesday, PepsiCo increased its revenue outlook for the year. The multinational food
and beverage company said that it intends to continue reducing product sizes and using other
strategies to control increasing costs since it anticipates costs to increase considerably more in
the second half of the year.
Hugh Johnston, the company's chief financial officer, told that while "we do not expect
commodity prices to decrease for us, only the rate of inflation will get a little bit lighter during
the course of the year." For the quarter that ended on March 25, the business posted adjusted
profits of $1.50 per share on $17.85 billion in sales, above analysts' expectations of $1.38 per
share on $17.24 billion in sales. The business earned profits of $1.29 per share on revenues of
$16.2 billion at same time last year.
Raw milk is one of the main components used by PepsiCo, along with other ingredients made
from crops including maize, wheat, beet sugar, orange, banana, cocoa, sunflower, soya, and
canola. For the war the price of the materials has been increased, as a result PepsiCo also
increased their snacks and other food items.
PepsiCo last 9 years net income chart is below
All numeric number is million of us dollar

PepsiCo net income

14000

12000

10000

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6000

4000

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0
2015 2016 2017 2018 2019 2020 2021 2022

Series 1 Series 2 Series 3

The above chart showing PepsiCo net income from 2015 to 2022PepsiCo pulled Pepsi and other
goods from Russia due to the conflict between Russia and Ukraine. PepsiCo raised the price of
their goods as a result of rising costs for raw materials and other additives. Almost the same as
before, there is presently a need for their items. As a result, they continue to make money like
before. But Russia was their second big market for Pepsi so they lost sales around 4%.
Viewing their income graph below.

Chart Title
100000
90000
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2015 2016 2017 2018 2019 2020 2021 2022

Series 1 Column1 Series 3

PepsiCo annual revenue ( millions of us $)

The graphs demonstrate that PepsiCo is now making a consistent profit from sales. Their net
income is steadily increasing. This is taking place as a result of the market demand being similar
to earlier times when product prices were low.

According to internal corporate correspondence with six employees, Mondelez, Nestle, and
PepsiCo, the makers of Oreos, are facing staff departures in Ukraine and opposition from
workers in eastern Europe who are upset about the firms' choices to continue doing business in
Russia.
The growing employee involvement follows Ukraine's repeated requests for Western businesses
to go above and beyond the present sanctions and sever all business links with Russia. The
mayor of Kviv has referred to such payments to Moscow as "bloody money."
Average stock price of PepsiCo is

Chart Title
200
180
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60
40
20
0
2015 2016 2017 2018 2019 2020 2021 2022 2023

avg. stock price Series 2 Series 3

The graph demonstrates that PepsiCo's share price is steadily rising while remaining relatively
constant. So, it can be said that PepsiCo's management appropriately handled a situation that
was uncertain.

Conclusion
Other than PepsiCo Ukraine and Russia, known as "the breadbasket of Europe," provide food
imports that many developing and emerging market countries rely on to complement domestic
food production. For instance, the top three countries importing Russian wheat in 2018 were
Turkey, Vietnam, and Indonesia. Similar to the previous year, Morocco, the Philippines, and
Indonesia were the top three countries importing Ukrainian wheat. As a result, the volatility
caused by the war will negatively affect the nations that import food. PepsiCo is now doing very
well financially. Their stock price is rising and their market is as strong as it was previously.