War & Boycotts: Analyzing the Impact on the Foodservice Industry in Kuwait and the Middle East



Product boycotts are a common form of consumer activism where individuals choose not to purchase specific goods as a means of expressing disapproval of a company’s practices. The ongoing conflict between Israel and Hamas has resulted in a notable product boycott, particularly affecting regional businesses such as those in the foodservice industry. In the Middle East, the conflict has triggered consumer protests and boycott movements, leading to decreased foot traffic in American restaurants and impacting sales in the final quarter of 2023. Social media has played a pivotal role in amplifying awareness and mobilizing consumers against brands that have expressed support for the Israel Defense Forces. Consequently, these brands have witnessed a sustained decline in footfall, underscoring a strong public stance against them.

Global Impact

Since the boycott campaigns started in October 2023, there was no clear evidence of the financial impact of the boycott on the brands until they started disclosing their Q4 2023 sales results in January. McDonald’s CEO Chris Kempczinski stated that the 2023 boycott campaign had a crucial impact on their business which resulted in missed sales targets, particularly in the Middle East and Muslim-majority countries like Malaysia and Indonesia. It was also reported that the growth target for sales in the Middle East, India, and China was set at 5.5% in the last quarter of 2023, but only 0.7% growth was achieved. Starbucks on the other hand, adjusted its sales forecast and projected revenue growth for 2024 downwards due to weakening spending in markets like China and the Middle East.

The company now anticipates 7% to 10% growth, down from its previous forecast between 10% to 12%. According to Laxman Narasimhan, Starbucks CEO, during post-earnings call in January, the company registered “significant impact on traffic and sales” in the Middle East due to the conflict. Moreover, Yum! Brands, Inc., the American multinational corporation behind popular fast-food chains such as KFC, Pizza Hut, and Taco Bell, had also faced challenges brought by the war crisis. Yum! Brands, CEO David Gibbs shared in an earnings call that “top-line sales were impacted by the conflict in the Middle East region, with varying degrees of impact across markets in the Middle East, Malaysia and Indonesia.” Although Gibbs emphasized that the impact on sales is only representing a low-single-digit headwind to Yum’s overall sales growth and is expected to diminish in the remaining months of 2024.

Regional Impact

The recent Earnings Presentation released by the Americana Restaurants International PLC (Americana Group) illustrated the impact of the conflict in detail. Americana Group operates 12 brands and 2,435 restaurants across 12 countries, including Morocco, Egypt, Lebanon, Iraq, Kuwait, Kazakhstan, Bahrain, UAE, Oman, Saudi Arabia, Jordan, and Qatar. The company holds regional franchise rights for well-known American brands such as Hardees, KFC, Krispy Kreme, and Pizza Hut. It is important to highlight that while the Americana Group operates the majority of the brands’ outlets in the region, there are instances where different franchisees manage certain brands depending on the country. For instance, Pizza Hut in Kuwait, Qatar, Oman, Morocco, Lebanon, and Iraq is owned by different franchise operators. Similarly, Hardee’s has distinct franchisees in Morocco and Lebanon, whereas Krispy Kreme is exclusively operated by Americana in only six countries (USA, KSA, Kuwait, Egypt, Qatar, and Bahrain).

During the 2023 earnings call, Americana Group’s CFO, Harsh Bansal, highlighted a negative full-year like-for-like revenue growth primarily attributed to the adverse impact of the regional geopolitical situation in the fourth quarter. This impact resulted in a significant revenue decline of 15% in the last quarter of 2023, amounting to a loss of 128 million USD. Notable drops were observed in revenue for the months of October (-9.4%), November (-29.3%), and December (-26.6%). Among Americana’s major brands, which are KFC, Hardees, Pizza Hut and Krispy Kreme, KFC witnessed the highest decline with a quarter-on-quarter growth of -19% in the last quarter followed by Hardees with -18%. Pizza Hut and Krispy Kreme also registered substantial degrowth, with -10% and -8%, respectively.

The earnings report also revealed the varying impacts of the crisis in the region. Global Markets categorized the impact level of the geopolitical crisis based on the countries’ quarterly growth rate. Low impact level is applied to countries with a positive quarterly growth rate, while medium impact to countries with less than 10% degrowth, while a high impact level is applied to countries with more than 10% degrowth. A high impact level was observed in countries such as Qatar, Bahrain, Oman, Kuwait, and Egypt which displayed the decline in sales growth with -44%, -34%, and -33% in their quarterly growth performances for Q4 2023 versus Q4 2022. A series of boycott campaigns against Western Brands were previously highly reported in these countries, such as deserted branches of McDonald’s and other Western fast-food chains, especially during the month of November. Meanwhile, a medium impact level is observed in Kazakhstan, Iraq, Lebanon, Jordan, which recorded a combined -8% degrowth. Also, Morocco and UAE experienced a medium impact in their Q4 2023 sales versus the same period in the previous year registering the same sales degrowth of -6%. Moreover, Saudi Arabia unveiled that the country was least affected by the crisis with a low impact level, displaying a positive quarterly growth rate despite the market challenges in the last quarter. It is important to note that among the 12 countries, 70% of the total revenue share, according to Americana Group’s 2023 financial statement, is contributed by the UAE, Kuwait, and Saudi Arabia.

Despite facing a challenging geopolitical climate, Americana Group managed to achieve a 1.5% year-on-year revenue growth which is attributed to the company’s implementation of cost-saving measures, including supply chain optimization and expense control. In addition, pre-war sales performances from January to September have already demonstrated positive growth trajectory, with a significant 36% growth in store openings. These data suggest that without the geopolitical crisis, the company could have potentially achieved even greater revenue growth.

Boycott Market Impact’s Timeline in Kuwait

October 2023

The conflict erupted on October 7th, leading to a week of uncertainty in the market as companies remained neutral. About a week later, news emerged of Israel franchisors and international brands expressing solidarity with the Israel Defense Forces (IDF) through various means such as providing meals, drinks, products, and financial support. This news sparked widespread consumer protests globally, particularly in the Middle East, leading to heavy criticisms of brands in the region. The consumer boycott movement gained traction on social media platforms in the third week of October before spreading to regular consumers. By this time, brands were already experiencing a decline in foot traffic, indicating a strong public backlash against them. It is worth to note that some of the American brands targeted by the boycott are perceived supporters as they did not directly state their stance about the war.

November and December 2023

Since October, the public has been actively publishing boycott lists across various sectors, including restaurants, fashion, furniture, and home appliances. These lists have been circulating alongside recommendations for local products and services as alternatives to international brands that support the Israeli side. Pro-Palestine groups have even developed applications to highlight which products and services to boycott and which to replace them with. However, the impact of these lists seems to have waned in recent months. By December, there was a noticeable decrease in the circulation of these lists, possibly due to consumer fatigue with boycotts or social media platforms actively filtering out such content. Despite this decline, the slow erosion of active opposition to these brands has resulted in a sluggish performance recovery for some businesses.

January and February 2024

As a result of the continuous boycott movement, American brand operators started offering major promotional discounts reaching 50% across their brands to reattract customers into their stores. Such promotional activities, however, did not yield the desired outcome and were extended several times. Apart from these strategic promotions, the minimal monthly increase in sales from November to February can also be attributed again to boycott fatigue, which is a common occurrence in boycott cycles, particularly for well-established brands that have a strong influence on consumer habits. Moreover, the month of February registered a significant turnaround, with a decline of only 53.9%, a marked improvement from the previous month’s contraction of 61.1%. With schools reopening in the first week of February, an increase in foot traffic was observed, boosted further by National Day and Liberation Day celebrations, leading to high customer spending among locals, expats, and visitors from the neighboring GCC countries.

Impact on Kuwait’s Local Brands

Conversely, the local foodservice industry’s monthly growth percentages remain consistently positive, with the highest figures recorded in November and December. This trend clearly indicates that local brands are benefiting from the boycott against US brands, becoming consumers’ choice alternative. For example, in the fast casual burger industry, despite the war occurring in the last quarter, consumer preference for local brands due to the conflict has resulted in local burger chains achieving an average growth rate of 16.5% in October 2023, compared to a 10.7% decline in overall sales for American fast casual burger brands. The local foodservice market grew by 7.6% in February, driven by Kuwait’s upcoming festivities and increase in footfall from schools and universities. This growth, however, is barely registered by specific local brands due to the dispersed presence of the local brands in terms of outlet count per brand unlike the concentrated presence of the leading international brands.

How long it is expected to last?

The American brands are projected to feel the impact until the end of the year, although sales degrowth for each brand could potentially decrease month by month due to boycott fatigue. However, performance recovery is not guaranteed unless ceasefires are granted, and favorable accords between the two countries are reached. Overall, regardless of all the losses from the boycotts, it is still impossible for the major American brands to perennially decline and exit the market, as these US market players had already established a strong market positioning and extensive network of outlets in the country for many decades.