In a challenging move reflective of the current market conditions, Alshaya Group, the franchise operator of Starbucks in the Middle East and North Africa, has announced the layoff of over 2,000 employees. This decision comes amidst ongoing consumer boycotts directly linked to the conflict in Gaza.

The Alshaya Group, responsible for operating licensed Starbucks stores across the region, expressed the arduous nature of their decision, stating that the consumer boycotts have resulted in difficult trading conditions. The layoffs began recently and represent approximately 4% of Alshaya’s total workforce of 50,000.

Starbucks found itself targeted by consumer boycotts following its legal dispute with a union group over a social media post expressing solidarity with Palestine. This has further exacerbated the challenges faced by the coffee giant in the region.

The boycotts, initiated to protest the war in Gaza, were ignited by the October 7 Hamas terrorist attack, resulting in significant loss of life and ongoing humanitarian crises. President Joe Biden’s recent calls for a temporary cease-fire underscore the severity of the situation.

Diogenes Mejia, Director of S&P Global Ratings, highlighted that these layoffs signify a dimming growth prospect for Starbucks in the Middle East, aligning its trajectory more closely with other fast-food giants facing similar challenges.

The impact of consumer boycotts extends beyond the Middle East, affecting Starbucks’ growth prospects in one of its most profitable markets, the United States. Slower-than-anticipated sales in the first quarter were attributed in part to these boycotts, leading to a forecast of slower growth for the rest of the year.

Despite some growth in international sales, Starbucks faces complexities in its growth plans, especially in the Middle East, where store closures diminish growth prospects. Most of Starbucks’ stores in the region are licensed and owned by Alshaya, which has been operating the coffee chain since 1999.

The layoffs, while affecting a fraction of Starbucks’ global workforce, represent a significant setback, given the company’s extensive presence worldwide. Starbucks remains committed to supporting affected employees and working closely with Alshaya to navigate through these challenging times.

Similar challenges have been observed in other fast-food chains, such as McDonald’s and Yum Brands, further highlighting the broader economic implications of the ongoing conflict in the Middle East.

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