AlShaya Group, a Gulf retail giant that owns the rights to operate the Middle East business of the U.S. coffee chain Starbucks, plans to lay off over 2,000 people as the operations take a hit from consumer boycotts tied to the war on Gaza, according to people familiar with the matter.
The cuts, which began on Sunday, amount to about 4% of AlShaya's total workforce of almost 50,000 people and are mostly concentrated in its Starbucks franchise in the Middle East and North Africa (MENA), said the people, who declined to be named as the matter is not public.
The boycotts have led to tough trading conditions for the company, one of the people said.
"As a result of the continually challenging trading conditions over the last six months, we have taken the sad and very difficult decision to reduce the number of colleagues in our Starbucks MENA stores," Alshaya said in a statement.
"We will ensure that we give our colleagues leaving the business, and their families, the support they need," said the company, adding that it remained committed to the region.
Established in 1890 in Kuwait, AlShaya is one of the biggest retail franchisees in the region with rights to operate businesses of popular Western brands, including The Cheesecake Factory and Shake Shack.
It has owned the rights to operate Starbucks coffee shops in the Middle East since 1999. The Starbucks unit runs around 2,000 outlets in 13 countries, across the Middle East and North Africa, and Central Asia.
U.S private equity firm Apollo Global Management Inc. has been in talks to buy a stake in AlShaya's Starbucks business, three sources close to the matter told Reuters last month.
Western brands have been hit by a grassroots boycott campaign over Israel's ongoing indiscriminate military offensive in the Gaza Strip that has killed at least 30,000 Palestinians since Oct. 7, including over 13,000 children according to the Media Office in Gaza.
In the wake of the boycotts, Starbucks in October said it was a non-political organization and dismissed rumors that it had provided support to the Israeli government or army.
Starbucks said in January that the Israeli-Palestinian war has hurt its business in the region as it missed market expectations for first-quarter results.
It said sales were significantly impacted due to the conflict, in the Middle East and in the U.S., as some consumers launched protests and boycott campaigns asking the company to take a stance on the issue.
In January, AlShaya announced it was scaling back operations in Egypt due to the country's ongoing economic troubles, including multiple currency devaluations and record inflation. It did not comment on which stores it would be closing or when they would shut.