Corporate LGBT+ scandal

The Bell

Hello! This week our top story is the social media storm that erupted when a top Russian retailer featured a homosexual couple in an ad — and then apologized for doing so. We also look at government plans for a tax hike on the middle class, and the jokes that resulted when a recent media law complicated reporting on talks in Moscow between Russian officials and a delegation from the Taliban.

Russia’s first major corporate LGBT+ scandal

Social media went into a meltdown this week when supermarket chain VkusVill launched — and then suppressed — an ad campaign involving a homosexual couple. It was the first major LGBT+ scandal to engulf a top Russian company.

  • VkusVill is a successful Moscow food retailer that is somewhat comparable to U.S. chain Whole Foods. The company promotes a healthy lifestyle and stocks fresh food, healthy ready-made meals, and plenty of sugar-free options. A typical VkusVill customer is a ‘sophisticated’ city resident with a slightly above average budget and a desire to ditch their bad habits.
  • This was the audience targeted by VkusVill’s latest ad campaign launched late last week. On June 30, the chain published an ad in article form with the title “Recipes for happy families”. One of the families featured was a Russian family that included a lesbian couple, Alina and Ksenia; and Alina’s mother and sister.
  • The PR department must have been aware there are laws in Russia against the ‘promotion’ of homosexuality (the definition of promotion is extremely vague) and their ad was likely to be controversial. For the first time in VkusVill’s history, its аd was rated 18+ and the accompanying text admitted “it would be hypocritical not to talk about the real families of our customers.”
  • The first reactions on Vkusvill’s social media аccounts were mixed: both outraged promises to stop shopping at VkusVill and messages of support. The original post with the article received over 40,000 likes on social media and the company issued new posts defending the inclusion of the lesbian couple.
  • However, it wasn’t long before the ad attracted the attention of social conservatives (RT editor-in-chief Margarita Simonyan, for example, pledged she would no longer shop at VkusVill) and anti-LGBT+ activists including homophobic group Men’s State. The general tone of comments on social media changed and both VkusVill and the featured family began receiving violent threats.
  • Roman Polyakov, head of the VkusVill department that came up with the ad, took public responsibility. He said his bosses only learned of the content after publication, in line with company policy. “Senior managers reacted positively and more importantly so did the audience,” he said in one interview.
  • But Vkusvill did a screeching U-turn Sunday when the ad was taken down and replaced by an apology signed by all of the company’s managers (but without Polyakov). “An article offended the feelings of many of our customers, colleagues, partners and suppliers. We are sorry that this happened and consider it to be our mistake arising from a lack of professionalism of individual employees. The aim of our company is to give our customers a chance to buy fresh, tasty food every day, and not to publish articles that push some kind of social or political agenda,” the statement read.
  • The volte-face caused anger and disappointment among those who had been given hope by VkusVill’s original stance. “This ‘apology’ is absolutely without ethics,” wrote one person on social media. RT boss Simonyan even weighed in again on Twitter: “The traditionalists, people like me, have been lost … and now the very audience with which they flirted is seriously disappointed,” she said.  
  • The story might have international consequences. Vkusvill is planning an IPO in the U.S. and opened a store in Amsterdam last year. For more on the planned IPO and international expansion you can watch this Russian-language interview with CEO Andrei Krivenko as part of our Russians are OK! series.
  • Despite boycott calls in Russia, the scandal is actually unlikely to hit the company’s bottom line. The retailer did well last year, increasing revenues by 38 percent to 128 billion rubles ($1.7 billion). Over 10 percent of this came from their delivery service (by January it was 25 percent). Krivenko remains the majority owner of the company, but Russia-focused private equity fund Baring Vostok Capital holding about 12 percent (a Baring Vostok Capital spokesperson declined to comment on the situation with the ad when approached by The Bell).
  • VkusVill’s PR failings in this saga are obvious: the negative impact of wading into such a socially divisive issue was compounded by an ‘apology’ that alienated a significant chunk of its audience. But for Russian companies, this story may yet be beneficial (as an example of what not to do) because — sooner or later — they will have to find ways to appeal specifically to LGBT+ audiences – if not out of a belief in inclusivity, then for commercial reasons.

Why the world should care

Foreign brands that have presented themselves as gay-friendly for decades need to take into account Russia’s homophobia (which is actively encouraged by the state). Even IKEA — generally seen as a company that found the right ‘voice’ in Russia — got burned in 2016 when gay couples took the top prizes in a competition. Just like for Vkusvill, IKEA found itself facing bitter criticism and at the center of a media storm.

Officials mull tax hike for the middle class

After a raid on the ‘superprofits’ of metals companies, Russian officials are now looking at new taxes on the middle class and high earners. Two new levies are being considered to bring in 200 billion rubles ($2.7 billion) a year, according to media reports Thursday. Such a move might also be politically beneficial for the ruling United Russia party as they campaign ahead of parliamentary elections in September.

  • Plans to tax high net worth Russians were reported Thursday by Russian Forbes. There are apparently two measures under discussion: a hike in taxes on property worth over 500 million rubles and increased social insurance contributions on monthly salaries above 122,000 rubles.
  • Obviously, the property tax hike targets the genuinely wealthy (Russia has 269,000 dollar millionaires, according figures from investment bank Credit Suisse). But the second will affect many more people: 122,000 rubles a month is just 23 percent above the average Moscow salary.
  • The government has not confirmed these plans, possibly because it is the kind of political announcement that would traditionally be made by Putin himself. For example, a week before the referendum on constitutional amendments last summer Putin unveiled tax hikes for the rich for the first time in 20 years, promising to use the funds to treat children with rare illnesses. Social justice is an idea the Kremlin has been keen to monopolize in recent years.
  • This summer would also be a great time for such measures. Parliamentary elections are scheduled for mid-September and United Russia’s ratings are at an all-time low. Independent pollster Levada Center put the party’s approval rating at just 27 percent in March — a seven-year low. In the battle for voters, the party even recently sidelined its long-term leader Dmitry Medvedev.
  • But Putin’s televised phone-in last month showed he isn’t ready to use ‘tax the rich’ as a political slogan. Putin had every opportunity to do so. Among the carefully rehearsed questions that day was a complaint from a man who wanted to build a metal fence and found that raw materials had doubled in price in a month. It was a perfect set-up for Putin to show he was curbing the excesses of rapacious oligarchs, but the president contented himself with a lecture about the nature of inflation and noted that “decisions are being made to control prices.”

Why the world should care

The Kremlin clearly has no scruples about ramping up taxes on Russia’s tiny middle class. But it is wary of trying to make political capital from exploiting social divisions, or playing on a widespread envy of the wealthy.

Media law sparks ‘terrorist’ absurdity at Taliban talks

The withdrawal of U.S. forces from Afghanistan appears to have reignited the country’s civil war and could even return the Taliban to power — but the Kremlin has prepared for such an eventuality by cultivating a relationship with the Taliban in recent years. The arrival of a Taliban delegation in Moscow for talks Thursday could hardly be more serious, but Russian laws requiring the media to use formal labels like ‘terrorist’ and ‘extremist’ in their reporting turned the visit into something of a joke.

  • The Taliban officials met the presidential envoy to Afghanistan in Moscow and held an hour-long press conference Friday that was hosted by state news agency TASS. The Taliban promised they wouldn’t try to cross Afghanistan’s borders with its Central Asian neighbors and pledged to fight against the drug trade and keep militant groups Al-Qaeda and ISIS out of Afghanistan.
  • There’s little point in criticizing Russia for talking to the Taliban – this isn’t the U.S., and Russia is separated from Afghanistan by just the porous borders of other Central Asian countries (which have visa-free agreements with Russia). Whether Taliban officials should be publicly invited to high-level talks, however, is a different matter — and it’s worth noting that Foreign Minister Sergey Lavrov, who met with the Taliban in 2018 and 2019, was not present this time.
  • But it wasn’t the talks that prompted hilarity — rather new media laws that obliged journalists to label the Taliban as a terrorist organization in every article and news report. This is required under a Russian law that came into force this month stipulating media outlets must identify organizations as terrorists or extremists if they are officially designated as such. As a result, state news agencies published grotesque reports, for example: “A delegation from the Taliban movement (a terrorist organization prohibited in Russia) met with Russia’s presidential envoy to Afghanistan”.
  • The Foreign Ministry found the neatest solution: although it’s not a media outlet and, therefore, not officially required to comply with the media law, the ministry’s website subtly re-named its guests: the ‘Taliban’ became the ‘Talib movement’.
  • Opposition figures were quick to highlight the absurdity. Laws passed this spring prevent anyone from standing for public office if they have links to terrorist or extremist organizations – and Lavrov was recently named one of the top three candidates on United Russia’s electoral list. A candidate in September elections from the liberal Yabloko Party, Marina Litvinovich, duly filed a petition Friday with the Central Election Commission demanding Lavrov be disqualified from elections for being an associate of a terrorist organization.
  • This media law was, of course, introduced with a specific aim: to discredit opposition leader Aleksei Navalny and prevent him or his supporters from standing in elections. Navalny’s Anti-Corruption Foundation was designated an extremist organization earlier this year meaning that, in effect, Navalny has the same status as the Taliban. The only difference is that Navalny’s supporters do not get meetings with Russian officials. Media outlet Meduza published an amusing table about the similarities and differences between the two groups.

Why the world should care

Despite talk of the ‘power vertical’, a feature of Russian government is a lack of unified policymaking. And that means parliament can pass extremism laws to bar Navalny supporters from elections while the Foreign Ministry engages in realpolitik with terrorists.

Support The Bell!

The Bell's Newsletter

An inside look at the Russian economy and politics. Exclusively in your inbox every week.