When Russia invaded Ukraine in February 2022, the conflict sparked debate over whether manufacturers caught in the midst of battle should stay, sell or shutter operations.
On Sunday, Russia seized control of a pair of major food manufacturers, including the French yogurt maker Danone subsidiary and a local brewer owned by Danish outfit Carlsberg.
According to Reuters, President Vladimir Putin signed a decree that said foreign-owned stakes in Danone and Baltika Breweries would be put under "temporary management" of the Russian government.
About three months ago, Putin took over foreign energy companies Uniper and Fortum and threatened to at least temporarily seize more Western assets in retaliation for action taken against Russian companies.
What is odd is the timing, as both Carlsberg and Danone were in the process of selling their stakes to Russian interests.
In a statement, Carlsberg seemed to be taken off guard, noting that the presidential decree occurred without any information from Russian Authorities. The company has been operating "in accordance with local rules and regulations in Russia and finds this development unexpected." The brewer will assess the legal and operational consequences and take all necessary actions in response.
According to the Guardian, Baltika is a significant brewing company in the area, with some 30% of the market share and 8,400 employees.
In March 2022, the Carlsberg Group announced plans to exit Russia. Following an exhaustive process to carve out the business, the brewer already had an agreement to sell the Russian entity; it was signed on June 23, 2023. Following the presidential decree, no one knows what to expect next.
The same is true for Danone. The company says it has "taken note" of Russia's decision and is investigating the situation. Like Carlsberg, Danone last October started the process to transfer control of its essential dairy and plant-based business in Russia, and everything was progressing according to plan. According to Reuters, the deal was proceeding even though it could've led to a potential $1.12 billion write-off for the food manufacturer.
Despite ongoing uncertainty, several major manufacturers are still doing business in Russia, including Heineken, Nestle, Stryker and Unilever, to name a few.
