Danone to transfer control of its business in Russia

18-10 | |
The decision will not affect customers in Russia, as all of Danone's production facilities in the country will keep running as usual. Photo: Canva
The decision will not affect customers in Russia, as all of Danone's production facilities in the country will keep running as usual. Photo: Canva

Danone has decided to transfer the effective control of its Essential Dairy and Plant-based (EDP) business in Russia, the company said in a statement.

Danone said it considered this the best option to ensure long-term local business continuity for its employees, consumers and partners.

Over the first 9 months of 2022, the EDP Russia business represented around 5% of Danone’s net sales and had a dilutive contribution to Danone’s like-for-like sales growth and recurring operating margin. The transaction could result in a write-off of up to €1 billion.

Once closed, the transaction, which will be subject to regulatory approvals, will result in the deconsolidation of Danone’s EDP Russia business. Danone’s priority remains to act responsibly and respectfully to its local employees, consumers, and partners throughout the process, the company said.

Artem Belov, general director of the Russian union of dairy producers, Soyuzmoloko, said that Danone published this statement because it is a public company and has to notify investors about its plans.

No ready plans yet

“At the moment, it is not clear how this intention [of leaving Russia] will be realised – the transfer of management or the search for a strategic investor – and when this can be done,” he explained.

As estimated by Soyuzmoloko, Danone was the largest milk processor in Russia last year in monetary terms, with net revenue of 122.7 billion rubles (US$1.97 billion). The company runs 13 dairy factories in Russia manufacturing a broad range of dairy products under the brands Prostokvashino, Activia, Actimel, Rastishka, Danissimo, Danone, BioBalance, Tyoma, and Alpro.

The Russian newspaper Kommersant, citing its sources, suggested that Danone’s decision to leave Russia was associated with increased pressure on the global office to sever ties with the country amid the continuing military conflict in Ukraine.

Product range to be impacted

The decision will not affect customers in Russia, as all of Danone’s production facilities in the country will keep running as usual, Soyuzmoloko said.

On the other hand, Kommersant warned that the EDP’s production range could narrow after transferring the business to new management. For example, Actimel is at risk. This product was developed by the Danone R&D division and patented by the company. It is also yet to be seen whether Danone will allow the use of some international brands in Russia, such as Activia, Danone, and Alpro, Kommersant said.

Finnish dairy firm Valio, which also pulled out from Russia in 2022, left the rights to the Viola brand to the buyer of the Russian business, Belov said.

Vorotnikov
Vladislav Vorotnikov Eastern Europe correspondent

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