Russia Seizes Control of Danone and Carlsberg Subsidiaries, Prompting Foreign Firms to Evaluate Risks

Russia Takes Control of Danone and Carlsberg Subsidiaries in Moscow

London/Atlanta – In a move that underscores the risks faced by foreign companies operating in Russia, Moscow has seized control of the Russian subsidiaries of French yogurt maker Danone and Danish brewer Carlsberg. Russian President Vladimir Putin signed a decree on Sunday placing foreign-owned stakes in Danone’s Russia business and Carlsberg’s stake in local brewer Baltika under the temporary management of Russia’s federal property agency.

This action follows another decree signed by Putin in April that allows the government to take temporary control of foreign assets in Russia if Russian assets abroad are seized or threatened. Previously, the Russian government had taken control of utilities owned by German energy company Uniper and Finland’s Fortum Oyj.

The seizure of Danone and Carlsberg subsidiaries could further increase pressure on Western companies that have been criticized for remaining in Russia. Over 1,000 companies have already left the country since Putin’s full-scale invasion of Ukraine last year. However, some businesses, including Heineken, Nestlé, Unilever, and Mondelez, have chosen to maintain a presence in Russia for various reasons. The recent developments may prompt companies still in the process of leaving Russia to expedite their departure.

Carlsberg expressed surprise at the seizure and stated that the prospects for the sale of Baltika Breweries, which it had agreed to sell subject to regulatory approvals, were now highly uncertain. Baltika, one of the largest consumer goods companies in Russia, employs 8,400 people according to Carlsberg’s website.

Danone is also in the process of selling its Russian business and previously estimated that the deal could result in a €1 billion ($1.1 billion) loss in the value of the asset. The company released a statement on Sunday, saying it was investigating the situation and did not anticipate an impact on this year’s earnings. Danone is prepared to take all necessary measures to protect its rights as a shareholder of Danone Russia and ensure the continuity of its business operations.

The recent seizure of Danone and Carlsberg subsidiaries by Russia highlights the challenges facing foreign companies in the country. The move may further prompt other Western companies to consider exiting the Russian market. The situation remains fluid, and companies like Danone and Carlsberg are closely monitoring the developments and assessing their options. The impact on employees and stakeholders will also be a key concern, as companies will strive to safeguard their rights and maintain operational continuity. As tensions between Russia and the West continue, the fate of foreign companies in Russia remains uncertain.