Danone prepared to ‘protect its rights’ after Putin takes control of Russian subsidiary

According to a decree signed by Russian President Vladimir Putin, the Russian state has ‘temporarily’ taken control of dairy major Danone’s Russian subsidiary as well as Danish brewery Carlsberg’s stake in Baltika Breweries.

Danone says it has ‘taken note’ of the Russian authorities’ decision and is ‘currently investigating the situation’.

The move comes nine months after Danone launched a process to transfer the control of its Essential Dairy and Plant-based (EDP) business in Russia. The process was progressing according to the expected schedule, according to the company.

Danone is now preparing to take ‘all necessary’ measures to protect its rights as a shareholder of Danone Russia, and the continuity of the operations of the business in the interest of all stakeholders.

As to Danone’s financial guidance for 2023, for which it expects like-for-like sales growth between 4-6% (with moderate recurring operating margin improvement), the company said the ‘temporary’ takeover has no impact.

The Carlsberg Group, too, acknowledged the Russian government’s transferral of Baltika Brewers to the temporary management of the Russian Federal Agency for State Property Management. Carlberg has not received official information from the authorities.

The development is ‘unexpected’ for the brewing major, who said it has been operating in accordance with local rules and regulations in Russia. Like Danone, Carlsberg will assess the legal and operational consequences and take ‘all necessary actions’ in response.

“The Group is in the process of obtaining more detailed information and will publish any relevant and verified information, including potential financial implications, as soon as possible,” ​noted the company in a statement.

In March last year, one month after Russia launched a military invasion of Ukraine, the Carlsberg Group announced plans to dispose of its business in Russia. A sales agreement was signed last month, 23 June 2023, subject to regulatory approvals and fulfilment of certain conditions in several jurisdictions.

But following the presidential decree, the company says the prospects for this sales process are ‘highly uncertain’.