French dairy group Danone is reviewing its legal options after the Russian state took control of its subsidiary in the country, a source close to the matter has told Reuters.
The source said Danone would write to the Kremlin and was in contact with French authorities, including President Emmanuel Macron's office. The letter will ask for explanations, but Danone does not yet know what is legally feasible, the source added, declining to be named because the matter is confidential.
According to a decree signed by President Vladimir Putin on Sunday, foreign-owned stakes in Danone Russia, along with beer company Carlsberg's stake in a local brewer were put under the 'temporary management' of government property agency Rosimushchestvo.
Russian Operations
Moscow's action highlights the vulnerability of other consumer products companies that still have operations in Russia, some of which have announced plans to leave. Dove soap maker Unilever and Swiss food giant Nestlé remain in Russia, as well as British American Tobacco, which is trying to sell its unit.
Reckitt last year said it had begun a process to transfer ownership of its Russian business, which if successful would make it the first major personal goods maker to do so following the country’s invasion of Ukraine.
Western firms face tough exits from Russia after the government in December said they must sell their operations for at least half price and pay 10% to the state, Reuters reported.
Planning To Sell
Danone said in October it would relinquish control of its dairy food business in Russia, which could have led to a write-off of up to €1 billion. Global companies had at the time been announcing costly exits from Russia.
The source close to the matter said Danone had been weeks away from achieving an agreement to sell its Russian subsidiary, which has 7,500 employees spread across 13 factories.
The source said Danone, like everyone else, had learnt the news when the Russian presidency announced it to the media and had been very surprised, especially as the company had "initiated a very organised process to leave the country".
Nestlé, BAT, Reckitt and Procter & Gamble declined to comment on Monday's news, while Unilever did not respond to a request for comment.
Unilever had in February said there was a risk it might have to stop doing business in Russia, and that it might have to take a loss or write down its assets there.
Kellogg in December said it would divest its business in Russia to a local Russian company, Chernogolovka. "Local government regulatory approval has been granted and the sale of our Russian business has now closed," a Kellogg spokesperson told Reuters on Monday, adding that the sale was finalised last week.
