Russian Government Seizes Control of Danone Russia and Carlsberg’s Baltika

The Russian government has taken control of the Russian subsidiary of Danone and Carlsberg’s interest in a major local brewer.

The action was set in motion by a decree signed by President Vladimir Putin, giving the Russian government temporary management over Danone Russia and Baltika, the latter being owned by Carlsberg. This decision comes on the heels of the Russian government’s acquisition of Uniper and Fortum’s Russian subsidiaries back in April, cementing their grip on various sectors in the country.

The situation poses significant challenges and potential ramifications for the involved companies. Danone, in response to the government’s takeover, has initiated an investigation and is determined to take all necessary measures to protect its rights as a shareholder of Danone Russia. The company is also keen on ensuring business continuity amidst the uncertainties brought about by the government’s intervention.

For Carlsberg, the situation has thrown the sale of Baltika into jeopardy. The prominent Russian brewery, commanding a substantial 30 percent market share, was scheduled to be sold by Carlsberg in March. However, following the presidential decree, the fate of the sale hangs in the balance, as the government’s management may significantly alter the course of the transaction.

The intervention by the Russian government comes amid a series of strategic decisions made by major western companies in response to Russia’s offensive in Ukraine in February 2022. As tensions escalated, several significant western companies chose to exit the Russian market altogether, opting to limit their exposure to the increasingly volatile economic landscape.

Adding further complexity to the situation, Danone had previously announced its intention to reduce its presence in Russia significantly. The company planned to retain only its infant nutrition division, signaling a major shift in its business strategy within the country. However, this move could potentially lead to a substantial write-down of up to one billion euros, given the current circumstances and uncertainties surrounding the market.