Food Giant Danone To Exit Russia—Taking A Nearly $1 Billion Hit - Forbes

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Topline

French dairy and food giant Danone on Friday announced plans to exit the Russian market, following the likes of Pepsi, Coca-Cola, McDonald's and other global food brands to exit the country amid its ongoing invasion of Ukraine.

Key Facts

In a press release, Danone said it has begun the process of transferring control of its essential dairy and plant-based business to an as-yet unnamed entity in Russia.

The company said it expects the exit will cost the company €1 billion ($975 million).

So far this year, Danone said its Russian operations accounted for 5% of the company’s net sales, the company added.

Explaining the decision, Danone said it believes the move is the “ best option to ensure long-term local business continuity” for its workers, customers and partners in Russia.

Key Background

Danone joins several other multinational food and beverage companies that have either exited Russia or have been forced to scale down their business in the country, owing to a bevy of sanctions against the country following its invasion of neighboring Ukraine. Last month, PepsiCo stopped manufacturing its popular soda brands—including Pepsi-Cola, Mountain Dew, Mirinda and 7Up—in Russia. Its top rival, Coca-Cola, has also stopped producing and selling its marquee brands in the country and its bottler in the region is only working with local brands. Swiss food and beverage major Nestle has also suspended sales of its popular global brands like KitKat and Nesquik in Russia. Both Pepsi and Nestle, however, continue to sell products deemed as daily essentials such as milk, baby formula and baby food. Other major food brands like McDonald's and Starbucks have fully exited Russia after shutting all their locations across the country.

Tangent

Danone is the second major multinational to announce its exit from Russia this week, following a similar announcement by Japanese carmaker Nissan. In its announcement, Nissan said it was selling off its Russian unit to a state-owned entity for a token amount of €1 ($0.98). Other major carmakers such as Toyota, Volkswagen, Mercedes-Benz, and General Motors have all suspended manufacturing in, and imports into, Russia. Other companies that have exited or halted their business operations in Russia include apparel giants like Nike, H&M, Uniqlo and Adidas, among others. Several tech giants like Apple, Google, Microsoft, Samsung and Sony’s Playstation have suspended hardware sales and blocked access to their digital storefronts in Russia.