President Vladimir Putin has signed a decree placing food giant Nestlé’s Russian business under temporary state administration. The same legislation was used in 2023 to take control of dairy group Danone’s Russian business.
Swiss food group Nestlé is now weighing its options to protect its rights, after Russian authorities took control of the company’s Russian business, Reuters reports.
The decision follows a presidential decree signed by Vladimir Putin on Thursday 17 September. The decree places Nestlé’s Russian assets under the temporary administration of Russian company L.E.V. Management.
Nestlé, the maker of Nescafé coffee and KitKat chocolate, has six factories in Russia producing coffee, petcare and infant formula products. Nestlé said it had taken note of the decision and was assessing the situation, but declined to comment further on what action it was considering.
“Nestle is committed to taking all necessary steps to protect its rights and ensure continuity of business operations in the interests of all stakeholders, particularly its employees,” the company said in a statement.
Nestlé shares fell 1.5 per cent in early trading in Zurich on Friday. The Swiss government, which has been sharply criticised by the Kremlin for following EU sanctions on Russia, had no immediate comment on the matter.
Russia accounts for a small share of turnover
Nestlé generated sales of around 2 billion Swiss francs in Russia in 2021 — the last year it released figures — corresponding to around 2 per cent of the group’s total turnover, and had about 7,000 employees in the country. Analyst Jean-Philippe Bertschy of Bank Vontobel estimates the share has since fallen to around 1 per cent, following Nestlé’s scaled-back activities in the country.
Previously used against dairy group
The temporary administration of Nestlé’s assets is based on a 2023 decree giving Russian authorities the power to place assets belonging to companies from “unfriendly” countries under temporary administration. The law has also been used to raise cash through forced sales, exit taxes and discounts, whilst rewarding Kremlin-loyal figures.
In 2023, Russian authorities similarly took control of French dairy group Danone’s Russian business, as well as Danish brewing group Carlsberg’s stake in local brewer Baltika. Danone was removed from the list of companies under temporary administration in March 2024, after a Russian businessman reportedly sought to take over the business at a steep discount. Carlsberg sold its shares in Baltika Breweries in a management buyout in December 2024.
According to analyst Jon Cox of broker Kepler Cheuvreux, the previous cases bode ill for Nestlé: “Ultimately, Nestle may end up losing those assets — around 2% of its sales and cash tied up in Russia — for the foreseeable future and any compensation is unlikely to be an offset,” he said.
By Maja Løvstrup
Source: Reuters
Photo: Nestlé
