Arla fully exits Russia, sells business to local management

Russia – Danish multinational dairy cooperative, Arla Foods has sold its business in Russia, just a few months since it announced the suspension of its operation in the country.

The cooperative has sold the operation to the family of local management who will continue to run the business with the current workforce.

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CEO, Peder Tuborgh said: “We have written off everything in Russia. In particular, the warehouse. My reflexes were quite evident from the start. We wanted nothing to do with Russia.”

Tuborgh added that at this time they are focused on how to support its 70 employees there and will also continue to provide humanitarian support to Ukraine with food aid.

The terms and conditions of the sale were not disclosed but Danish newspaper Børsen said that the company has already sold everything in Russia to management and employees for 1 euro (US$1.05). Formally, now just a stamp is missing.

Arla noted: “The sale has been agreed upon in a binding share transfer agreement which is subject to a number of formal conditions, including registration of the share transfer by Russian authorities as a final step.”

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Arla group admitted the Russian market had previously been important considering it was experiencing an annual growth rate of 65-85%.

This was prior to the embargo Russia put in place on food imports in 2014 after western sanctions were issued against the country after its invasion of Crimea.

Arla joins more than 700 multinational companies that have scaled back, suspended, or exited their Russian businesses, including Fonterra, Valio, and Pepsi, according to the Yale School of Management.

The New Zealand multinational dairy cooperative Fonterra completely withdrew from Russia in February and re-allocated its products to other markets.

Also, a Finnish manufacturer of dairy products Valio sold its Russian operations to Velkom Group as part of its plan to fully exit the Russian market.

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The transaction for an undisclosed amount included Valio’s Russian operations, the processed cheese factory in Ershovo, and the Viola® brand processed cheese which was sold and produced in Russia.

The scramble to exit Russia by western multinational companies is having yet to be determined consequences on the federation.

Research from the Yale School of Management has found that revenue drawn from the (near) 1,000 companies curtailing or ending operations in Russia is equivalent to approximately 45% of Russia’s gross domestic product (GDP).

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