RUSSIA – Diageo, a British multinational alcoholic beverage company, has announced the decision to wind down its operations in Russia over the next six months.
The owner of popular brands such as Smirnoff, Johnnie Walker, Guinness, Baileys, and Captain Morgan is leaving Russia due to the Western sanctions pressure on Moscow over Ukraine, company representatives revealed.
The decision follows its initial option of stopping shipping to and selling goods in Russia in March citing the “state of global supply chains,” which was destabilized by the Ukraine crisis, as grounds for the suspension of exports.
Diageo also suspended the manufacturing of its beers, which are brewed locally under licensed third parties.
“Our focus will remain on supporting our employees in the region and providing them with enhanced redundancy terms while ensuring we comply with local regulations,” a Diageo spokesperson said in a statement.
Once the process of winding down is complete, Diageo will have fewer than 10 employees in Russia, and will retain a business license there, a source said familiar with the matter said on condition of anonymity.
According to the company’s website, it had been supplying drinks to around 70,000 stores and 19,000 restaurants and bars across Russia.
The company started supplying alcohol to the Russian market in 2006 and began bottling whiskey under the Bells and White Horse brands at a distillery in St. Petersburg in 2020.
Foreign companies seeking to exit Russia over the war in Ukraine face the prospect of a law being passed in the coming weeks to allow Moscow to seize assets and impose criminal penalties. That has encouraged some businesses to accelerate their departure, Reuters reported.
Market analysts say that stocks of non-Russian alcohol have started to dwindle in Russia, hampered by sales suspensions by major Western firms and supply disruptions, leaving Russian consumers with less choice and higher prices.
The alcohol market in Russia is also facing a recession due to leading Western breweries in the country like Carlsberg, as well as Anheuser-Busch InBev and Heineken exiting the country.
Carlsberg had held a 27.3% share of the US$16 billion Russian beer market, according to Bloomberg, and was previously wary of the impact that leaving would have on its sales.
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