RUSSIA- Danish brewer Carlsberg has announced the termination of its license agreements with Baltika Breweries according to a press statement released on the Carlberg Group’s website on Tuesday.
Baltika Breweries is the leading exporter of Russian beer, established in Saint Petersburg in 1990 with the company’s products being offered in more than 79 countries.
“We have informed Baltika Breweries that we have terminated the license agreements, which enable Baltika to produce, market, and sell all Carlsberg Group products, including international and regional brands,” the statement read.
This new development is in retaliation to what the company described as Moscow’s illegitimate takeover of its Russian breweries in July.
Vladimir Putin, the president of Russia, ordered the temporary seizure of Carlsberg’s Russian investment in the regional brewer Baltika in July.
Putin claimed that Russia had nationalized Carlsberg because “the management of these firms attempted to coerce Russian nationals, their employees, threatening with probable lay-offs in case they take a specific civil opinion. ” Carlsberg refuted this claim.
When it was seized, Carlsberg was just about to complete a deal with Arnest, a major producer of metal packaging and aerosols in Russia.
Before this announcement, Baltika Breweries headed by Taimuraz Bolloev, Baltika’s director and a close friend of Vladimir Putin had proposed to buy the company’s operations at the same price as Arnest.
Carlsberg instead opted to write off the entire value of its Russian business and terminated agreements allowing the local subsidiary to sell the company’s products due to the “unacceptable terms” of the deal, which the company felt would “justify the illegitimate takeover of our business in Russia”.
“We have now concluded that we currently see no path to a negotiated solution for exiting Russia,” the statement emphasized.
“We refuse to be forced into a deal on unacceptable terms, justifying the illegitimate takeover of our business in Russia.”
With its license agreements terminated, Baltika will have no legal basis to brew and sell international brands such as Tuborg and Kronenbourg in Russia.
Analysts estimate that the Russian brewer could lose up to 40 percent of its value which is directly tied to Carlsberg’s international brands that it sells in Russia.
Carlsberg had eight breweries and about 8,300 employees in Russia, and took a R26.8bn (US$ 265.34 million) write down on Baltika last year.
However, the implications of this action and how it will affect Carlsberg’s business operations and strategy globally remain unclear.