RUSSIA – French dairy giant, Danone, has decided to initiate a process to transfer the effective control of its Essential Dairy and Plant-based (EDP) business in Russia, a move that could result in a write-off of up to 1 billion euros (US$978 million).
The dairy added that it would retain only the infant nutrition branch, an option Danone said would ensure long-term local business continuity, for its employees, consumers, and partners.
The French food company said EDP Russia represented around 5% of its net sales and had a dilutive contribution to its organic sales growth and recurring operating margin over the first nine months of the year.
Once the transaction, which is subject to regulatory approvals, is closed, it will result in the deconsolidation of the company’s EDP Russia business.
In March, the French group said it would continue its business in Russia, where it employs 8,000 people, as many international companies suspended operations in the wake of Moscow’s invasion of Ukraine, but Danone spoke in July of the “extremely tense” operational conditions in Russia and Ukraine.
A large number of major western companies have pulled out of Russia in an exodus since Moscow invaded its pro-Western neighbor on February 24
As a result of McDonald’s exit from Russia, the American multinational fast-food corporation said it expected to record a charge, which will be primarily non-cash, of approximately US$1.2 billion to US$1.4 billion as it writes off its net investment in the market and recognizes significant foreign currency translation losses.
In April, the company said it was losing US$55 million per month, and US$100 million worth of inventory, due to restaurant closures. It has also closed 108 restaurants in Ukraine while continuing to pay employees in that country.
The McDonald’s Russian business was acquired by Russian businessman Alexander Govor and renamed “Vkusno i tochka” (“Delicious. Full Stop”).
In addition, Starbucks exited the Russian market and said it will no longer have any brand presence in the country.
Unlike other Western multinationals, Starbucks does not expect a significant financial impact from the closure as the business in Russia accounted for less than 1% of the company’s annual revenue.
Dairy major Arla Foods also sold its business in Russia to the family of local management who will continue to run the business with the current workforce.
In a statement, Arla said the sale was agreed upon in a binding share transfer agreement which was subject to several formal conditions, including registration of the share transfer by Russian authorities as a final step.
For all the latest food industry news from Africa and the World, subscribe to our NEWSLETTER, and YouTube page, follow us on Twitter and LinkedIn, and like us on Facebook.