Nestlé responds to seizure of its business in Russia

Nestlé said on Friday 18 September that it was considering all options to protect its rights after the Kremlin decided to take control of the Swiss food manufacturer's Russian business.

Source: press release from Nestlé

Details: The manufacturer of Nescafé coffee and KitKat chocolate bars has said it has taken note of the decision, announced on Thursday 17 September in a decree by Russian ruler Vladimir Putin, and is currently assessing the situation.

Quote: "Nestlé 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."

Details: Russia has tightened its control over foreign-owned assets since the start of the war in Ukraine in 2022. A 2023 decree signed by Russian ruler Vladimir Putin gives Moscow the power to place assets belonging to companies from countries it considers "unfriendly" under temporary administration.

Moscow has also used the legislation to raise funds through forced sales, exit taxes and mandatory discounts, while rewarding insiders loyal to the Kremlin.

Nestlé has six factories in Russia producing coffee, pet care products and baby food. In 2021, the latest year for which figures have been disclosed, its turnover in Russia was around CHF 2 billion (about US$2.2 billion), and it employed about 7,000 people there.

This accounted for around 2% of Nestlé's total sales, although analysts estimate that this contribution has fallen since the company scaled back its operations in the country.

Since 2022, Nestlé has suspended the vast majority of sales, imports and exports of non-essential products, as well as its advertising activities and capital investment.

Reuters reported that French supermarket group Auchan, whose assets have also been frozen in Russia, declined to comment on the situation. The company still has around 230 stores operating in Russia and employs about 30,000 people there.

In previous cases, temporary administration has often preceded state expropriation, after which assets were transferred to individuals or companies with ties to the Kremlin.

Background: On 18 September, Russian ruler Vladimir Putin signed a decree nationalising the Russian assets of Auchan, Nestlé and the retail chain formerly known in Russia under the name Leroy Merlin.

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