Nestle Faces Asset Control by Russia Amid Ongoing Tensions
By John Revill
ZURICH, Sept 18 (Reuters) – Nestle is considering all options to protect its rights after the Kremlin moved to take control of its Russian operations, marking another strike against a Western entity since the Ukraine conflict commenced.
The Swiss food giant, known for brands like Nescafe and KitKat, acknowledged the Kremlin’s decision, communicated through a presidential decree, and is currently assessing the situation.
“Nestle is committed to taking all necessary steps to protect its rights and ensure continuity for all stakeholders, especially its employees,” the company stated but withheld further details on potential actions.
Following the announcement, Nestle’s stock dropped 1.5% in early Zurich trading. The Kremlin has been tightening its grip on foreign-owned assets since the Ukraine war began in 2022. A decree from 2023 empowers Moscow to place assets under temporary administration from countries deemed “unfriendly.”
Additionally, Russia has leveraged this law for forced asset sales, exit taxes, and discounts, benefitting Kremlin-friendly individuals. The Swiss government, criticized by Moscow for aligning with EU sanctions against Russia, has not provided an immediate response.
Nestle operates six factories in Russia, producing items like coffee and pet care products, with 2021 sales reported around 2 billion Swiss francs ($2.4 billion) and roughly 7,000 employees in the country. Recently, analysts estimate that sales may now contribute about 1% to the company’s overall revenue after a steep reduction in Russian activities.
While Nestle has justified its presence in Russia as essential for providing food supplies, the company has largely suspended sales, non-essential imports, marketing, and capital investments. Despite the difficult situation, Bank Vontobel analyst Jean-Philippe Bertschy believes the financial repercussions will be minimal due to the limited contribution from Russia to Nestle’s total sales.
French supermarket chain Auchan has also fallen under the recent decree, with its Russian assets placed under the temporary management of L.E.V. Management. Auchan has approximately 230 stores in Russia, employing around 30,000.
Overall, as stakeholders watch the developments, Nestle’s future in Russia seems uncertain, with prior cases indicating that temporary administration often leads to expropriation or transfer to Kremlin-linked businesses.
