Despite their previous statements about leaving Russia following the Ukraine crisis, Western companies including Avon Products, Air Liquid and Reckitt have stayed there due to increasing bureaucratic obstacles and the recovery of consumer activity.
The Natura-owned cosmetics brand, the French industrial gas producer, and the British consumer group that produces almost everything, are among hundreds of Western groups that have remained in the country since Russia’s war on Ukraine in February 2022.
According to a report by the Financial Times newspaper, seen by Sky News Arabia, an executive working with Western companies in Russia said: “Many European companies found themselves in a real dilemma… They said they would leave, but they were offered purchase options that were not acceptable to the Western companies operating.” in Europe”.
Overall, the Kyiv School of Economics found that more than 2,100 multinational companies have remained in Russia since 2022, compared to about 1,600 international companies that either withdrew from the market or reduced their operations.
More than half of the foreign companies in Russia have remained there since the outbreak of war
Shortly after the Ukraine crisis, many of these groups pledged to reduce their presence in Russia as the West sought to impoverish Russia’s economy and starve the Kremlin’s war coffers of foreign funds.
However, Moscow has gradually raised the cost of companies leaving, imposing a mandatory 50 percent discount on assets sold to Russian buyers from “unfriendly” countries and an exit tax of at least 15 percent. It is also becoming increasingly difficult to find local buyers who are acceptable to both the seller and Moscow and whose participation does not conflict with Western sanctions.
Air Liquide announced in September 2022 that it had signed a memorandum of understanding to sell its business in Russia to the team of local managers that were running it. However, the deal did not receive approval from the Russian government, leaving the company in limbo and in limbo.
Some Western companies no longer feel compelled to leave Russia. For example, Avon began a sales process for its Russian business and received offers but decided to reject them.
“For more than 135 years, Avon has supported women everywhere in the world, regardless of race, nationality, age or religion,” the company said.
While Reckitt announced in April 2022 that it had “begun a process aimed at transferring ownership of its Russian business,” the company’s new CEO, Chris Licht, took a more conservative approach.
“We continue to look at options but they are becoming more complex, not less complex,” he told the Financial Times last month. “The crux of the debate initially was stay or leave, and companies were paying taxes… I think we are having a more nuanced debate now.” “
Multinational companies were mindful of the travails of Western companies such as Carlsberg and Danone, which had their assets seized after announcing plans to leave.
While Danone was eventually able to strike a deal to sell the assets at a deep discount, Carlsberg remains locked in a long legal battle with Moscow, and one of the beer company’s former top executives is in a Russian prison.
Rising wages and a more optimistic-than-expected economic situation have led to a spending boom, making Russia more attractive to multinational companies, particularly in the consumer goods sector, said Alexandra Prokopenko, a non-resident scholar at the Carnegie Russia and Eurasia Center.
Prokopenko added that the recent wave of nationalization targeting both foreign groups and local players remains “the biggest risk to foreigners in Russia… So, if they see this risk as manageable, why don’t they stay?”
PepsiCo announced in March 2022 that it had stopped selling and producing its flagship beverage in Russia but still operates a dairy business in the country that employs 20,000 people directly and 40,000 agricultural workers indirectly.
“As a food and beverage company, now more than ever we must uphold the humanitarian side of our business,” Ramon Laguarta, the company’s CEO, wrote in an email to employees in September 2022. “This means that we have a responsibility to continue offering our other products in Russia.” “.
Rival Coca-Cola has stopped sending soft drink syrup to Russia, but the role has been made up by the region’s drinks giant, Coca-Cola Hellenic, in which it has a 21 percent stake.
In August 2022, the bottler created an independent Russian company, Multon Partners, whose Russian versions of Coca-Cola brands include Dubri-Cola, which has dethroned the original Coke from the top spot as the country’s best-seller.
The bottler said: “Dupré Cola is an extension of an already existing brand in the market, produced and distributed by Moulton Partners. It has no affiliation with the parent Coca-Cola company or its brands.”
Of the more than 2,000 companies that have announced they will stay in Russia — which include consumer goods groups Mondelez, Unilever, Nestle and Philip Morris — some are becoming more open about their plans.
Mondelez’s CEO recently told the Financial Times that investors “don’t care ethically” whether the groups leave the country or not.
But there is a lack of clarity regarding the announced divestments of some companies. US stock short-seller Hindenburg Research revealed in March that goods from Polish fashion retailer LPP were still being sold in Russia despite it announcing its departure from the market in June 2022 after selling its business to an unknown Chinese consortium.
While Polish LPP denied any wrongdoing, it admitted it profited from sales to “transport agents” to help finance the cost of the conversion, a practice that will not be phased out until 2025.
Austria’s Raiffeisen International Bank also came under fire after the Financial Times reported that dozens of job advertisements it had published in Russia indicated ambitious growth plans in the country, despite its pledge to withdraw from the market.
A second executive who works with Western companies in Russia said there was a noticeable change in sentiment and sentiment.
He added that while companies that left in the first weeks after the war felt a moral imperative to do so, “the current wave is about do you really have to leave? Do you want to leave? Some of these companies have built four or five factories over the course of 30 years.” They won’t sell it for 90 percent off.”
Nelson Peltz, an activist investor and Unilever board member, revealed to the Financial Times this year that he had pressured the company, which had explored options for a sale, not to leave.
According to Peltz, competitors such as “Procter & Gamble” P&G and “Colgate-Palmolive” have not left the country… and therefore if we withdraw from Russia, they will take our brands for themselves, adding, “I do not think this is a good deal. Why should we do that?” ?
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