Copenhagen: Carlsberg has cut all ties with its Russian business and refuses to enter a deal with Russia’s government that would make its seizure of the assets look legitimate, the brewer’s new CEO said on Tuesday. The Danish group had since last year attempted to sell its Baltika subsidiary in Russia, following the footsteps of many other Western companies exiting Russia after Vladimir Putin invaded Ukraine. Baltika produces some of the most recognizable beer brands in Russia, with 8,400 employees across eight production plants.
But the company found itself in a bind when Putin signed a decree on July 16 that temporarily transferred operational control of the firm to the Russian state property agency Rosimushchestvo. The Danish company argued that this was an attempt to “sabotage” the sale of its Russian operations.
The Danish company has been in Russia for decades, and its Baltika brand is among the most popular in the country. The firm had around a 20 percent market share and employed 8,000 workers. It was one of the largest foreign firms operating in the country, according to a report by Bloomberg.
In recent years, however, the company has been criticized for putting profits ahead of principles and has been exposed to accusations that it was helping the military junta in Myanmar. It was a key supplier to the war machine and was seen as an ethically compromised company that put profits over human rights.
After the Ukraine crisis, some businesses pulled out of Russia. Still, others pushed for even closer ties to increase profits in the market, according to research by Yale School of Management professor Jeffrey Sonnenfeld. His team keeps a “Yale List of Shame” on global corporations with close links to Putin’s Russia.
As several big businesses started to pull out, other firms, including Danone and Carlsberg, postponed their ultimate exit from Russia and pushed to grow their shares in the Russian market even more. This was a mistake.
In the end, both of them got what they deserved: their assets were stolen by the Kremlin. “The expropriation of Carlsberg and Danone serves those two companies right for not having had a clean exit, as they should have had back in 2022,” Sonnenfeld says.
With Russian sales making up about 13% of its revenue and 9% of its profit, Carlsberg will be hit hard. Rival AB InBev, which also has significant operations in Russia, has announced that it is cutting its links with the country. Heineken, another major brewer, is believed to be planning a complete withdrawal of its business in Russia, too. The move comes as the EU and the United States remove Russian banks from the SWIFT system, a move that will limit the financial support of the Kremlin, and as they enforce sanctions on Putin and some oligarchs. Nevertheless, some breweries continue to operate in the country, even though sanctions make it more difficult.
