Danone’s Russian Political Maze
Explore Danone’s challenging journey in Russia amid unexpected management changes and complex negotiations, revealing the intricacies of corporate resilience.
Danone in Russia: Navigating a Corporate Maze Amidst Political Tensions
The Danone Dilemma in Russia: A Tale of Unexpected Management and Unsettled Deals
This summer, a group of Chechens linked to Ramzan Kadyrov, their regional leader, unexpectedly took control of Danone’s operations in Russia. This move occurred while Danone, a French dairy giant, was finalizing a deal to exit Russia. The Kremlin’s decision to place Danone and Danish brewer Carlsberg under “temporary external management” disrupted these plans, especially affecting Carlsberg, whose former executives are now imprisoned. However, Danone’s situation has evolved into a peculiar stalemate, with much of the company’s daily management remaining unchanged under the new Chechen leadership.
Business as Usual? Inside Danone’s Russian Operations Post-Takeover
While the Chechen takeover seemed alarming, the operations at Danone’s Russian dairy factories have continued with minimal disruptions. The new Chechen managers, surprisingly professional in their approach, have avoided aggressive tactics, maintaining a low profile. The situation, described as “extremely amicable,” has not provoked public complaints of mistreatment from Danone. Despite these developments, the company is still working to finalize the sale of its Russian business, seeking a Kremlin-approved buyer.
Impact and Response: Danone and Carlsberg’s Different Paths in Russia
Russia’s abrupt management changes in foreign companies, like Danone and Carlsberg, have created shockwaves. Danone, representing about 5% of the group’s annual revenue, is significantly impacted by these developments. Initially committing to stay in Russia post-invasion of Ukraine, citing responsibility towards employees and suppliers, Danone later shifted its stance, planning an exit that could lead to substantial financial losses. Meanwhile, Carlsberg’s situation contrasts sharply, with arrests and allegations of targeting innocent employees by the Russian government.
Navigating Uncertainty: The Road Ahead for Danone in Russia
Despite the takeover, Danone’s executive committee in Russia remains active, working towards asset protection and a potential sale. The company, while preparing to protect its shareholder rights, has stopped short of directly accusing Russia of expropriation. Interestingly, while Yakub Zakriev, Kadyrov’s nephew, is officially the general director of the renamed “Life & Nutrition,” Dutch Danone veteran Charlie Cappetti continues to play a significant role unofficially.
The Complexity of Yogurt Production: Danone’s Leverage in Russia
Danone’s expertise in yogurt production, involving complex supply chains and unique ingredients, offers it some leverage over the new management. This complexity ensures that the company’s unique production processes remain vital, posing challenges for any drastic changes by the new managers.
Conclusion: A Tense Balancing Act in Corporate Russia
Danone’s situation in Russia highlights the challenges faced by foreign investors in navigating uncertain political and economic environments. The company’s cautious approach and ongoing negotiations reflect the complexities of maintaining business operations while adhering to corporate responsibilities and navigating geopolitical tensions.
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