Nestlé Responded to the Seizure of Its Business in Russia
Nestlé has responded to the Kremlin’s decision to place its Russian business under temporary external administration. The Swiss manufacturer stated that it is assessing the situation and considering all necessary steps to protect its rights.
The Swiss company Nestlé has commented for the first time on Russia’s decision to take control of its business in the country. The company stated that it is currently assessing the situation and considering its next steps. The day before, on September 17, Russia issued a decree transferring Nestlé’s Russian business to temporary external administration. Following this, the company stated that it intends to defend its rights. “Nestlé is committed to taking all necessary measures to protect its rights and ensure the company’s uninterrupted operations in the interests of all stakeholders, including its employees,” the company’s statement reads.
Nestlé has not yet specified exactly what legal or other steps it plans to take. Reuters notes that the company has only reported on its assessment of the situation and its options for protecting its business.
What Happened to Nestlé’s Business in Russia
Russia began taking more active steps to seize the assets of foreign companies after the start of the full-scale war against Ukraine in 2022. In 2023, Vladimir Putin signed a decree allowing Russian authorities to place the assets of companies from so-called “unfriendly” countries under temporary administration.
In practice, this mechanism has already been used with regard to the assets of major Western companies. In a number of cases, after being placed under temporary administration, the businesses were later sold or transferred to other owners.
This time, Nestlé’s Russian operations were placed under external management. According to Reuters, a similar decision applies to the French retail chain Auchan. Its Russian assets were also transferred to the control of L.E.V. Management.
How much of Nestlé’s business remained in Russia
Nestlé has been operating in the Russian market for many years. Before scaling back its operations, the company had six factories there, producing coffee, pet food, and baby food. In 2021, the last year before the full-scale war, Nestlé’s revenue in Russia totaled about 2 billion Swiss francs, or approximately 2.4 billion dollars. At that time, the company’s Russian divisions employed about 7,000 people.
According to Reuters estimates, prior to the war, the Russian market accounted for about 2% of Nestlé’s total sales. After the company scaled back its operations, that share fell to approximately 1%. Following the start of the full-scale invasion, Nestlé significantly curtailed its operations in Russia. The company suspended most sales, imports, and exports of non-essential goods. Advertising activities and capital investments were also halted. At the same time, the company was unable to completely withdraw from the Russian market. Some production and operations continued to operate.
Russia had already seized assets from foreign companies
The transfer of Nestlé’s business marked yet another instance in which Russian authorities tightened their control over the assets of foreign companies. According to Reuters, Moscow used the temporary administration mechanism not only to control assets but also to facilitate their subsequent sale. In doing so, foreign companies were forced to agree to terms that included significant discounts and additional payments.
In previous cases, the transfer of a business to temporary administration was the first step toward its actual loss by the foreign owner. Among the companies that have already faced similar decisions, Reuters cites Danone and Carlsberg.
What’s Next for Nestlé
At this time, Nestlé has not announced whether it will challenge the Russian authorities’ decision in court or use other legal mechanisms. The company has only stated that it is assessing the situation and its options. It has identified its main priorities as protecting its rights and continuing to operate in the interests of its employees.
Therefore, there is no definitive answer yet as to what will happen to Nestlé’s Russian assets. At the same time, the Kremlin’s decision means that control over the Swiss company’s business in Russia will now be exercised not by its owners, but through external management appointed by the Russian authorities. This is stated in the company’s announcement.
