Danone commits to costly exit from Russia

By Teodora Lyubomirova contact

- Last updated on GMT

GettyImages/JeanUrsula
GettyImages/JeanUrsula

Related tags: M&A, Russia

The transaction could lead to a write-off of up to €1bn but the multi-national says this is ‘the best option’ to ensure long-term business continuity.

Danone is set to relinquish control of its essential dairy and plant-based (EDP) business in Russia, the company announced Friday.

The move could be a costly one for the multi-national, with the transaction potentially leading to a write-off of around €1bn (US$978).

Danone says that for the first nine months of the year - which saw Russia invade Ukraine at the end of February, causing market turbulence and uncertainty not seen since World War II – its EDP division in the country had a ‘dilutive contribution’ to the group's like-for-like sales growth and recurring operating margin, accounting for around 5% of net sales. The operation has 7,200 employees and 12 productions sites.

It is understood that Danone will retain its infant formula business in Russia, but shedding the EDP division means parting with 90% of its overall operations in the country.

“This is the best option to ensure long-term local business continuity,” ​the company said in a statement. “Danone’s priority remains to act responsibly and respectfully to its local employees, consumers, and partners throughout the process.”

The move comes after Danone had previously said that ‘all options are on the table’ with regards to its Russia business following the invasion. The company had since continued to manufacture essential dairy and infant nutrition products but had cut other ties with the country over its war in Ukraine, including imports and exports as well as investments.

The transaction in Russia, which is subject to regulatory approval, could spell a bigger reshuffle at the multi-national, where chief executive Antoine de Saint-Affrique took the reins in September with the promise for decisive actions towards low-performing businesses.

Danone has not revealed who would take over the Russian EDP division, with Econiva, one of Russia's largest milk supplier, being mentioned by industry analysts as a possible buyer.

Related topics: Business, Dairy

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