While Nestlé explores its options to defend its rights following Moscow’s landmark decision to impose external management over its Russian business, the food industry is asking a bigger question: What does this mean for Western food companies still operating in the country?
PepsiCo, Mondelēz International, Mars, Ferrero, Bonduelle and Lactalis all retain operations or assets in Russia. Observers see no obvious reason for them to panic – but little reason to feel entirely safe, either.
Almost a month after external management was imposed, the question of why Nestlé was targeted remains as unanswered as ever.
Speaking about the Nestlé case at the Valdai discussion forum on October 1, Russian President Vladimir Putin offered little clarity on why the company was targeted, saying only that the imposition of external management was not intended as punishment, but was “a response to actions taken against Russia”.
Earlier, Kremlin spokesperson Dmitry Peskov cited Nestlé’s Swiss ownership as one reason for imposing external management, while referring to other unspecified “working issues” without elaborating.
But foreign ownership alone is unlikely to explain the move: hundreds of Western companies continue to operate in Russia, yet the imposition of external management remains relatively rare
Around 1,600 companies from countries Moscow deems “unfriendly” continue to operate in Russia, the Russian state newspaper Vedomosti estimated in June 2026. Western business still plays a notable role in the Russian economy: assets held by 1,320 companies that regularly disclosed financial results totalled $156bn (€138.52bn) at the start of 2025.
What is driving the wave of measures?
There are several theories about what may be driving the latest wave of external management measures, which has affected not only Nestlé but also French retailer Auchan and German retailer Metro.
For example, Russian Union of Industrialists and Entrepreneurs president Alexander Shokhin believes that the recent transfer of Russian assets belonging to several European companies to temporary management could be seen as a series of “pre-emptive signals” from Moscow amid discussions about the possible seizure of frozen Russian central bank assets in the EU.
“The criteria for placing Russian assets under temporary management are now less clear than under the earlier “mirror” approach, which targeted assets owned by residents of countries that had seized assets belonging to Russian companies,” Shokhin said, speaking during a press conference in Moscow at the end of September.
Whatever the rationale, local lawyers see the move as a sign that Russia’s external management mechanism, introduced in 2023 to tighten state control over strategically important economic sectors, is now reaching into the food industry.
“The inclusion of Nestlé’s assets on the relevant list of foreign business under state management confirms that the mechanism is not limited to the energy or industrial sectors and can also affect food businesses,” says Dana Visotskaya, a lawyer with Vetrov & Partners, a Moscow-based law firm.
To stay or to go?
Since 2022, many Western companies have operated on the assumption that staying out of Russia’s strategic sectors and avoiding a rushed exit would keep their businesses safe. The Nestlé case has thrown that assumption into question.
The Nestlé situation raises the stakes for all Western food companies that continue to operate in Russia, says Yaroslav Kabakov, director for strategy with Finam, a Moscow-based financial consultancy.
The risks for foreign food companies, from PepsiCo to Mondelēz and Mars, in Russia are no longer limited to sanctions, currency controls, or reputational damage, as in previous years, Kabakov said.
Foreign companies now face the prospect of losing operational control of their Russian assets, he stresses.
But an exit is far from straightforward, he admitted, as large production facilities and established market positions make withdrawal costly, while asset sales are subject to strict restrictions and steep discounts.
Foreign owners from countries Moscow has designated as “unfriendly” generally need government approval to sell their Russian assets and, under rules tightened in October 2024, must accept a discount of at least 60% of market value and contribute at least 35% of the asset’s appraised value to the budget. Transactions involving assets valued at more than RUB 50bn ($596m) also require presidential approval.
“Foreign food companies therefore face a difficult choice: absorb the cost of leaving now or risk losing control of their assets later,” Kabakov said.
External management in Russia could ultimately lead to an asset sale, but foreign owners may struggle to secure a fair price, or even recover any meaningful proceeds.
Alexander Ermolenko, a partner at law firm Orlova & Ermolenko, expresses confidence that the Nestlé assets were likely to attract strong demand, making their sale an obvious next step. “And if, say, negotiations proceed relatively smoothly, without aggression or any attempts to render the assets unusable, foreign owners could receive real money for them,” he says.
No way to fully eliminate risk
Local analysts believe there is no way to fully eliminate the risk of a Nestlé-style scenario.
“Changes in ownership structures, transferring some responsibilities to local management, curbing investment, moving excess capital out of Russia and minimising cash balances can limit potential losses, but cannot shield companies from a decision by Russian authorities,” Kabakov says.
As long as assets remain under Russian jurisdiction, the ultimate risk is not just legal – partly it is political, observers believe.
Kabakov suggested that Western food companies remaining in Russia should avoid increasing their exposure, keep investment to a minimum, and prepare an exit plan in advance.
“The Nestlé case has made Russian operations a riskier asset for Western owners – a risk that must now be reflected in their valuation,” Kabakov said.
A fight against the odds
Nestlé has vowed to defend its rights in Russia. Its options, however, may be limited.
From a legal standpoint, Nestlé still has avenues to defend its rights both in Russian courts and at the international level, says Vetrov & Partners’ Visotskaya.
“However, having procedural grounds to challenge the decision is one thing; having a realistic chance of overturning it is quite another,” she admitted.
Under Russian law, Nestlé could theoretically challenge the relevant presidential decree, or specific provisions of it, before the Supreme Court of Russia.
“However, the chances of overturning the decision appear limited,” says Visotskaya.
She explained that judicial review would focus on whether the decree complies with applicable law, while questions about the necessity and merits of special economic measures fall within the remit of the relevant state authorities.
In other words, the court is unlikely to second-guess the government’s judgment on whether the measures were necessary.
Another avenue could be international legal mechanisms. Russia and Switzerland have had a bilateral agreement on the promotion and reciprocal protection of investments in force since December 1, 1990.
“Subject to the conditions set out in the agreement, certain investment disputes may be referred to international arbitration,” says Visotskaya.
However, the prospects of securing an effective remedy through international arbitration remain vague.
Moreover, not everyone is convinced that deploying the full arsenal of legal options at this stage would be the right strategy for Nestlé.
“At a strategic level, Nestlé’s management now faces two options: fight or negotiate,” comments a source in the Russian food industry who wished to speak under the condition of anonymity to discuss sensitive issues.
“Pushing back too aggressively risks making matters worse,” the source says.
The source suggested a better strategy might be to hold private discussions to resolve the issues that led to external management or, if that proves impossible, negotiate a sale of the assets on the most favourable terms possible.
“But, of course, every case is rather unique – there are no guarantees that this will lead to a positive outcome,” the source admitted.
Regaining control of assets placed under external management is possible, although such outcomes remain rare.
In April 2024, Russia transferred the Russian subsidiary of the Italian heat-equipment maker to temporary management by state-owned company Gazprom. In March 2025, the Russian authorities reversed the decision, restoring Ariston’s ownership and full management rights.
The Italian foreign ministry attributed the result partly to sustained diplomatic efforts by Italy, its embassy in Moscow and business associations.
For most companies affected by external management, the outcome has been less positive. Danone, for example, was placed under state management in July 2023 before selling its Russian dairy business to local investors in May 2024 for RUB 17.7bn (€188.4m/$191.5m) – a price reportedly 56% below market value. Of that sum, RUB 7.7bn (€81.94m/$83.2m) was earmarked to cover the Russian unit’s debt, leaving around RUB 10bn (€106.4m/$108.3m) for Danone’s stake.
