Nationalisation in the Russian dairy industry

Since the beginning of its invasion of Ukraine, Russia has experienced an exodus of Western companies. Nearly 200 companies publicly declared plans to suspend operations in Russia, which involves shutting down production capacities in the country.

Several dairy companies also joined the trend. For example, Valio declared plans to pull out from the country suspending supplies to Russia, and local production.

“We strongly condemn Russia’s invasion of independent Ukraine,” Valio president and CEO, Annikka Hurme, said in a statement on 7 March. “Valio does not have the ethical pre-conditions to continue operating in Russia, and we will therefore close down our operations in Russia.”

Valio operated a cheese factory near Moscow, along with contract manufacturing partners in central and northwest parts of the country.

Lyudmila Manitskaya, chairman of the Russian dairy union, said that dairy companies leaving Russia must be nationalised so that production capacities would not be closed and jobs lost.

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Decisive steps needed

“Various options for state policy and scenarios for protecting state interests in managing foreign companies whose shareholders decide to leave the Russian market are being worked out,” Manitskaya said, adding that one possibility involves transferring shares of foreign shareholders to local legal entities and individuals, as well as state intervention through the accelerated bankruptcy procedure.

Manitskaya said that the Russian dairy union advocates the idea of more decisive steps, including nationalising production assets when foreign dairy companies leave Russia, closing production and dismissing staff.

Sanctions

In the context of the Western sanctions, there are a growing number of cases where local subsidiaries of foreign companies or local producers with non-Russian capital have pulled out from the Russian market, Manitskaya said, not providing additional details on these companies. This causes social and economic damage to the country, sparking crisis and destabilising markets, she added.

Some companies opt to stay

On the other hand, some Western companies confirmed plans to continue operating in Russia. For example, Danone officials said it would not leave Russia, stating that it would not commit new investment to Russia but continue to sell dairy, water bottles and baby food in the country.

Antoine de Saint-Affrique, Danone CEO, said to the Financial Times: “It is very easy to get drawn into black-and-white thinking and demagogic positions, but in the end, our reputation is about our behaviour.”

Putin supports nationalisation

During a government meeting on 10 March, Russian president, Vladimir Putin, endorsed a plan to nationalise foreign-owned businesses that are fleeing the country due to its invasion of Ukraine.

LATEST NEWS UPDATES: Ukraine/Russian conflict impacts dairy sector