Joining a lengthening list of global companies making costly exits from Russia over the war in Ukraine, Danone will be offloading a business representing about 90% of its operations in Russia, where it will retain its infant nutrition unit.
“This is the best option to ensure long-term local business continuity,” a Danone statement said, adding that the Russian dairy unit accounted for about 5% of the group’s net sales in the first nine months of the year.
A source close to the matter said Danone could retain a stake in the dairy business, Russia’s biggest.
According to the source, “the board has just initiated a procedure that will lead to a transaction that might be a whole sale or a partial sale,” with the intention of ceasing operations of the company.
Despite demands from consumers and activists to sever all connections with Moscow, several Western food and consumer goods businesses, including as Nestle and Procter & Gamble, have continued to provide Russia with crucial food and medications.
Analysts welcomed the announcement and said it may signal a bigger reorganisation of Danone’s business as shares of the company increased more than 1% in early trade.
As part of a turnaround plan he unveiled this year, Chief Executive Antoine de Saint-Affrique, who assumed the position in September of last year, stated the company will sell off underperforming assets.
Pierre Tegner, an analyst at broker Oddo BHF, wrote in a note that “Russia is definitely an asset they have to withdraw from.”
“It’s not only that the Russian market has low margins and slow growth. It is mostly because senior management has been greatly distracted for the past 11 years with this asset.
As part of a turnaround plan he unveiled this year, Chief Executive Antoine de Saint-Affrique, who assumed the position in September of last year, stated the company will sell off underperforming assets.
Pierre Tegner, an analyst at broker Oddo BHF, wrote in a note that “Russia is definitely an asset they have to withdraw from.”
“It’s not only that the Russian market has low margins and slow growth. It is mostly because senior management has been greatly distracted for the past 11 years with this asset.
The transfer of Danone’s Essential Dairy and Plant-based (EDP) division, which has 12 manufacturing facilities and 7,200 people, was not made clear.
Following Nissan’s sale of its assets to the Russian state, which resulted in a loss of almost $687 million, this news is the second of its kind from a major Western firm this week.
