Report: Nestlé could lose control of five Russian subsidiaries

Nestlé generates around 2% of its group turnover in Russia. Keystone-SDA

Nestlé risks losing control of part of its Russian business after a local logistics company reportedly asked President Vladimir Putin to place five of the Swiss group's subsidiaries under temporary state administration.

According to the Russian newspaper Kommersant, such a measure could be a first step towards a subsequent change of ownership. The Russian government plans to reportedly examine the request by the end of the year. KS Logistika justifies the move, amongst other things, on the grounds that Nestlé is not expanding its production capacity and is no longer exporting goods manufactured in Russia.

Reports of a possible compulsory administration weighed on Nestlé shares on Monday. The share price fell by 1.6% to CHF79.70 ($98.30), making it the weakest blue chip in the Swiss benchmark index, the SMI.

Nestlé: ‘We are fulfilling our obligations’

Nestlé has not yet been contacted by the authorities regarding this matter, a Nestlé spokesperson told the AWP news agency. Its factories and offices are continuing to operate and the group is fulfilling its obligations. A withdrawal from the country is not on the cards, he declared.

According to the spokesperson, Nestlé generates around 2% of its group turnover in Russia. The company operates six production sites in Russia, where it manufactures, amongst other things, coffee, confectionery, baby food and pet food.

In recent years, Russia has tightened the regulatory framework for foreign companies and introduced instruments to exert greater influence over firms.

Following Russia’s invasion of Ukraine in 2022, Nestlé decided not to cease its operations in Russia entirely. At the time, the group justified this by stating that, as a food manufacturer, it wished to continue supplying the population with basic foodstuffs even in conflict regions. Other Western consumer goods groups also remain active in Russia, including Barry Callebaut, L’Oréal and Beiersdorf.

Danone has withdrawn

Analysts at the US bank JPMorgan now believe it possible that the Nestlé’s Russian business could be lost. Should Nestlé be forced to sell and generate little in the way of proceeds, this could reduce earnings per share by around 3-4%.

JPMorgan also expects this development is likely to increase pressure on Nestlé to withdraw completely from Russia. This would not be unprecedented: the French food group Danone lost control of its Russian business in 2023 after the authorities placed it under temporary state administration. Danone eventually sold the business in 2024 for around €180 million and recorded a total loss of €1.2 billion.

The Danish brewing group Carlsberg faced a similar fate. Its Russian operations were also placed under state administration in 2023. At the end of 2024, Carlsberg completed its withdrawal with a management buy-out worth $320 million. Heineken, for its part, sold its Russian subsidiary for the symbolic price of €1 and recorded a total loss of €300 million.

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Translated from German, reviewed by an English Department journalist.