Nestlé Weighs All Options After Kremlin Seizes Control of Russian Business

Nestlé said on Friday that it was weighing all options to protect its rights after the Kremlin moved to take control of the Swiss food maker's Russian business, the latest act of expropriation against a Western company since Russia's full-scale invasion of Ukraine.

The maker of Nescafé and KitKat said it had taken note of the decision, announced in a presidential decree on Thursday, and was assessing the situation. In a statement, the company said it was committed to taking all necessary steps to protect its rights and ensure continuity of business operations in the interests of all stakeholders, particularly its employees. It declined to comment further on what action it was considering. Nestlé shares fell 1.5 per cent in early trading in Zurich.

Russia has tightened its grip on foreign-owned assets since the 2022 invasion of Ukraine. A decree signed by President Vladimir Putin in 2023 gives Moscow the power to place assets belonging to countries it deems unfriendly under temporary administration. The Kremlin has also used the law to raise cash through forced sales, exit taxes and discounts, while rewarding insiders loyal to the regime.

Nestlé operates six factories in Russia producing coffee, pet care and infant formula products. It generated sales of about 2 billion Swiss francs, or $2.4 billion, in the country in 2021, the last year it released figures, and employs about 7,000 people there. That sales figure corresponds to about 2 per cent of the company's total, though analysts estimate the contribution has declined since Nestlé scaled back its activities in Russia. Jean-Philippe Bertschy, an analyst at Bank Vontobel, noted that the company had suspended the vast majority of sales, non-essential imports and exports, advertising and capital investment, and estimated that Russia now accounts for around 1 per cent of group sales. While the development was negative for sentiment and raised the prospect of an asset impairment or an unfavourable disposal, he said the financial impact was expected to be marginal given Russia's limited contribution.

French supermarket group Auchan was also targeted by Thursday's decree, with its Russian assets transferred to the temporary management of L.E.V. Management. Auchan, which operates 230 stores and an online business in Russia and employs about 30,000 people there, declined to comment. The newspaper Kommersant has previously reported that a company known as KS Logistika asked Putin to place Nestlé's assets under temporary administration.

In previous cases, temporary administration has often preceded state expropriation, with assets later handed to Kremlin-linked individuals or companies. Other Western companies have sold Russian assets or transferred them to local managers to comply with sanctions or in response to Moscow's threats to seize foreign-owned holdings. Nestlé has justified its continued operations in Russia by arguing that, as a food producer, it supplies essential goods.

Moscow took control of the French dairy company Danone's Russian business and the beer company Carlsberg's stake in a local brewer in 2023. Danone was removed from the list of assets under temporary Russian state management in March 2024 amid reports that a Russian businessman known for his pro-war credentials planned to buy the business at a steep discount. In December 2024, Carlsberg sold its shares in Baltika Breweries in a management buyout. Jon Cox, an analyst at Kepler Cheuvreux, said such experiences did not bode well for Nestlé, warning that the company may ultimately lose those assets, around 2 per cent of its sales and the cash tied up in Russia, for the foreseeable future, with any compensation unlikely to offset the loss.