Nestle weighs all options after Kremlin moves to seize Russian business

Nestle shares experienced a decline of 1.5% in early trading in Zurich following Russia's decision to seize the Swiss food maker's Russian business. The company is currently evaluating all possible actions to safeguard its rights and ensure uninterrupted business operations. Nestle's CEO emphasized the company's dedication to protecting its interests and the well-being of all stakeholders, particularly its employees.

Russia has been tightening its grip on foreign-owned assets since the onset of the Ukraine conflict in 2022. The Kremlin's 2023 decree grants it the authority to temporarily administer assets from unfriendly countries. President Vladimir Putin has utilized this law to generate revenue through forced sales, exit taxes, and discounts, while simultaneously rewarding loyal Kremlin insiders.

Auchan, a supermarket chain that previously had six factories in Russia producing coffee, petcare, and infant formula products, has also been targeted by the Kremlin. The company generated sales of approximately CHF2 billion (US$2.4 billion) in Russia in 2021, accounting for about 2% of Nestle's total sales. However, analyst estimates suggest that this contribution has dwindled to around 1% of group sales after Nestle scaled back its activities in the country.

Nestle has suspended most sales, non-essential imports and exports, advertising, and capital investment in Russia, according to Bank Vontobel analyst Jean-Philippe Bertschy. The analyst estimates that Russia now contributes around 1% of Nestle's total sales. While this situation may lead to a marginal financial impact, it is expected to be minor due to Russia's limited contribution to the company's overall sales.