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Danone may retain Russian business.

Several Russian food companies, including Russia’s largest meat producer, Cherkizovo, and the country’s largest dairy company, EkoNiva, have expressed interest in acquiring the Danone business in the country, according to the Russian newspaper Kommersant, citing anonymous market sources.

Danone may sell 13 dairy plants it operated in Russia before ceasing operations in October 2022. To keep a seat on the board of directors, the company wants to sell at least 75% of its Russian business, but not 100%. Danone also wants to make a buyback option a contractual requirement, according to Kommersant.

The buyback option may complicate the company’s withdrawal from Russia. According to Dmitry Gabishev, managing partner of Moscow-based think tank Peregrine Capital, this stage of the selloff could severely limit the number of potential buyers.

Danone has not responded.
Market to be affected

Furthermore, Danone intends to pass only Russian brands to the new owner. Prostokvashino, Rastishka, and Tyoma are among them. International brands such as Activia, Actimel, and Oikos will be prohibited from being sold in Russia.

According to Alexei Gruzdev, CEO of Russian research firm Streda Consulting, the Prostokvashino brand is unlikely to suffer from a change in ownership due to its strong position in the Russian dairy market. The prohibition on using the Activia and Actimel brands, on the other hand, could have a serious impact because they provided a significant share of sales, according to Gruzdev.

Danone was once Russia’s second-largest dairy company, processing 3,400 tonnes of raw milk daily. The company dominates several segments of the Russian dairy market, including fermented dairy products.

Alexander Petrikov, head of the All-Russian Institute of Agrarian Problems and Informatics, stated in January that the Danone business in Russia should not be sold in pieces. He warned that selling all dairy plants one by one would devastate Danone’s ecosystem and harm Russia’s entire dairy market.

“Estimating the resulting reputational losses is difficult. They will inevitably arise not only for buyers, but also for the corporation’s numerous Russian partners – raw milk and other input suppliers, universities and research institutes with which Danone has established partnerships,” Petrikov predicted.

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