Despite obstacles, Western companies continue to leave Russia’s dairy sector, according to local experts.
The withdrawal of Danone from the Russian market is the largest and most anticipated transaction in the Russian dairy business, according to Alexey Kurasov, director of the corporate finance department at the Russian consultancy Finam, who spoke at the Agricultural Holdings of Russia 2023 conference in Moscow.
According to experts, Danone still has a chance to sell its Russian company, which has been placed under temporary state administration. To close the contract, the corporation must agree to a discount.
After the firm has been appraised by advisors chosen by the Russian government, Moscow requires a 50% discount on all overseas agreements. According to reports, the authorities have sought a larger reduction in certain situations in recent months.
According to the Financial Times, Danone still wants to finalize the official sale of its Russian company. The firm thinks that if it is correctly paired with the appropriate government-approved buyer, it may still generate money.
Western companies are projected to leave until the first quarter of 2024, according to Kurasov. Furthermore, researchers expect ‘cautious attempts’ by investors from the Middle East and China to join the Russian market, according to Kurasov.
PepsiCo simplifies operations
Danone is hardly the only company attempting to sell Russian assets. According to the local business weekly Kommersant, PepsiCo is in negotiations with Tkachev’s agricultural complex about selling its dairy factory in Krasnodar Krai. According to the magazine, the corporation intends to simplify its operations in the nation.
It intended to halt operations during the summer of 2023 before being passed to the new owner.
PepsiCo’s dairy segment now has 14 manufacturing facilities in Russia. It produced 940,700 tons of dairy products in 2022, 8.7% less than the previous year.
According to Alexey Gruzdev, general director of Moscow-based think tank Streda Consulting, the Kradnodar plant’s output levels were judged to be inadequate and were dispersed to other manufacturing locations.
Tkachev’s agricultural complex is Russia’s second-largest producer of raw milk. The transaction might benefit the company’s business margins, since raw milk prices in the nation fell by 20-25% in the first half of 2023, according to Kommersant, citing statistics from the Russian Union of Dairy Producers Soyuzmoloko.
