Nestlé Russia falls under Kremlin control

Nestlé Russia takeover by Kremlin – overview

• Nestlé is assessing options after Russia assumed control of local business
• Kremlin placed Nestlé Russia under temporary external administration arrangements
• LEV Management now oversees subsidiaries while ownership remains unchanged
• Russia increasingly intervenes in foreign assets from “unfriendly” countries
• Auchan was also targeted, signalling broader risks for multinationals

Nestlé has said it’s “assessing the situation and its options” following the Kremlin’s shock decision to take control of the Swiss multinational’s Russian business.

The Russian government announced Thursday that it’s to place the food and beverage giant under temporary administration, according to a decree published on the country’s official legal portal.

According to the decree, Nestlé Russia and Nestlé Kuban have been transferred to the temporary management of LEV Management, a Moscow-based company.

While ownership of the subsidiaries remains with Nestlé, the move removes the Swiss group’s ability to manage or make decisions regarding those assets while the administration remains in place.

Nestlé released a brief statement on Friday, saying it “takes note of Russia’s presidential decree” which places Nestlé Russia, including six factories, under temporary external administration.

The world’s biggest CPG went on to say it’s “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”.

Nestlé declined further request for comment on the matter.

Foreign businesses face increased intervention

Russia has tightened control ⁠over foreign-owned assets since its invasion of Ukraine in 2022, with a 2023 decree signed by President Vladimir Putin giving ​Moscow powers to place assets from countries it deems “unfriendly” under temporary administration.

The mechanism has previously been used against a number of Western companies, including the Russian operations of Danone and Carlsberg.

Nestlé employs around 7,000 staff in Russia and generated approximately CHF2bn (€2.1bn) in sales in the country in 2021 – the last year that figures were publicly disclosed.

Following Russia’s invasion of Ukraine, Nestlé suspended non-essential imports and exports, capital investment and advertising activities in the country, while continuing to supply what it described as “essential products”.

French supermarket seized

The Russian government has also taken control of French supermarket group Auchan.

Auchan, which employs around 30,000 staff in Russia and operates 230 stores and an online business, is yet to respond to request for comment. And, at time of publishing, has not released a public statement on the matter.

French home improvement and gardening retailer, Leroy Merlin, has also been placed under Russian control.

The latest move underscores the Kremlin’s continued use of temporary administration orders to increase control over foreign-owned businesses that have remained in Russia since the start of the war in Ukraine.

We’ll continue to report on this developing story.