++ Update: Carlsberg Maintains ‘Business As Usual’ in Russia ++ Why Beer Giant Carlsberg Stays Tied to Putin’s Regime As Other Multinationals Exit

This news story was updated at 9am CET on March 9 (see original story below).

++ Growing public scrutiny over multinational corporations’ failure to stop business in Russia over war on Ukraine ++

On March 8, the BBC reported that pressure was growing on Western junk food and sugary drink giants to pull out of Russia due to Putin’s invasion of Ukraine.

McDonald’s and Coca-Cola have been criticized on social media for continuing to operate in Russia, while Putin’s regime is waging war on the people of Ukraine.

Many well-known multinational brands – listed below – had already suspended sales or stopped providing services in Russia.

In addition to the list companies that responded in recent days, international brands such as Levi’s have already suspended sales …

Other multinational corporate giants receive scrutiny over their refusal to to close their outlets and stop sales in Russia: KFC, Pepsi, Starbucks and Burger King.

Absent from this level of scrutiny – so far – is beer giant Carlsberg.

The Danish beer maker belongs to the corporations that have decided to put profits over human rights.

Over one-third of Carlsberg’s market share (39% volume), a quarter of revenue (25%), and almost a quarter of profits (24%) come from the Central and Eastern European region, according to their 2021 Annual Report. For Carlsberg, this is a lucrative region largely dominated by their Russian market. In this region, in 2021, Carlsberg’s Beer consumption increased by 4.9% while other beverages increased by 20.3% bringing total consumption by volume to a 6.1% increase. Revenue in the region increased by 10.1%.

Carlsberg is the 3rd largest beer producer in the world and the largest beer maker in Russia through its ownership of Baltika Breweries. The beer giant took control of the Russian Baltika Breweries in 2008. The brewery is a major exporter of Russian beer. The company’s products are offered in more than 75 countries, including Western Europe, North America, and Asian Pacific region.

Similar profit maximization interest have been dominating decision-making at Yum Brands.

Yum Brands, the parent corporations of Pizza Hut, has announced that it has suspended future investments in Russia – as did Carlsberg (see below) – revealing their approach to maintain business in Russia while avoiding scrutiny and public pressure.

Yum Brands is the world’s second-biggest restaurant chain, according to the BBC. There are about 1,000 KFC outlets and 50 Pizza Hut restaurants in Russia. The company was not pulling out entirely, but Yum said that it would “redirect all profits from operations in Russia to humanitarian efforts”. It is also donating $1m (£762,000) to the Red Cross.

McDonald’s reported on their website that it has 847 stores in Russia. The company also owns the majority of these outlets, whereas across the rest of the world most are typically operated by franchisees.

Both McDonald’s and Pepsi have come under public pressure to stop their business in Russia. Thomas DiNapoli, comptroller of the New York state common retirement fund, wrote letters to the companies, as per BBC. Mr DiNapoli reportedly urged the corporate giants to review their businesses in Russia because they faced “significant and growing legal, compliance, operational, human rights and personnel, and reputational risks”.

++ More multinational corporations stop business in Russia, Carlsberg still NOT one of them ++

In response to growing public scrutiny and pressure, Coca-Cola, Pepsi, McDonald’s and Starbucks suspended business in Russia after Putin’s invasion of Ukraine, on March 8, 2022. CNBC reports that it is a “symbolic move by the iconic U.S. brands.” Some of the multinationals have done business in the country during the time of the Soviet Union. For example, Pepsi has sold it products in Russia for more than six decades, even when the company had to trade its soda concentrate for Stolichnaya vodka and warships. McDonald’s opened its first location in Moscow, just months before the Soviet Union collapsed, according to CNBC.

McDonald’s announced on March 8 that all 850 of its Russian restaurants would temporarily close. Until then, the fast food chain had stayed silent on the war, drawing stronger criticism than the handful of restaurant companies that condemned the invasion but kept their locations open.

Starbucks went a step further than McDonald’s, saying it would suspend all Russian business activity, including shipment of its products. Starbucks CEO Kevin Johnson condemned the attacks in a letter on Friday.

Of the two restaurant companies, McDonald’s has a larger presence in the country and receives a higher percentage of its global revenue from those sales, according to CNBC reporting.

The New York Times reported that Yum Brands finally decided to follow suit. Yum, announced on March 8 that it was suspending operations at 70 company-owned KFCs and all 50 franchise-owned Pizza Huts in Russia.

In an article for Fortune, Prof. Jeffrey Sonnenfeld explains why the “Great Business Retreat” matters in Russia today – just as it mattered in 1986 South Africa during Apartheid:

The collective withdrawal of 200 Western companies from South Africa in protest of the Apartheid government’s violations provides a powerful roadmap for why and how CEOs should affirm American values amidst global challenges.

In total, after the passage of the sanctions bill in 1990, well over 200Western companies cut all ties with South Africa, resulting in a loss in excess of $1 billion in direct American investment. Nobel Peace Prize winner Bishop Tutu told me over a private lunch I had with him in Atlanta in September of 1996 that the message of this U.S. corporate blockade ‘was essential to reach the larger public that systemic change was vital or there would be no future.'”

Jeffrey Sonnenfeld, senior associate dean and Lester Crown Professor of Leadership Practice, Yale School of Management

So far over 300 companies have withdrawn from Russia, according to Prof. Sonnenfeld’s analysis. However, Carlsberg remains tied to Putin’s regime.

Big Tobacco giant Philip Morris International has also NOT stop business in Russia. Japan Tobacco, which has a 37% share of the Russian market, also continues to operate in Russia. British American Tobacco (BAT) also continues to sell cigarettes in Russia. 

This situation is another instance of similarity between the alcohol and tobacco industry.

This news story was updated at 9am CET on March 7.

++ Carlsberg maintains ‘business as usual’ in Russia ++

Movendi International reported on March 1 that beer giant Carlsberg maintained operations in Russia, despite many other multinational corporations divesting, stopping operations, and cutting ties with Putin’s war machine. On March 4, Carlsberg CEO Cees ‘t Hart said the beer giant would halt new investments into Russia and suspend exports of beer and other beverages to the country as a result of its invasion of Ukraine, according to Reuters. Carlsberg condemned the violence. The announced export ban primarily entailed “finished goods”, meaning beer and other beverages, which are not produced in Russia, as well as packaging material. But an analyst told Reuters that this meant “business as usual”. Carlsberg’s Russian business would now run as an isolated unit, according to Sydbank analyst Per Fogh. The decision was not likely to impact Carlsberg’s offering to Russian consumers.

++ Ex-head of Carlsberg in Ukraine Exposes Carlsberg tactic of maintaining business in Russia, but using donations to white-wash their image ++

Interfax Ukraine, Ukraine’s news agency, reports that former head of Carlsberg in Ukraine Peter Chernyshov called on the Danish beer giant to stop business in Russia due to Putin’s invasion of Ukraine. Mr Chernyshov is former Vice President of Carlsberg Group in seven countries of Eastern Europe.

I came across an internal letter to Carlsberg employees from the current CEO. It contains interesting information about ‘events between Russia and Ukraine.’ They write that they are not going to stop doing business in Russia,” wrote Mr Chernyshov on Facebook, according to Interfax.

They will just stop investing additional money in Russia. And then another letter where they want to simply donate €10 million to Ukraine and buy their way out of any responsibility. This is small amount for Carlsberg.”

Peter Chernyshov, former head of Carlsberg in Ukraine

Mr Chernyshov calls on Danish beer giant to stop doing business in Russia. In his opinion, in connection with the invasion of Russian troops in Ukraine, Carlsberg should completely stop its business in the Russian Federation, putting its factories up for sale.

Obviously, I will not only post it to Facebook – but will write to Carlsberg Foundation, Wall Street Journal and main Danish paper Berlingske – they all be very curious to learn this information,” he wrote, as per Interfax.

Peter Chernyshov, former head of Carlsberg in Ukraine

Carlsberg has struggled with tough competition in Russia, its main Eastern European market, since it took control of Baltika, the country’s largest beer brand in 2008, reports Reuters.

Goldman Sachs lists European companies with the highest exposure to Russia – meaning the highest portion of their revenue coming from Russia, including Carlsberg. The Street reports that Carlsberg was among the multinational corporations with the highest portion of their revenue coming from Russia.

• For Coke HBC, 13% of its revenue comes from Russia, according to Goldman, FactSet and Stoxx.
• For Carlsberg, it’s 11%,
• For Nestle it’s 10%,
• For Renault it’s 9%, and
• For Danone it’s 6%.

++ More multinationals terminate business in Russia over Putin’s invasion of Ukraine ++

Movendi International reported on March 1 about a selection of corporations form different industries cutting their ties with Putin’s regime. CBS News reported on Sunday, March 6, about a range of multinationals that terminate their business in Russia.

H&M

The Swedish fast-fashion chain announced it would pause all sales in Russia.

Ikea

The Swedish furniture company announced the closure of all its Russian stores and pausing sourcing from Russia as well as Belarus, an ally of Putin’s war in Ukraine.

Nike

Nike said it would temporarily shut down all its stores in Russia, a move that followed the sportswear company making purchases on its website and app unavailable in the country.

Visa, Mastercard and American Express

Visa and Mastercard announced Saturday that they were suspending their operations in Russia, days after blocking transactions for Russian banks targeted by U.S. and European sanctions, and American Express followed suit on Sunday. 

Visa and Mastercard’s suspensions were announced within 16 minutes of each other, and they followed a private video call earlier in the day between President Volodymyr Zelensky of Ukraine and U.S. lawmakers, according to CBS News reporting.

The original news story was published at 6.30pm CET on March 1.

Major global corporate giants stop doing business with Putin’s regime, but beer giant Carlsberg is not one of them

Beer giant Carlsberg is staying in Russia while many other multinational companies are leaving in response to President Vladimir Putin’s invasion of Ukraine and the resulting economic sanctions placed by Western governments against Russia.

Sanctions by the United States and the European Union aim to obstruct the Russian economy and end the invasion of Ukraine or convince the country to join peace talks. These sanctions include preventing the Russian government and banks from borrowing in global financial markets, blocking technology imports, and freezing the assets of Russians with ties to Putin’s regime.

The EU and U.S. and other Western allies removed some Russian banks, including the Russian Central Bank, from SWIFT, the global payment system, over the weekend, and executed other rounds of sanctions on Russian financial institutions. Russian President Vladimir Putin has also been the direct target of sanctions, with the U.S. freezing his personal assets and those of Foreign Minister Sergei Lavrov and other wealthy Russian oligarchs. 

The sanctions pressure companies with Russian operations to withdraw. However, Carlsberg is still continuing their Russian operations. In contrast even major players of Big Oil – another unethical, harmful industry – have begun cutting their ties to Putin’s regime over ethical concerns.

Sanctions, divestments and economic boycotts can substantially weaken the economy of Putin’s regime and its war machine. For example, the European Union is Russia’s largest trading partner, accounting for 37% of Russia’s global trade in 2020. About 70% of Russian gas exports and half of its oil exports go to Europe.

Major divestments from Russia

Big Oil

Big Oil has started to cut ties to Putin since his military invasion of Ukraine on February 24, 2022. British oil companies BP and Shell have announced they are quitting business with Russia.

BP announced on February 27 that the company will divest from its 19.75% stake in Rosneft, the Russian state-controlled oil company. BP is putting an end to three decades of operations in Russia. Rosneft accounts for about half of BP’s oil and gas reserves and a third of its production. Divesting will incur charges of up to US$25 billion for BP.

The move by BP is notable since it is (was) the largest foreign investor in Russia. BP’s divesting has increased the pressure on other Western companies with operations in Russia. The world is watching to see how these corporate giants will act during this time of crisis.

A day after BP announced its end to operations in Russia, Shell, Europe’s largest oil company, followed suit. Shell will exit its joint ventures with Gazprom, the Russian government’s natural gas giant. Shell’s investment in Russia is worth about $3 billion.

A relatively smaller player Equinor, the Norwegian energy company announced it will stop new investments and start exiting joint ventures with Russia. The Russian production for Equinor accounts for about 1.5% of the company’s total output.

Big Oil’s actions in response to Putin’s war on Ukraine underscores the pressure placed by governments on companies to divest as economic sanctions are tightened on Russia.

Norwegian sovereign wealth fund

Meanwhile, the largest sovereign wealth fund in the world, the Norwegian wealth fund worth US$1.3 trillion also announced divesting from Russia.

Other industries boycott Russia

Apart from major divestments, many industries are boycotting Russia in response to Putin’s military invasion of Ukraine.

Global payments firms Mastercard and Visa blocked a number of Russian financial institutions targeted by sanctions from their networks, in compliance with Western sanctions, the companies announced, according to Forbes.

Container and automobile industry

And the world’s largest container shipping company, Maersk, is taking measures due to the sanctions against Putin’s regime and stopping container traffic to and from all Russian ports. “As the stability and security of our operations are already being directly and indirectly affected by the sanctions, new bookings by Maersk in sea and land transport to and from Russia will be temporarily suspended,” Maersk said, as per Spiegel Online. The decision affects all Russian ports. Food, medical and humanitarian supplies are excluded. Maersk operates container shipping routes to St. Petersburg and Kaliningrad in the Baltic Sea, Novorossiysk in the Black Sea, and Vladivostok and Vostochny on Russia’s east coast. The group owns 31% of the Russian port operator Global Ports, which operates six terminals in Russia and two in Finland. Global Ports shareholders also include Russian state-owned nuclear company Rosatom and Russian businessman Sergei Zhiskarev.

Daimler Truck has also announced it stops cooperation with Russian truck manufacturer Kamaz. It meant one of the first decision of heavyweights of German industry were taking action after Putin’s attack on Ukraine. Daimler intends to suspend its activities in Russia until further notice, according to Spiegel Online.

Polls show that people want companies to take action -not just make statements – against Putin’s regime for invading Ukraine.

Organizations around the world are taking action against Putin’s war on Ukraine.

Sports world

The International Olympics Committee requested that sports organizations around the world ban Russian and Belarusian athletes from competing.

Formula 1 canceled the Russian Grand Prix.

The world football governing body FIFA and the European authority UEFA banned Russian teams from games and competitions. “Football is fully united here and in full solidarity with all the people affected in Ukraine,” it said in a joint statement, according to Japan Times reporting.

Several European football associations put in place more restrictive policies against Russia before FIFA did. For example, Poland’s football federation expressed concern that FIFA’s initial restrictions were not enough when FIFA initially only stopped international competitions hosted in Russia “until further notice.” However, at first “home” matches were still allowed to take place on neutral soil without spectators. The international governing body of football said the country must play under its federation name, the Football Union of Russia, and without its flag and anthem.

Poland, Czech Republic and Sweden have all been outspoken early about refusing to play Russia in qualifying matches for the 2022 World Cup. England’s football league said its national teams won’t play Russia for the “foreseeable future.”

German sportswear company Adidas has suspended its partnership with the Russian Football Union (RFS) with immediate effect, a company spokesperson said according to Reuters, bringing a halt to the years-long partnership between the football program and Europe’s largest sportswear manufacturer. Adidas is the world’s second largest sportswear manufacturer.

Latvian ice-hockey team the Latvian club Dinamo Riga pulled out of the Russian-owned and run Kontinental Hockey League citing the “military and humanitarian crisis.”

Entertainment industry

The Eurovision song contest barred Russia from competing this year.

The Metropolitan Opera in New York City announced it would end its relationships with artists who support Mr. Putin.

The Rotterdam Philharmonic Orchestra cut ties with conductor Valery Gergiev due to his refusal to retract his support for Russia’s military assault, according to Dutch News reporting. The maestro was dropped from previous performances over his pro-Putin views.

The mayor of Munich, Germany, Dieter Reiter (Social Democrats) announced the firing of conductor Valery Gergiev from the Munich Philharmonic Orchestra, due to Mr Gergiev’s ties to Russian President Putin, reports Spiegel Online. Mr Gergiev had not distanced himself from Putin’s war on Ukraine.

The Walt Disney Company, which owns Marvel Studios, 20th Century Studios, Pixar and other film properties, announced it is pausing its release of theatrical films in Russia, including its anticipated Pixar film Turning Red, “given the unprovoked invasion of Ukraine and the tragic humanitarian crisis,” according to Forbes. So did Sony Pictures, according to Spiegel Online.

A spokesperson for Netflix told the Wall Street Journal that “given the current situation,” the streaming service has no plans to distribute news, sports and entertainment channels from Russian state media, despite a new Russian regulation that requires organizations with more than 100,000 subscribers to carry them, according to a source familiar with the matter.

Social media giants

Youtube on Tuesday blocked channels operated by Russian-state-funded outlets Russia Today (RT) and Sputnik News across Europe, days after it temporarily demonetized RT and other channels Saturday and prevented it from earning money through ads on its videos, and limited access to these channels in Ukraine.

Twitter said it would label tweets that share information from Russian state media accounts, and announced it was temporarily suspending ads in Ukraine and Russia “to ensure critical public safety information is elevated and ads don’t detract from it,” according to Forbes reporting.

Facebook’s parent company Meta said it restricted access to Russian state media accounts in Ukraine, blocked Russian state media from running ads and earning money from their accounts on the platform, and that it took down posts related to a disinformation campaign targeting Ukraine, as per Forbes.

Why is Carlsberg keeping its ties with Putin’s Russia?

When many other companies, including those with bad reputation for their unethical business practices such as Big Oil, are divesting from Russia and cutting their ties to Putin’s regime, why is Carlsberg staying?

The answer lies in the beer giant’s profits from Russia.

Over one-third of Carlsberg’s market share (39% volume), a quarter of revenue (25%), and almost a quarter of profits (24%) come from the Central and Eastern European region, according to their 2021 Annual Report. For Carlsberg, this is a lucrative region largely dominated by their Russian market. In this region, in 2021, Carlsberg’s Beer consumption increased by 4.9% while other beverages increased by 20.3% bringing total consumption by volume to a 6.1% increase. Revenue in the region increased by 10.1%.

Carlsberg is the largest beer maker in Russia through its ownership of Baltika Breweries. The majority of Baltika’s supply chain, production and customers are based in the country, which limits the direct impact of many sanctions, a Carlsberg spokeswomen said, according to Japan Times.

In contrast to other multinational companies, Carlsberg’s main concern is the direct or indirect consequences from sanctions on their Russian operations, as per Japan Times reporting.

Carlsberg took control of the Russian Baltika Breweries in 2008. The brewery is a major exporter of Russian beer. The company’s products are offered in more than 75 countries, including Western Europe, North America, and Asian Pacific region.

This shows the beer corporation’s dependence on and vulnerabilities to even small changes in the Russian alcohol market. Evidently, the Russian market is key and generates a significant share of profits for the beer giant.

Profit or human rights? Profit over human rights, says Big Alcohol

Some businesses left Russia after its annexation of Crimea through a military invasion into Ukraine in 2014. But others, including Carlsberg, have pursued profits and pushed for growing their shares of the Russian market even more. Even while President Putin was preparing to invade Ukraine certain businesses were looking to expand even more into Russia for profit maximization. As the New York Times reports, in January this year 20 of Italy’s top executives had a video call with Mr. Putin about strengthening economic ties in Russia. A similar call arranged with German business leaders was only called off when Russian forces invaded Ukraine on February 24, 2022.

But the alcohol industry has an appalling track record of partnering with military regimes, war machines, and dictators. Carlsberg is not the only beer giant putting profits over human rights.

Investigative journalist Oliver van Beemen revealed in his book “Heineken in Africa” just how far the Dutch beer giant Heineken was and is willing to go in their pursuit of market shares, more consumers, and ever more profits. Mr van Beemen exposed grossly unethical practices of Heineken across the African continent. The book details a shocking list of unethical practices employed by the world’s second largest beer producer. Some of which are:

1. Support for apartheid,
2. Complicity in genocide in Rwanda,
3. Support for authoritarian regimes and collaboration with rebel groups, and
4. Corruption.

The Japanese beer giant Kirin also was exposed for putting profits over human rights. They maintained close ties to the military junta in Myanmar, even during the genocide against the Rohingya people, effectively bank rolling the regime in Myanmar.

For further reading

Carlsberg’s unethical business practices and human rights violations

Sources

Fortune: “The Great Business Retreat matters in Russia today–just as it mattered in 1986 South Africa“

Reuters: “Brewer Carlsberg halts exports, new investments into Russia“

CBS News: “These are the corporations that have pulled out of Russia since its invasion of Ukraine“

Reuters: “Factbox: Companies with exposure to Russia react to Ukraine crisis“

Financial Post: “BP quits Russia in up to $25-billion hit after Ukraine invasion“

The New York Times: “Shell Quits Russia, Joining BP as Oil Giants Object to Attack on Ukraine”

The New York Times: “They Do Business in Russia, and Now They May Pay a Price“

CNN Business: “These companies have the most to lose from Russia’s attack on Ukraine“

Financial Times: “The corporate fallout from Russia’s invasion of Ukraine“

Carlsberg Group: “Annual Report 2021“

Reuters: “Russian alcohol curbs hit Carlsberg’s 2017 sales“

Carlsberg Group: “Carlsberg Group in Russia“

The New York Times: “Multinationals halt operations in Ukraine and move employees to safety.“

Reuters: “Companies shut Ukraine operations, assess impact of sanctions on Russia“

Forbes: “Adidas, Visa And Mastercard Halt Key Russia Services–Here’s The Growing List Of Companies Responding To Invasion“

Japan Times: “More foreign firms pull out of Russia as assault on Ukraine continues“