Since the start of Putin’s war in Ukraine, many major companies have left Russia in a mass exodus. But many Big Alcohol giants were late, deciding to put profits over human rights, until public pressure and scrutiny became too big.
The pace of the withdrawal from Russia has increased as Putin’s military started using even more brutal tactics, such as targeting Ukrainian civilians. Hundreds of companies – from Adidas to Shell to McDonald’s – have severed or suspended their economic activities in Russia. The Washington Post reports that at least 350 multinational corporations have abandoned or frozen their operations in Russia, according to a tally by Jeffrey Sonnenfeld, a professor at Yale University’s School of Management. But Carlsberg and other multinational alcohol producers stayed tied to Putin’s regime much longer than many other transnational corporations from other sectors.
Companies boycotting Russia includes either pausing investment, suspending operations, or pulling out of the country altogether.
Movendi International has been closely covering this developing issue, specifically in terms of beer giant Carlsberg’s continued involvement with the Russian regime. As we reported, companies that divested from Russia. Even Big Oil companies, such as BP, Shell, and Exxon – that operated a major oil and natural gas project in partnership with Russian government-owned Rosneft – announced they are discontinuing operations. Several other major brands such as Nike, Ikea, and H&M have cut ties with Russia, closing their stores in the country. Visa and Mastercard joined the mass exodus and suspended operations in Russia.
Companies are cutting ties with Russia for two main reasons.
- Companies who were partnering with state-owned enterprises are leaving because their involvement with Russia helps fund its assault on Ukraine. The big oil companies that exited Russia all had partnerships with Russian state-owned entities.
- Other companies are leaving Russia to create political pressure to end the war. Russian President Vladamir Putin has blocked almost all media in the country, including foreign-run news outlets. Only the state media is active and feeds false information to the people in Russia about Putin’s invasion of Ukraine. Russia recently enacted “a law to punish anyone spreading ‘false information’ (in other words any news contradicting state media) about its Ukraine invasion with up to 15 years in prison.”
Major multinational companies leaving Russia is important for several reasons. The exodus not only targets the Russian economy, thus undermining Putin’s war machine. The business exodus also sends a strong message to the Kremlin that what it is doing is unacceptable. Meanwhile, the U.S. and European countries have together implemented comprehensive sanctions packages cutting out Russia from the world economy.
What has Big Alcohol been up to in Russia?
Some companies did not leave Russia willingly but were compelled to by the threat of popular support for global boycotts. This includes unhealthy food and drinks companies McDonald’s, Coca Cola and Pepsi. For days the hashtags #BoycottCocaCola and #BoycottMcDonalds were trending on Twitter. In the end, the corporate giants yielded to the pressure and shut down operations in Russia, at least for now.
Big Alcohol has so far gone fairly under the radar from such public pressure to exit Russia. For example, Carlsberg did not take any action until March 9, and even when they did, the Danish beer giant did not choose to completely stop operations in Russia.
Most of the actions taken by Big Alcohol giants include stopping exports to Russia, stopping investments, suspending their flagship brands in Russia. Some companies like Carlsberg and Heineken are ring-fencing their Russian operations. This means they will continue to operate in Russia but as a separate business cut off from their global operations. This is not the same as exiting Russia completely. If a company ring-fences their Russian operations it maintains business operations in Russia and ties to Putin’s regime.
However, media reporting about the alcohol industry is ambiguous, lacking clarity and clustering these companies as a part of the mass exodus from Russia when in fact they are either continuing to stay and operate some part of their business in Russia, ring-fencing their Russian operations or are unclear about their position.
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 in Russia
27% market share.
No. 2 Market position.
Goldman Sachs lists European companies with the highest exposure to Russia – meaning the highest portion of their revenue coming from Russia, and this includes Carlsberg with 11% revenue coming from Russia.
Carlsberg did take some action because they came under increasing scrutiny, including from Movendi International and our members, regarding their business in Russia. As the company announced on March 9, it has taken the following actions:
- No new investments or exports from Carlsberg Group into Russia.
- Cease advertising by both the Carlsberg Group and Baltika Breweries in Russia.
- Stop producing and selling its flagship brand, Carlsberg, in the Russian market.
- Baltika Breweries will be run as a separate business!
- Any profits generated by the business in Russia will be donated to relief organisations
However, this does not mean a complete halt of Carlsberg operations in Russia, in contrast to what other multinational corporations have done.
Carlsberg is definitely not exiting Russia.
What they are doing is ring-fencing the Russian business. This means separating out the Russian business from its global operations. Carlsberg confirms this, saying that its Russian business Baltika Breweries will be run as a separate business, continuing to make profits and continuing with its business tie to Putin’s regime.
Meanwhile, the company is white-washing its image by publicizing its €10 million donation to support humanitarian efforts in Ukraine. Trying to cover up any further questions the company might be asked about its Russian business Carlsberg claims that any profits generated by the business in Russia will be donated to relief organizations.
Carlsberg suspended its annual earnings guidance for 2022 citing the uncertainty in Russia and Ukraine. As a result, the Carlsberg stock traded 5% lower in Copenhagen on March 10, the Thursday after suspending the guidance.
Movendi International closely followed Carlsberg’s activity in Russia since the start of the Russian invasion of Ukraine. Carlsberg is a major Big Alcohol company in Russia with the no. 2 market position in the country in their segment and holding 27% of the market share.
Heineken is taking a similar stance to Carlsberg.
Since March 7, the company has stopped new investments in Russia and exports to Russia from other Heineken Group companies. Production, advertising, and sale of the flagship Heineken brand have been suspended in Russia as of March 9. The company is taking steps to ring-fence its operations in Russia, just like Carlsberg.
According to Bloomberg Quint Heineken is “assessing the strategic options for the future of the business in Russia”. It appears Heineken has no intention to completely exit Russia any time soon.
Heineken is also white-washing their image and using the Ukrainian humanitarian crisis for good PR by publicizing its €1 million donation to unspecified local NGOs to provide humanitarian aid in the region.
It appears Heineken’s strategy in Russia and white-washing their image is working in their favor. As Bloomberg Quint reports on March 9, Heineken’s shares rose as much as 4.3% in early trading.
Anheuser-Busch InBev (AB InBev)
The world’s largest beer maker, AB InBev, merged its Russian and Ukrainian operations with Turkey’s Anadolu Efes in 2017. As reported by Nasdaq, AB InBev does not have a controlling stake in the merger or consolidate it in their accounts.
The beer giant has requested the controlling shareholder to suspend the license for the production and sale of Bud in Russia. The company is reportedly forfeiting all financial benefits from the joint venture operations.
AB InBev has joined other beer giants in using the Ukrainian humanitarian crisis by publicizing their donations and relief efforts. The company has used this as an opportunity to join with the Red Cross, local NGOs, and other consumer product groups to provide food, blankets, medical supplies, and 2 million cans of drinking water to Ukraine and the surrounding refugee relief areas.
Since March 3, Diageo reported suspending exports to Russia. There is no mention of stopping sales altogether or exiting Russia. It is unclear how long exports will be suspended.
Pernod Ricard took a similar stance to Diageo, suspending its exports to Russia as of March 3. The company does not state whether sales will be on hold or whether it will exit Russia. The duration of the export suspension remains unclear.
Jack Daniels owner Brown Forman has halted the sales of their Tennessee Whiskey brand in Russia. However, the group currently sells both spirits and wine through third-party sellers in Russia. The group has not commented whether all exports would be stopped to the country or regarding any plans to exit Russia.
The liquor giant has stopped hiring for its distribution business in Russia as of March 3.
Brown Forman has joined other Big Alcohol giants using the Ukrainian humanitarian crisis for their benefit by publicizing their donations to UNICEF, UNHCR, and International Medical Corps and other organizations aiding Ukrainian refugees.
Big Alcohol using the Ukrainian humanitarian crisis for good PR
The alcohol industry is using the humanitarian crisis in Ukraine for getting good PR. A host of Big Alcohol companies has announced and promoted their donations and relief funds:
- AB InBev,
- Brown Forman,
- Asahi Group,
- Vodka brand Dima,
- Thornbridge Brewery,
- Stoli Group, and
- Campari Group.
Standing in solidarity with the people of Ukraine is absolutely essential to give voice and mobilize support for the protection of their human rights. This includes donations to humanitarian efforts, health support, food, and more. Movendi International issued a statement and developed a resource page with a toolkit for people to take action in support of the people of Ukraine.
Why is it a problem that Big Alcohol giants are publicizing their donations and relief efforts?
These companies are producing alcohol products that kill three million people worldwide. The people of Ukraine, their health, the country’s economy, and health infrastructure have been badly harmed in recent years by the products and practices of Big Alcohol.
Harm caused by Big Alcohol in Ukraine
As data from the World Health Organization’s 2018 Global Alcohol Status Report shows, the products and practices of the alcohol industry – especially the liquor and beer industries – are causing massive years of lives lost. Ukraine ranks among the countries in the world with most years of lives lost due to alcohol.
In 2016, more than 8.000 Ukrainians died from liver cirrhosis due to alcohol. Almost 2.000 died from road traffic injuries due to alcohol. And more than 8.000 people die in Ukraine in 2016 from cancer due to alcohol.
The products and practices of Big Alcohol cause a heavy toll on Ukrainian society.
11.5% of Ukrainian men have an alcohol use disorder. More than half of all alcohol consuming young males engage in binge alcohol consumption. Per person, alcohol consuming Ukrainian men are drinking more than 20 liters of pure alcohol per year.
All this amounts to tremendous loss of human potential, social capital, economic productivity, and sustainable development of Ukrainian society.
Big Alcohol is hypocritical in their support for humanitarian causes while producing, selling, marketing, and profiting from products that cause human suffering, social harm, economic deficits for countries, such as in Ukraine.
Not only is it hypocritical but also unethical to use a humanitarian crisis for good PR which in turn benefits the companies by creating a positive image about alcohol leading to increased sales and profits for these companies.
This is not the first time Big Alcohol exploited a crisis for their benefit. The same was done during the COVID-19 pandemic.
During the pandemic alcohol companies moved quickly to portray themselves and their products in a positive light, employing long-established but largely discredited corporate social responsibility (CSR) tactics that align with their interests. They also seized opportunities to forge links to governments, increasing scope for lobbying, and incorporated messaging on their contribution to the pandemic response into their marketing.
Scientific research has proven that alcohol companies do not reduce alcohol harm through their CSR project. Instead, the CSR project benefits the companies.
- One study showed that one of the three reasons that alcohol corporations undertake philanthropic sponsorships are as a means of indirect brand marketing as well as gaining preferential access to emerging alcohol markets.
- Another study found that alcohol industry CSR actions could be implemented as a way to preserve markets by counteracting scientific evidence about alcohol-related harms.
- A review of scientific research found that there is no robust evidence that alcohol industry CSR initiatives reduce alcohol harm. There is good evidence, however, that CSR initiatives are used to influence the framing of the nature of alcohol-related issues in line with industry interests.
Who else is still staying tied to Putin’s regime in Russia?
Big Alcohol is not alone in continuing its operations in Russia.
Big Tobacco is still staying in Russia as well. However, Big Alcohol has been more subversive by employing some restrictions such as stopping exports to avoid public and political scrutiny.
Big Tobacco giant Philip Morris has said they are suspending planned investments in Russia and pledged to scale down manufacturing operations. As reported by Popular Information when asked if they would stop the sale of its cigarettes in Russia the company avoided the question.
British American Tobacco continues to operate in Russia as usual, according to Yahoo News reporting.
The way that the Big Alcohol and Big Tobacco are behaving in this crisis is another example of the similarities between the two industries when it comes to their strategies.
Haliburton, a major oil fields operator in Russia, has not shared any change in plans for operations in the country. By the looks of it they continue to operate as usual. According to Popular Information, in a January 22, 2022 shareholder call, Haliburton said it anticipated “steady, profitable growth” and “higher utilization for our existing equipment” in Russia.
Other companies staying in Russia include the following:
- Oilfield service provider Baker Hughes. It is only second to Haliburton in Russia in terms of exposure, according to JPMorgan analysts.
- Fast-food chain Burger King with 800 fully franchised outlets in Russia.
- Citi is a U.S. bank that has the largest presence of any U.S. bank in Russia.
- Not only are they staying but offering “financial services” to international corporations that are adjusting their presence in Russia.
- Hotel industry, including Mariott, Hilton, and Hyatt.
- Tire companies Pirelli and Bridgestone Tyre.
U.S. and Europe moving to strip Russia of trade status
Putin’s regime has been hit with comprehensive sanctions packages by global superpowers including the U.S., European nations, and Japan.
As the Washington Post reports, the United States and Europe have already cut off major Russian banks from global financial channels, blocked the country’s access to advanced technologies, and blacklisted oligarchs who back Putin’s rule and profit from it.
Now the U.S. and European allies are moving to strip Russia of trade benefits enjoyed by most countries. This is designed to add to the financial pressure on Putin’s regime to cripple the ability to fund Putin’s war against Ukraine and thus stop its invasion. Stripping of trade benefits means Russian imports will have higher tariffs.
The United States has already halted purchases of Russian oil and energy products, which made up about 60% of the $26 billion in goods imported from Russia in 2021. In a more symbolic move, the U.S. banned imports of Russian seafood and alcohol, which amounted to $550 million last year.
Canada announced in the first week of March that it would strip Russia and Belarus of their most-favored-nation status. This would subject goods from those two countries to a new 35% tariff.
The European Union and the other Group of 7 nations will implement similar measures. This could hurt the Russian economy even more since two-way trade between the European Union and Russia amounts to about $281 billion a year, roughly 10 times that of U.S.-Russia trade.
Early last week, the European Commission announced a plan to cut European imports of Russian natural gas this year by two-thirds. Approximately 40% of the EU’s gas supplies currently come from Russia.
The combined effects of the sanctions and losing trade benefits can shrink the Russian economy by at least 15% this year, according to the Institute of International Finance. The sanctions are already taking their toll on Putin’s regime. The Ruble has lost almost half its value. The Russian stock market has been closed for weeks. Many foreign corporations are abandoning Russia amidst increasing political and public pressure.
Popular Information: “These companies are still doing business in Russia“
Just Drinks: “Russia’s attack on Ukraine – Drinks industry response“
Carlsberg Group: “Update on Ukraine and Russia; Suspension of 2022 guidance“
Bloomberg Quint: “Heineken Halts Beer Sales in Russia, Joins Corporate Exodus“
Investing.com: “Carlsberg Falls After Dropping Guidance, Stops Selling in Russia“
Financial Times: “Companies’ flight from Moscow sets some hard precedents“
The Washington Post: “Biden, European allies move to strip Russia of trade status“