Two Big Alcohol companies Heineken and Carlsberg are finally leaving Russia over Putin’s invasion of Ukraine. This comes long after many other multinationals left Russia. However, several questions remain about what will happen during the transition period.
According to New York Post reporting, more than 400 companies have already left Russia since its invasion of Ukraine. Movendi International previously reported on the issue providing an overview of how Big Alcohol behaved since Putin invaded Ukraine. This reporting also brought scrutiny to the question why beer giant Carlsberg remained in Russia.
Since Movendi International directed attention to the alcohol industry’s unethical approach to Putin’s regime, in contrast to hundreds of other multinational corporations – including other unethical industries – the scrutiny has intensified and the pressure has grown for Big Alcohol to cut its ties to Putin’s regime.
Now, two major Big Alcohol companies Heineken and Carlsberg are reportedly leaving Russia for good. However, their approach to exiting leaves some questions open.
Is Heineken leaving Russia for good?
As Movendi International previously reported, by March 7 Heineken announced it will stop new investments in Russia and halt 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.
This means Heineken continued production, advertising, and sale of its other brands in Russia. This includes over 35 brands including Amstel, Affligem, and the Russian brands Botchkarev, Ochota, and Tri Medvedya.
As Olivier van Beemen writes on Mediapart, the Heineken brand accounts for only about 12% of the volume of beer sold in Russia and 18% of revenue. This means that 80% of Heineken’s Russian operations continued business as usual, even after the beer giant announced discontinuation of the Heineken brand and other restrictions in operations.
A whistleblower exposed how Heineken is attempting to maximize profits even while there is an ongoing humanitarian crisis in Ukraine, caused by Russia.
In a cynical way, Heineken uses the fact that the name of the company and one of its brands are identical,” said the whistleblower, as per Mediapart.
Heineken escapes both criticism and possible boycott of companies that remain open in Russia.”
Heineken whistleblower
Heineken further pursued plans to ring-fence its Russian business, meaning it would be separate from the global business. The company said it does not want any profits made in Russia. But Heineken did not answer questions as to how this decision was taken and who would then benefit from the Russian business.
Currently, Heineken’s Russian operations make up 2% of its overall sales.
Heineken announces it will leave Russia but will continue “reduced operations” during the transition period
According to the most recent news from Heineken the company has decided to exit Russia. Heineken has said that continuing business in Russia is “no longer sustainable nor viable in the current environment.” Therefore the company will be transferring the business to a new owner. “We aim for an orderly transfer of our business to a new owner in full compliance with international and local laws,” Heineken said in a statement.
Heineken has said the company will not profit from any transfer of operations and that it expects an impairment and other non-cash exceptional charges of approximately €0.4 billion.
The Dutch beer giant also states that “To ensure the ongoing safety and wellbeing of our employees and to minimize the risk of nationalization, we concluded that it is essential that we continue with the recently reduced operations during this transition period.”
This brings up several questions for which there are still no answers:
- When will Heineken fully exit Russia?
- How long will this transition period last?
- Why is Heineken much slower in exiting compared to other multinational corporations with massive operations in Russia?
- What happens to the profits earned during this time?
- What about the taxes the company pays to Russia which indirectly fund Putin’s assault on Ukraine?
Heineken’s continued “reduced operations” still means 80% of its Russian business will be going on as business as usual during this transition period. Since Heineken has said they will pay the Russian employees until the end of this year, it is possible the transition period will last at least that long.
Maintaining a presence in Russia under “reduced operations” during the transition period means Heineken will continue to pay taxes and duties to the Russian government which indirectly supports Russia’s assault on Ukraine. The figures for taxes and duties paid to Russia in 2021 have not been disclosed by the company but in 2019 it amounted to ca. €400 million.
“Loyalty to employees,” Heineken’s strategy to continue business in authoritarian regimes
Heineken has continued to claim they want to support their 1800 employees in Russia. This is not a new strategy, as stated in the Mediapart article by Mr van Beemen. Heineken has argued for loyalty to employees before – as a tactic to avoid exiting a territory where its presence could contribute, indirectly, to war crimes or other human rights violations, for example in Burundi or in the Democratic Republic of Congo.
Heineken’s egregious human rights violations have been exposed in the book Heineken in Africa by Olivier van Beemen. This is certainly not the first time the company backed authoritarian regimes.
Heineken’s supposed loyalty to its employees certainly did not stop the company from using the pandemic excuse to eliminate 8,000 jobs worldwide. This was despite the profits of Heineken reaching ca. €2 billion in 2021, not far below pre-pandemic profits of €2.6 billion in 2019.
Employees of Heineken are against continuing business in Russa
As per the whistleblower cited in the Mediapart article by Olivier van Beemen, employees are against the company continuing its Russian operations. Screenshots of the workplace internal program – a Facebook for employees – show that they have been asking Heineken to quit operations in Russia.
Heineken continues whitewashing its image
Earlier Heineken announced a donation of one €1 million for humanitarian aid in Ukraine. This corresponds to 0.05% of the brewer’s profits in 2021. The bonus paid to Dolf van den Brink, the CEO of Heineken International, was 3.5 times higher. This bonus was paid for his performance in 2020, when the company recorded a loss of €200 million due to the pandemic.
Carlsberg’s strategy to leave Russia
Unlike Heineken, Carlsberg has a much larger presence in Russia.
Carlsberg in Russia
Eight breweries.
27% market share.
No. 2 Market position.
As Movendi International previously reported, Carlsberg and Heineken both took similar actions regarding their Russian operations.
The company announced on March 9, it has taken the a number actions regarding its Russian operations:
- 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 organizations.
Discontinuing the flagship brand still means other brands including Baltika will continue to be produced and sold in Russia during the “reduced level of operations” announced by the company.
Carlsberg announces it will exit Russia
According to the most recent news from March 28, the Danish beer giant announced it has decided to quit Russia.
Carlsberg states “we have taken the difficult and immediate decision to seek a full disposal of our business in Russia, which we believe is the right thing to do in the current environment. Upon completion, we will have no presence in Russia.” The company has taken Russia out of the Group’s revenue and operating profit. For accounting purposes Carlsberg will consider the Russian business as an “asset held for sale until completion of the disposal”.
The company then states, “until the completion of the process, we will maintain the recently announced reduced level of operations…” The beer giant states, exactly as their Dutch competitor Heineken, that this was to support their Russian employees.
The questions that arise with Heineken’s transition period apply to Carlsberg as well.
One question that Carlsberg provides an answer to is what the beer giant will do with profits earned during the transition period. The company claims it will donate these profits to relief organizations. This decision also doubles as whitewashing their image.
However, the company will continue to produce and sell alcohol brands other than the flagship including the Baltika brand under the “reduced level of operations”. Maintaining a presence in Russia means Carlsberg will maintain its ties to Putin’s regime as well as paying taxes and duties to the Russian government.
Carlsberg’s shares have been falling by roughly a quarter since the Russian invasion of Ukraine. After announcing that the company will leave Russia on March 28, 2022, shares traded 4.2% higher, heading for their best day since November 2020.
Image protection instead of ethical stance
These developments clearly show that Big Alcohol has been playing the waiting game with a focus on protecting brand image instead of focusing on an ethical stance. In the beginning of March, the alcohol giants announced actions that feel short off the decisions made by other major corporations. In the end of March the whitewashing attempts were not sufficient anymore and both beer makers needed to alter their course of action.
But the Russian invasion of Ukraine began on February 24, 2022. Internationally considered an act of aggression, Putin’s invasion of Ukraine has caused Europe’s largest refugee crisis since World War II, with more than 4.2 million Ukrainians fleeing the country and a quarter of the population displaced.
As is the case with Heineken, also in the case of Carlsberg a whistleblower spoke out early about the Danish beer giant continuing “business as usual” in Russia, while diverting attention with meager donations and weak decisions that lacked the ethical stance of hundreds of other multinational corporations.
Already in the beginning of March major multinational corporations from multiple different industries, including entertainment, oil, junk food, fashion, furniture, automobile, and more, made announcements of their decisions to boycott Russia – meaning to either pause all investments, suspend all operations, or pulling out of the country altogether. Already in the beginning of March, media outlets were reporting a mass exodus of multinational corporations.
It took Big Alcohol much longer and still there is a lack of clarity regarding all the details of their latest about-face.
Sources
Mediapart: “A whistleblower denounces Heineken’s hypocrisy in Russia“
Carlsberg: “Carlsberg Group to leave Russia“
Heineken: “Heineken N.V. announces decision to leave Russia“
The Drinks Business: “Heineken to exit Russia permanently“
The New York Post: “Heineken fears Russia will take over business as it leaves country“
Business Insurance: “Carlsberg and Heineken to exit Russia“
CNBC: “Beer giants Heineken and Carslberg join exodus from Russia“
Food Ingredients 1st: “Beer giants exit Russia: Heineken and Carlsberg join mass F&B exodus in Ukraine invasion protest“
People’s Gazette: “Heineken, Carlsberg exit Russia over Ukraine’s invasion“
