Heineken still operating in Russia despite promises to exit
The beer giant continues to sell in Russia but says it’s working hard to unload the Russian arm of business, and is prepared to take a “significant financial loss”.
In March 2022 Heineken vowed to withdraw its business from Russia permanently following Putin’s invasion of Ukraine. The beer company said at the time that operating there was “no longer sustainable nor viable in the current environment” and expressed its sadness over the escalating war.
“We are shocked and deeply saddened to watch the war in Ukraine continue to unfold and intensify,” Heineken said in a statement, adding that “as a result, we have decided to leave Russia.”
Almost one year later and the company is still operating in Russia, selling Heineken-owned brands such as Amstel. According to a report by investigative website Follow The Money, Heineken has also launched new products in the Russian market during the last 12 months.
Responding to the report, the brewer claimed this week that it still plans to exit the country but that selling the Russian part of the business is taking longer than expected.
“We’re working hard to transfer our business to a viable buyer in very challenging circumstances and at significant financial loss to the company,” Heineken said in a statement on Wednesday.
“In the meantime, our local colleagues are doing what they can to keep the business going to avoid nationalisation and to ensure their livelihoods are not at risk. There is no exchange of funds between Heineken and our local business in Russia, and we do not receive any dividends or royalties.”
Heineken anticipates taking a 300 million euro loss when its Russian business is eventually transferred to a buyer.
The company is hopeful that a sale will be finalised in the first half of 2023.
Heineken is by no means the only beer company to have hung around in Russia longer than expected. Its rival Carlsberg, which also announced its intention to exit Russia last March, initially said it would be out of the country by the end of 2022. The departure has since been postponed until “mid 2023”.
“It is a more difficult sales process than we had anticipated,” Carlsberg CEO Cees ‘t Hart has admitted.
He also added that Carlsberg was not ruling out returning to Russia in the future and was keen on including a “buy-back clause” into any contract with a potential buyer, which would give Carlsberg the opportunity to repurchase the Russian assets at a later stage.
“It’s the dream scenario if there comes an era when we can come back again,” t’Hart said.
It tells a somewhat different story to the company’s more resolute announcement last year, when Carlsberg asserted that “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.”
“As a result of this decision, our business in Russia will no longer be included in the Group’s revenue and operating profit,” the statement continued. “From an accounting perspective, the business will be treated as an asset held for sale until completion of the disposal. The business will be reassessed at fair value, which will result in a substantial non-cash impairment charge.”