Nestle, tobacco groups, gamemaker Sony join move away from Russia

Nestle, Philip Morris, and video gamemaker Sony joined the list of multinationals stepping back from Russia on Wednesday, March 9, as pressure mounts from consumers in the West to take a stand against the invasion of Ukraine.

Nestle, the world’s biggest packaged foods group, and Mondelez International, followed actions by rivals Procter & Gamble and Unilever in halting investment in Russia.

But the four companies will continue providing essentials, with Mondelez aiming to help to maintain “continuity” of the Russian food supply.

Similarly, while cigarette maker Imperial Brands suspended operations in Russia, rival Philip Morris only said it would scale down manufacturing, and Camel maker British American Tobacco said its business in Russia continued to operate, even though it had suspended capital investment.

Sony, whose movie studio has already stopped releases in Russia, took additional action on Wednesday, saying its PlayStation gaming unit would stop shipments and operations in Russia. “Sony Interactive Entertainment joins the global community in calling for peace in Ukraine,” it said.

Many businesses face difficulty working in Russia due to sanctions and a lack of shipping, in addition to pressure from consumers and investors, and describe ending work in Russia in more practical terms, without blaming the Russian government for attacking Ukraine.

Heavy equipment maker Deere & Co., saying it was “deeply saddened by the significant escalation of events in Ukraine,” announced it had ended shipments to Russia two weeks ago, and subsequently to Belarus, and said it would follow US and international sanctions. Caterpillar said it was suspending business as supply chain disruptions and sanctions made business difficult and 3M followed suit after reassessing its business in Russia.

Still, pressure in the West is building.

A Rio Tinto executive early in the day said the miner was working to maintain supplies of Russian fuel to its Mongolian copper mine, but the company later announced it was terminating all commercial relationships with Russian businesses.

Hotel companies Hilton Worldwide Holdings and Hyatt Hotels Corporation said they would suspend development in Russia.

Coca-Cola Company and McDonald’s Corporation halted sales in Russia on Tuesday, March 8, in symbolically potent gestures. A senior member of the Russian ruling party has warned that foreign firms that close down could end up having their operations nationalized.

McDonald’s said the temporary closure of its 847 stores in the country would cost it $50 million a month.

Sportswear firm Adidas also quantified the cost of scaling back its operations, saying it would take a hit to sales of up to 250 million euros ($277 million).

Yum Brands, parent of fried chicken giant KFC, said it was pausing investments in Russia, a market that helped it achieve record development last year.

Carlsberg said it was suspending Russian brewing of its namesake brand of beer while keeping its Russian Baltika brand operating.

“We feel a moral obligation to our Russian colleagues who are an integral part of Carlsberg, and who are not responsible for the actions of the government,” Carlsberg said, adding it was withdrawing financial guidance for the year.

E-commerce company Shopify joined the crowd, saying it would suspend Russian operations and collect no fees from Ukrainian merchants, citing millions of Ukrainian refugees needing support.

‘Laws of war’

In response to the exodus, Andrei Turchak, secretary of the ruling United Russia party’s general council, warned Moscow might nationalize idled foreign assets.

“United Russia proposes nationalizing production plants of the companies that announce their exit and the closure of production in Russia during the special operation in Ukraine,” Turchak wrote in a statement published on the party’s website on Monday, March 7.

The statement named Finnish privately owned food companies Fazer, Valio, and Paulig as the latest to announce closures.

“We will take tough retaliatory measures, acting in accordance with the laws of war,” Turchak said.

Sanctions

Moscow, which calls its invasion of Ukraine a “special military operation,” has been hit by sweeping Western sanctions that have choked trade, led to the collapse of the rouble, and further isolated the country.

Banks and billionaires have also been targeted, with the European Commission preparing new sanctions targeting additional Russian oligarchs and politicians, and three Belarusian banks, Reuters reported.

While the war in Ukraine and the sanctions have bolstered prices for commodities that Russia exports such as oil, natural gas, and titanium, those sanctions have largely barred Moscow from taking advantage of the high prices.

On Tuesday, the United States banned Russian oil imports.

US oil field services company Schlumberger, which derives about 5% of its revenue from Russia, said the ongoing conflict would likely hurt results this quarter.

Global commodities trader Trafigura Group raised a $1.2-billion revolving credit facility from banks to help address soaring energy and commodity prices.

Norway’s Yara, a top fertilizer maker, said on Wednesday it would curtail ammonia and urea output in Italy and France due to surging gas prices. – Rappler.com

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