Domino’s Pizza leaves Russia after sale efforts fail

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Domino’s Pizza will no longer be available in Russia after the US brand’s local franchise operator on Monday announced it was following other western companies in leaving the country.

DP Eurasia, the London-listed company that holds the rights to the Domino’s brand for Russia, Turkey, Azerbaijan and Georgia, said it had initiated bankruptcy proceedings for DPRussia, its Russian subsidiary.

The decision came after the failure of efforts to sell the Russian business, it said.

“With the increasingly challenging environment, DPRussia’s immediate holding company is now compelled to take this step, which will bring about the termination of the attempted sale process of DPRussia as a going concern and, inevitably, the group’s presence in Russia,” DP Eurasia said.

The move is the latest of several similar withdrawals by western companies. Many have suffered financial losses as a result of selling at significant discounts or closing their Russian operations. Moscow has also carried out forced nationalisations of some foreign-controlled businesses.

According to data compiled by Ukraine’s Kyiv School of Economics, more than 750 of the 3,400 foreign companies it has tracked have either sold their Russian businesses or stopped operations. But the institute said more than 1,400 companies were still running their businesses in the country as usual.

In July, meanwhile, the Russian government seized control of the Russian subsidiaries of France’s Danone and Baltika Breweries, the Russian subsidiary of Denmark’s Carlsberg. The steps were widely seen as part of the escalation of Moscow’s retaliation against western sanctions and military aid to Ukraine.

An April decree allowed the state to take over the assets of companies from countries deemed unfriendly by the Kremlin in order to “protect Russian property and national interests”.

Companies still present in Russia include Italy’s UniCredit, Austria’s Raiffeisen, Switzerland’s Nestlé, the UK’s Unilever and the US’s Philip Morris International and PepsiCo.

DP Eurasia, the third largest pizza delivery company in Russia, offered pizza delivery, takeaway and eat-in facilities at 142 outlets, as of June. DP Eurasia said in December it was considering pulling out of Russia as it considered the effects of sanctions.

The company had previously said it had limited further investment in Russia after sanctions were imposed last March, and that royalty payments from its Russian operations had been suspended.

DP Eurasia said it was too early to assess the exact financial impact of the expected insolvency. However, it said the company’s Turkish subsidiary had “fully and finally settled” its Rbs520mn ($5.5mn) guarantee for the external debt of the Russian segment. The guarantee had been settled out of the Turkish operation’s cash resources and DP Eurasia had a gross cash balance of 162mn lira ($5.9mn) after the step, the company said.

DP Eurasia is the fifth largest holder of branding rights — or master franchisee — for the Domino’s Pizza brand.

DP Eurasia’s shares were up 1.7p — 3.4 per cent — at 52p on Aim on Monday.