Carlsberg prepares for fight over Russian unit’s right to sell its brands

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Carlsberg is gearing up for a legal fight with its Russian business Baltika over the subsidiary’s right to sell its international brands as the Danish brewer enters the next phase of its tortuous exit from the country. 

On Tuesday Carlsberg said it had chosen to write down the entire value of its Russian business, after rejecting a deal to sell the subsidiary to its new directors, who were installed after Moscow seized Baltika in July. 

In a blow to Baltika’s new management, the brewer also said it had terminated the licence agreements that allow it to sell international Carlsberg brands such as Tuborg and Kronenbourg in the country. Carlsberg’s international brands make up approximately 40 per cent of Baltika’s value.

Baltika last month applied to the St Petersburg Arbitration Court asking it to prohibit Carlsberg from initiating legal proceedings against the company in a Danish court “for termination of the licence agreement”, according to filings from the Russian courts database. The court set a hearing for February 2024.

On the same day, September 14, Baltika also asked the court to prohibit the Russian patent authority Rospatent from making any changes to its trademarks concerning Tuborg, Kronenbourg, Seth & Riley’s Garage, Holsten and LAV.

A spokesperson for Carlsberg said: “We are aware of the case in Russia but we have not received any formal notice by the Russian courts.” They added: “We will of course assess the information when we receive it.”

Baltika declined to comment.

Alongside French food giant Danone, Carlsberg’s Baltika was seized by state authorities in July and placed under “temporary management”. Baltika’s former director and a close friend of Vladimir Putin, Taimuraz Bolloev, returned to take over the management of the breweries.

Carlsberg said on Tuesday it had come to its decision to write down the business due to the “unacceptable terms” of the deal, which the company felt would “justify the illegitimate takeover of our business in Russia”.

Western companies trying to sell their businesses in Russia have had to jump through multiple regulatory hoops, agree to strict terms and have little hope of extracting much value from a potential deal. 

Carlsberg was on the verge of completing a sale to Arnest, a leading Russian manufacturer of metal packaging and aerosols, when it was seized. 

The seizure “shows the unpredictability of this country — politics above the law”, said a person briefed on the matter. That Carlsberg and Danone were seized shortly after warlord Yevgeny Prigozhin’s failed mutiny in late June “was no coincidence”, the person added. “Friends rewarded. And a strong signal sent: don’t try to leave Russia no matter how chaotic it all seems. Then you lose it all.”

In August Carlsberg’s competitor Heineken agreed a deal to sell to Arnest at a loss of €300mn. To secure approval of the transaction, the company said it had agreed a three-year licence for “some smaller regional brands”. 

“While it took much longer than we had hoped, this transaction secures the livelihoods of our employees and allows us to exit the country in a responsible manner,” Heineken’s chief executive Dolf van den Brink said at the time.