Danone looks to offload Russian dairy and yoghurt business

Danone is seeking an exit from its dairy and yoghurt business in Russia in a transaction that could result in a write-off of up to €1bn for one of the world’s biggest makers of consumer goods.

Almost eight months since Russia’s full-scale invasion of Ukraine, the French group said on Friday that it would “initiate a process to transfer the effective control” of the business, which includes 13 factories, 7,200 employees and accounts for 5 per cent of its annual sales of about €24bn.

It remains unclear who will take over the business whose most popular brand is a local one called Prostokvashino, or if there would be proceeds from a sale. The move would not represent a complete exit from Russia though since Danone will continue to sell baby formula in the country.

“Danone considers that this is the best option to ensure long-term local business continuity, for its employees, consumers and partners,” it said in a statement.

Like other consumer goods companies, Danone came under pressure from shoppers and activists to quit Russia as the EU and US applied volleys of sanctions in response to Moscow’s aggression.

Danone’s chief executive Antoine de Saint-Affrique initially said just after the invasion that staying in Russia was the right thing to do because the company had a responsibility to “the people we feed, the farmers who provide us with milk, and the tens of thousands of people who depend on us”. But his position has evolved as the corporate exodus from Russia gathered pace and operating there has become more difficult.

The decision to go or stay was complicated for consumer goods makers and retailers because many had significant manufacturing operations in Russia and employed thousands of local staff.

Some, such as French food retailer Auchan and its sister company hardware store Leroy Merlin, remain in the country, while others including L’Oréal and Philip Morris International took an intermediary route of “suspending operations” or “halting investments” in Russia while continuing to manufacture and sell local brands there.

Others such as beer maker Carlsberg and carmaker Renault took a financial hit when they sold their Russian operations at steep discounts.