ZURICH, Sept 18 - Nestle said on Friday it was exploring every option to protect its legal rights and ensure continued operations after a presidential decree ordered Russian control of the Swiss food maker's Russian business. The company, maker of brands including Nescafe and KitKat, said it had taken note of the decision and was assessing the implications.
In a public statement, Nestle emphasized its commitment to taking necessary steps to protect its rights and to secure continuity of operations in the interest of all stakeholders, with particular attention to employees. The company declined to elaborate on the specific measures it was considering.
Scope of the action and local footprint
The presidential decree announced on Thursday also affected French supermarket group Auchan, transferring its Russian assets to the temporary management of L.E.V. Management. According to information provided in prior disclosures, Nestle operates six factories across Russia that produce coffee, petcare and infant formula products. The company reported approximately 2 billion Swiss francs in sales in Russia for 2021, the last year for which it published a regional sales figure, and has around 7,000 employees in the country.
Auchan, which runs an estimated 230 stores and an online business in Russia and employs roughly 30,000 people there, declined to comment on the decree.
Legal framework and precedents
Since the start of the war in Ukraine in 2022, Russian authorities have tightened control over foreign-owned assets. A 2023 decree signed by President Vladimir Putin grants Moscow the authority to place assets from countries it considers "unfriendly" under temporary administration. Moscow has previously used that law to extract cash through forced sales, exit taxes and discounts, and in some cases to transfer assets to individuals or companies with Kremlin connections.
Media reports have said a company known as KS Logistika requested that President Putin place Nestle's Russian assets under temporary administration. Those reports said the request covered five Nestle-owned entities in Russia and could ultimately lead to a change in ownership. In previous instances, temporary administration has often preceded expropriation or transfers to Kremlin-linked parties.
Context from other Western companies' experiences
Other Western businesses have responded to sanctions or threats of seizure by selling Russian assets or handing operations to local managers. Moscow took control of Danone’s Russian business and Carlsberg’s stake in a local brewer in 2023. Danone was later removed from the list of assets under temporary Russian state management in March 2024 amid reports that a Russian businessman known for pro-war credentials intended to purchase the business at a sharp discount. In December 2024, Carlsberg sold its shares in Baltika Breweries to long-serving Baltika employees in a management buyout.
Nestle has argued that, as a food producer, it provides essential goods, a rationale the company has used to justify continuing to operate in Russia despite mounting pressure and risks.
Analyst view and potential financial implications
Kepler Cheuvreux analyst Jon Cox warned that the outcomes experienced by other firms did not bode well for Nestle. He said that Nestle could ultimately lose the Russian assets - representing around 2% of its sales and the cash tied up in the country - for the foreseeable future, and that any compensation was unlikely to offset the loss.
In its statement, Nestle reiterated its focus on protecting its legal rights and maintaining operations for the sake of stakeholders and employees. The company declined to provide further details on planned legal or commercial responses.
Currency note
($1 = 0.8242 Swiss francs)