Ukrainian Prime Minister urged Nestle CEO to withdraw from Russia
Nestle operates in the aggressor state despite mounting pressure to cut ties with Russia. Prime Minister Denys Shmygal spoke with Nestle CEO Mark Schneider about the unethical nature of the company's work in Russia, which has invaded Ukraine and has been shelling residential areas and destroying Ukrainian cities and killing civilians.
Read more: Ukrainian military inflicted significant losses on enemy near Kharkiv and Izyum
On Thursday, Ukrainian Prime Minister Denys Shmyhal tweeted that he had spoken with Nestle CEO Mark Schneider "about the side effect of remaining in the Russian market."
"Talked to @Nestle CEO Mr.Mark Schneider about the side effects of staying on the Russian market. Unfortunately, he shows no understanding. Paying taxes to the budget of a terrorist country means killing defenseless children & mothers. I hope Nestle will change its mind soon”, Shmyhal wrote.
According to Shmygal, "Jobs and taxes going to a terrorist country's budget are funding the killing of defenseless children and women."
On Thursday, Roman Hryshchuk, a member of Ukraine's parliament, tweeted, "Putin is a war criminal," "Russia is a terrorist state," and "Doing business in Russia means paying taxes in Russia." He added that "paying taxes in Russia means financing terror and war crimes in Ukraine" and concluded by saying, "Companies like Nestle are financing the war."
Many politicians and activists have also criticized Nestle for paying taxes in Russia and created graphics depicting the company as a "sponsor" of the Russian-Ukrainian war.
Stratcom Center UA, a strategic communications company under the Ukrainian Ministry of Culture and Information Policy, tweeted, "Nestle continues to pay taxes into the budget of a terrorist state and fund indiscriminate attacks on Ukrainian civilians."
Some activists posted pictures on Twitter displaying Nestle logos with wartime signs.
Over 400 big companies ceased doing business in Russia
Russia invaded Ukraine on February 24. Since then, over 400 companies have announced they will cease doing business in Russia in response to its aggression.
The list of companies that continue to operate in Russia is getting shorter, but dozens of companies, including multinational manufacturers and hotel chains, continue to operate in the Russian Federation despite public pressure to pull out because of the war against Ukraine.
Nestle has stopped advertising in Russia
Nestle said on March 9 that it had suspended capital investments and advertising in Russia. But the Swiss company has also stopped shipping non-essential products such as espresso and mineral water. However, the world's largest food company continues to supply essential products to Russia.
"As a food company and employer, we also have a responsibility to the people of Russia and our more than 7,000 employees, most of whom are local," Nestle said in a statement.
90% of Nestle's products in Russian market are manufactured in Russia
Nestle is one of the largest food companies that continue to operate in Russia despite Putin’s war against Ukraine. In 2020, it paid $502 million to Russia's budget.
As of 17th of March, Nestle continues to supply baby food, cereals and pet food to Russia. About 90% of Nestle's products in Russia are manufactured in Russia.
Nestle Corporation owns a number of well-known brands: Nescafe, Nesquik, Kit Kat, Purina, Nuts, Fitness.
General Mills, the US-based maker of Cheerios and other packaged foods, has a joint venture with Nestle called Cereal Partners Worldwide (CPW) that operates in Russia. CPW has suspended its investments in Russia and said that it "will continue to be in close contact with Nestle as the situation develops”.
Meanwhile, public activists in many European countries, including Switzerland, organized rallies and launched a campaign on social networks demanding Nestle management to restrict the activities of the company in Russia.
Since the start of Putin's war against Ukraine, over 400 major companies have announced their withdrawal from Russia.
The Yale School of Management updates its list of companies leaving or remaining in the Russian market. The list consists of four categories, and the status as of March 18 is as follows:
Withdrawal from business: 150 companies are completely ceasing their involvement in Russia.
Suspending business: 178 companies are temporarily limiting their Russian business but keeping open the possibility of returning.
Reducing activities: 74 companies scale back some but not all activities and/or postpone investments.
Economic cooperation: 34 companies remain stubborn and resist demands to stop or reduce their activities.
Hall of Shame of the companies operating in Russia
At the same time, The Fortune created a list that constituted an oft-cited "Hall of Shame" where employees, customers and investors came forward to express their disapproval. On the first day after this list appeared on CNBC, shares of many of the companies identified as remaining in Russia fell by 15% to 30%, on a day when the major market indexes fell by only 2-3%.
What does the label “essential products” mean?
Consumer goods companies such as Carlsberg, Danone, General Mills, Kellogg, Kraft-Heinz, Mars, Mondelez, Nestle and Pepsi are reluctant to cut off supplies of so-called essential products such as baby food, diapers and chocolate. But the "essential" label includes Oreo cookies, Cadbury and Dannon's Cheesecake Yogurt which may be sacred household items for most people, as they are hardly essential.
Danone
French dairy company Danone (with Prostokvashino, Activia, Actimel, Evian, Rostishka brands) will continue to produce dairy products and baby food in Russia despite the war against Ukraine. The French manufacturer justifies its actions by "providing the Russian population with basic foodstuffs. However, Danone has decided to stop all investment projects in Russia. It should be noted that during the presence of the company in the Russian market, the volume of investments amounted to more than $2.5 billion.
Unilever
British food and consumer goods giant Unilever (including Persil, Dove, Domestos, Lipton, Clear, Timotei, Velvet Handles, Black Pearl) has stated that it will continue to supply "vital food and hygiene products manufactured in Russia for the people of Russia. However, the company says it will "closely monitor" the situation. However, Unilever has declared that it will no longer invest in the economy of the Russian Federation. The company has suspended all imports and exports. The food and consumer goods manufacturer has also announced that it will stop its advertising spending in Russia.
Subway
Fast-food giant Subway said it would use all profits from its Russian operations for humanitarian purposes. Its roughly 450 stores in Russia are independently owned and controlled by local franchisees, it said. The fact that Subway is one of the outliers on the list is prompting calls on social media to boycott Subway and other companies.
Russian invasion of Ukraine: companies’ reputation at risk
The Russian invasion of Ukraine has made it clear that risk, reputation, and revenue are intertwined. For many companies, the decision to suspend relations with Russia is likely to be relatively easy.
Given the size of the Russian economy, the associated revenues are likely to be small. And the reputational damage of continuing to do business, and the benefits of announcing a withdrawal, can be huge.