Russian retreat: Unilever reportedly sells assets two years after exodus of Western companies

10 Sep 2024 --- Unlike many Western companies that fled Russia right after the country invaded Ukraine, Unilever stood pat. Now, the FMCG giant is reportedly ready to sell its Russian assets to the Arnest Group, marking its final step to withdraw from the country. For many years, Arnest served as Unilever’s Russian contract manufacturer. 

The deal could be worth up to US$440 million and bring Unilever up to US$500 million, according to Russian media reports. However, asset sales must include a 50% discount and a 10%–15% exit tax, according to Russian law.

The Financial Times reports no formal approval of the deal has been granted as yet but Russian news agencies Kommersant and RBC cite sources who believe the Russian government has given the green light. 

Morality in question

The move follows moral watchdogs calling on the FMCG giant to leave and stop investing in Russia due to the invasion of Ukraine.

Last year, Unilever responded to a letter from B4 Ukraine — a coalition of civil society organizations aiming to cut Russia off from means to conduct war. The owner of Dove, Axe and Cif, defended its “essential” operations in Russia while granting 3,000 employees to be conscripted if called, while also condemning the war as a “brutal, senseless act by the Russian state.”

The food and personal care giant has a perfume and cosmetics factory in St. Petersburg. It maintained that its best solution is to continue operations for “everyday essential food and hygiene products” under “strict constraints.”

At the time, the company said: “We do not think it is right to abandon our people in Russia. We believe remaining (with strict restraints) is the best option, both to avoid the risk of our business ending up in the hands of the Russian state, either directly or indirectly and to help protect our people.”

Grocery Gazette cites Moral Rating Agency founder Mark Dixon saying, “It is interesting that a payment of half a billion dollars might help [Unilever] do the moral thing.”

“While an exit would be good news, we should never forget that Unilever has been supporting the Russian economy at the rate of half a billion pounds a year, which is enough to pay for a thermobaric rocket every nine days or an Iranian drone every 17 minutes. It gets no medal for dancing with the devil for two-and-a-half years.”

Despite its pledge to refrain from making money from the Russian branch following the invasion of Ukraine, Dutch TV RTL Z found that Unilever received at least €200 million (US$221 million) from Unilever Russia since the beginning of 2022. According to its report based on Unilever Russia’s annual accounts, a substantial portion of that money passed through the Netherlands.

Last year, Ukraine’s National Agency on Corruption Prevention added Unilever to its International Sponsors of War red list.

The Coalition of Ukraine lists several chemical and luxury companies that previously suspended business activities in Russia, including Henkel, BASF, Dow, LVMH, Prada and Yves Saint Laurent, among others.

By Venya Patel