FMCG Giants Could Face Repercussions From US-Russia Sanctions: Analysis

By Steve Wynne-Jones
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FMCG Giants Could Face Repercussions From US-Russia Sanctions: Analysis

The Kremlin has said that a new batch of sanctions on Moscow announced by the United States is illegal under international law and that Russia's financial system was stable.

Washington said earlier this week it was imposing fresh sanctions on Russia by the end of August after determining that Moscow had used a nerve agent against a former Russian agent and his daughter in Britain, something the Kremlin denies.

Kremlin spokesman Dmitry Peskov, speaking to reporters on a conference call, said the US move was "absolutely unfriendly," but said Moscow continued to hope that for an improvement in battered US-Russia relations.

However, the sanctions, and the possible response from Russia could impact several major US-based FMCG firms, which have a significant, and in many cases growing, presence in the country.

Mondelez International

In Mondelez International Inc's quarterly earnings call in January, Chief Executive Dirk Van de Put said the company had become the leading chocolate maker in Russia.


Russia is a market Mondelez is feeling "very good about," Van de Put said at the time. "The economy is showing clearly signs of progress with falling inflation. Our team is executing well.

"We are now the number one player in chocolate. We did launch our choco bakery in Q3 and then we're off to a very strong start. So we’re encouraged in Russia because of the signs of the economic improvement and the higher oil prices, better GDP and the ruble strengthening."


Elsewhere, PepsiCo reported that in 2017, its Russian operations generated net revenue of $3.23 billion, which made up 5.1% of the company's total net revenue.

"Organic revenue growth outside North America was fueled by continued strong performance in developing and emerging markets," PepsiCo CEO Indra Nooyi said in February, "which posted organic revenue growth of 7% as a group, led by double-digit growth in Vietnam, Turkey, Thailand, Philippines and Argentina, high-single-digit growth in Russia and China, and very solid mid-single-digit growth in Mexico and India."


Philip Morris

Philip Morris International is also among the foreign companies with exposure to Russia's tobacco market. The company's sales exposure to Russia is 7%, according to a note from Goldman Sachs.

However, the company has faced some pricing issues in the country, as Martin King, the tobacco firm's CFO, said in April.

"The whole pricing situation in Russia is still unfolding. The first quarter actually came in pretty good. We're on track, there is no big new news there. But we have a situation in Russia where the timing between when the price is announced and when it actually reaches retail is quite long in Russia because of the way the pricing happens, it has to be declared at production and then there's inventory that works its way through the market."

Johnson & Johnson

Finally, Johnson & Johnson has identified Russia as a strong market for regional consumer brands.


The company is seeking to extend its reach there through products such as contact lenses, executives have said.

News by Reuters, edited by ESM. Additional reporting by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.

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