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Mondelēz Revamps European Operations After Boycotts Over Russian Business, Internal Memos Show

By Reuters
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Mondelēz Revamps European Operations After Boycotts Over Russian Business, Internal Memos Show

Oreo cookie-maker Mondelēz put new management in place at its profitable Russian business, according to two internal company memos seen by Reuters that reveal fresh details of a corporate overhaul in Europe.

After months of boycotts and pressure from shareholders and activists to leave Russia, Chicago-based Mondelēz stopped advertising in the country, but has failed to exit Russia entirely.

In one of the internal memos seen by Reuters, Europe president Vince Gruber informed staff that it appointed a new general manager to lead its Russia business, which Gruber described as a "standalone organisation."

But in his new role, the Russia general manager reports to another executive who reports to Gruber, the memo said. The arrangement may not placate Mondelēz critics. The company has three factories in Russia and has continued to sell its products, including Milka chocolate there despite investor pressure and boycotts calling for it to leave.

'An Attempted Workaround'

"In the law we use the expression 'a distinction without a difference.' This is an attempted workaround that is not very meaningful," said Nell Minow, a corporate governance expert and vice chair of ValueEdge Advisors.

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"There are certain kinds of business connections where you see a justification, if it has to do with health, urgently needed supplies. These are cookies and there really is no excuse."

In response to Reuters' questions, Mondelēz said last week (on 16 February) that 'effective at year-end 2023, we have stood up our local business to operate more independently.'

It added, 'Products sold in Russia are now produced and distributed locally, with no imports of finished goods from Europe into Russia or exports from Russia into Europe.'

Mondelēz is scheduled to present at the Consumer Analyst Group of New York conference Tuesday (20 February) in Boca Raton, Florida.

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McDonald’s, Starbucks and many other global brands left Russia following its invasion of neighbouring Ukraine in 2022, writing off billions in assets.

Mondelēz rivals including Maggi manufacturer Nestlé continue to operate in Russia. Food does not fall under any international sanctions.

The company said in its annual report released in February that the war in Ukraine is a risk to its business that could lead to loss of life and physical damage and destruction of its property.

'Scrutiny From Stakeholders'

'We might also face questions or negative scrutiny from stakeholders about our operations in Russia despite our role as a food company and our public statements about Ukraine and Russia,' Mondelēz said in the annual report.

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In a company statement last year, Mondelēz said its business in Russia provides 'shelf-stable products that are daily staples for ordinary people," and that suspending operations "would mean cutting off part of the food supply for many families who have no say in the war.'

Mondelēz executive Gruber told staff in one memo on 31 January that the company would reorganise the European region into 14 'commercial units' with responsibility for smaller areas and individual countries.

On 13 February, a separate memo from Gruber informed staff that Alexey Blinov will become the new Russia general manager. Blinov is a Moscow-based finance executive for Mondelēz, according to LinkedIn.

Price Hikes

Europe, where its Milka and Cadbury chocolate is popular, is the company's biggest market by sales, but it has been at odds with retailers there over price hikes.

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Following Russia's invasion of Ukraine, Mondelēz said it was scaling back its business in Russia and focusing on 'basic offerings,' but still faced internal pressure from employees to exit.

A corporate boycott of Mondelēz broke out in the Nordic countries last year after a Ukrainian agency named the company an 'international sponsor of war.'

Mondelēz said last June it would make its Russian operations 'stand-alone with a self-sufficient supply chain before the end of the year' but did not provide additional details.

Its Russia business is more profitable than it has been historically, the company said in its annual report released earlier this month.

Before the war, Mondelēz executives in Moscow also managed its operations in Ukraine, a source familiar with the structure said. Its Ukraine business was removed from Moscow supervision following Russia's February 2022 invasion of Ukraine, the source said.

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