Denmark & Russia: Carlsberg ‘shocked’ at Russian subsidiary seizure, forced to cut all contact with Baltika employees

Carlsberg chief executive Cees ’t Hart said the brewer was “shocked” at the seizure of its Russian subsidiary, Baltika Breweries, by the Kremlin last month but was still hoping to sell the business, the Economic Times reported on August 16.

Hart said that Baltika, which comprises eight breweries employing 8,000 staff, had not been nationalised but was still under state management and Carlsberg was looking for ways to engage with Russian authorities on the unit’s future.

“If you take the two extremes, we could be pushed back to the previous process [of approval of a sale], or to nationalisation. We don’t know which direction it will go,” he said, speaking to the Financial Times after a half-year trading update on August 16.

Baltika was placed under Russian state control in July alongside French food giant Danone, a month after Carlsberg announced it had found a buyer for the business. Taimuraz Bolloev, who previously ran Baltika in the 1990s and is a longtime friend of Russian president Vladimir Putin, has been installed as Baltika’s director.

Hart said he was not aware of any specific individuals or companies that were now interested in taking on Baltika, but there had been huge interest in the brewer when it was first put up for sale.

Carlsberg has retained the title to shares in Baltika, but no longer has control or influence over it, and was forced to cut all contact with its thousands of Baltika employees when Russia took control.

In late July, Putin said Carlsberg and Danone had been seized because “the management of these companies attempted to pressure Russian citizens, their employees, threatening with possible lay-offs in case they express a certain civil stance”.

“We strongly reject the accusation that we pressured employees at Baltika to express certain political opinions,” Hart said, adding that Baltika was “known as a successful company, so we knew we were on the radar”.

After Russia invaded Ukraine last year, several western companies announced plans to divest from Russia. Those that left early have not suffered the same stringent exit rules that those still looking for a buyer — such as rival brewer Heineken and consumer giant Reckitt Benckiser — are now subject to.

Hart said he did not regret not getting out of Russia sooner because it would have resulted in immediate nationalisation.

“It would [have led to] huge unemployment. These people would have been exposed to significant risk,” he said. “There is also [the fact] that we have a small opportunity to protect our assets.”

On August 15, the brewer upgraded its forecast profit ahead of reporting its half-year earnings and announced a DKr1bn ($147mn) share buyback programme following better than expected profit growth.

The earnings announced on August 16 were the last for Hart, who will step down later this year after eight years heading up the brewer. He will be replaced by Jacob Aarup-Andersen, chief executive of ISS, the Danish cleaning, security and catering group.

Operating profit rose 5.2 per cent in the first six months of the year, far ahead of analyst expectations of 0.5 per cent and bucking a trend of disappointing earnings in the sector. Carlsberg said strong growth in Asia, where sales volumes rose 4.8 per cent, helped to offset higher input and energy costs and salaries globally.

Like-for-like revenues grew 11.2 per cent thanks to the recovery of bar and pub trade, the growth of its premium brands in Asia and central and eastern Europe, and price increases across most markets.

The brewer, which also counts Tuborg, Kronenbourg and Somersby cider among its brands, said volumes rose 0.8 per cent, slightly below analyst forecasts of 1.2 per cent growth. Its positive sales volumes contrasted with declines at competitors Heineken and AB InBev.

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