Unilever finally sells a Russian unit to a local tycoon, after years of intense pressure

Unilever sold its Russian subsidiary for €520m to a local group after being criticized for continuing operations in the country following its invasion of Ukraine. Unilever, the London-listed consumer company, has been called a “sponsor” of war for not leaving Russia earlier. It said that it had reached a deal to sell Unilever Rus. Arnest is a Russian manufacturer and distributor of household, cosmetics, and perfumes.

Unilever has sold its entire business in Russia, including four factories and the group’s interest in Belarus. The Russian arm employs around 3,000 people and owns local rights for brands such as Domestos disinfectant, Domestos soap, and Dove soap. Alexey Sagal is the owner of Arnest, a Russian entrepreneur who has benefited from western companies’ exit from Russia. He bought Heineken’s Russian operations, which included seven breweries with 1,800 employees for €1 last year.

Hein Schumacher said that Unilever had been “carefully preparing Unilever Russia for a possible sale” during the last year. This work was complex and involved the separation of IT platforms, supply chains and the migration of brands to Cyrillic.

This move comes nearly three years after Russia invaded Ukraine, in February 2022. Campaigners and politicians have repeatedly called for Unilever, the maker of Magnum ice-cream and Hellmann’s Mayonnaise to leave the country. Sir Chris Bryant said that the idea of Unilever profiting from selling Magnums to Russians as essential items, it angered him beyond belief.

Unilever was dubbed a “sponsor of war” by the Ukrainian government after it paid corporate taxes to Russia totaling 3.2 billion Russian roubles in 2022 (about £27million).

Oleh Simoroz – a Ukrainian wounded in the war – had also asked the consumer goods company to stop doing business with Russia. He complained that “you are paying taxes to an aggressor country, and therefore financing terrorism”.

Schumacher had said that trading in the area remained the “best” option to avoid risking its business being in the hands the Russian state “either directly, or indirectly, to help protect our citizens”. Unilever’s boss said in the past that withdrawing “could lead to it being nationalised”, pointing out the takeover by Danone of its Russian subsidiary.

The Moral Rating Agency (which highlights companies’ links with Russia) said in September that Unilever shouldn’t be applauded for reports that they were due to sell their Russian assets to Arnest.

The agency stated: “It’s interesting that a half-billion dollar payment might help them do the right thing. Unilever’s support for the Russian economy is worth half a billion pounds per year. That would pay for an Iranian drone or a thermobaric missile every nine days.

Schumacher stated in July that his conglomerate has “substantially localised” its operations in Russia in the last year, and that their main objective is to minimize economic contributions to Russia.

Unilever was the first major European food company in March 2022 to cease imports and exports from Russia.

In his first year as ‘s CEO, Schumacher has taken the decision to completely exit Russia. He has also overseen plans for its ice-cream business to be spun off, 7,500 employees to be laid off, and to focus on 30 key brand to reverse years of poor performance.

Tom Saunders reports that despite the departure of many well-known companies such as Bet365 and Next, several British firms still operate in Russia.

On its website, FS Mackenzie International Group (the logistics company) states that it “is proud to have been among the first international business team to set foot on the Russian market”. The company has seven offices and is “committed” to developing and investing in the Russian market.

Rostelecom is the state-owned telecoms company of Russia.

Smith & Nephew’s chief financial officer said that several months after the February 2022 invasion of Ukraine, the medical equipment manufacturer does not directly source from Russia. The company has also stopped making new investments in Russia but continues to provide essential medical products.

A paper published by the Kyiv school of economics shows that the number of foreign businesses with assets in Russia is not declining significantly. In 2021, 1,519 companies held assets, compared to 1,304 at the close of 2023. Sales have dropped by 39.2 percent from $319 billion down to $194 billion. Companies from the United States, Germany and China saw the greatest revenue declines.

The profits remained relatively unchanged, with companies making $18,4 billion collectively in 2021 as opposed to $16.7 billion by 2023.

Chinese companies are the biggest beneficiaries of the departure of western corporations. They quickly filled the void left by 12 western car brands who stopped operations in Russia.

Haval, a Chinese automaker, has increased its revenue by 818 million dollars in 2021, to $3.79 Billion in 2023. Chery Automobile increased its revenue from $0.86 billion up to $6.53billion.

BT stated: “We condemn the invasion in Ukraine and adhere firmly to all international sanctions.” We will continue to maintain connectivity in and out of Russia, as we believe that a world without connections is more dangerous.

“We still have our offices in Russia,” said a FS Mackenzie spokesperson. During the past two years we have drastically reduced our operations and activities in Russia and are currently restructuring our organization in Russia.

“Business activity between the UK and Russia is virtually zero, except for transporting medical or humanitarian aid. Our company adheres strictly to the western sanctions. “We also have offices in Ukraine.”

Smith & Nephew has declined to comment.