HEINEKEN’s commitment and approach to leaving Russia
We are shocked and saddened by the war in Ukraine. The strength and resilience of the Ukrainian people is remarkable, despite the continuing horrors that are happening in the country.
HEINEKEN is committed to leaving Russia and we’re doing everything we can to find a suitable new owner for our business while taking care of our local employees.
The situation in Russia is unprecedented and the reality for businesses with large production and manufacturing operations in the country is challenging and complex. That’s why we share here the dilemmas we have faced, the principles that guide us, the actions we have taken and the next steps towards our exit from Russia.
Our business in Russia
We’ve been in Russia for 20 years and we’re the third largest brewer in the country. We have 7 breweries and around 1800 colleagues across the country. The Russian business accounts for around 2% of our global sales.
What we did when the war started
We took quick action, stopping new investments into Russia, ending beer exports and stopping the production, sale and advertising of the Heineken® brand. We undertook a strategic review of the business and on 28th March, announced our decision to leave Russia and transfer the business to a new owner. We made it clear that we would financially ringfence the business – meaning no money would flow into Russia and no money would flow out. This meant we would not accept any royalties, fees or dividends. Our aim was to make sure that we would not profit from activities in Russia while we found a new owner.
The dilemmas we faced
We faced two major dilemmas at the start of the war and these continue today:
- Protect the livelihoods and safety of local employees - we wanted to leave as quickly as possible, but we also had a responsibility to look after our employees. People ask why not simply suspend or close the Russian operations? The truth is the business would’ve very quickly gone bankrupt, and as a result, employees would have lost their livelihoods. And because as everyone knows, its hard to sell a loss-making business, we would’ve deprived them of a chance of future employment with a suitable new owner.
Bankruptcy could also have led to criminal prosecutions of our managers in the country. Two days after we announced the withdrawal of Brand Heineken®, we received letters from local authorities warning of prosecutions if this decision led to the suspension or closure of our Russian operations. This is because ‘intentional bankruptcy’ is a criminal offence in Russia. At the same time, legislation was going through the Russian Parliament to give the government authority to nationalise foreign companies that left or stopped operations. We assessed these risks as significant and still do.
- Avoiding nationalisation - If we couldn’t find a suitable owner, would it be better for employees if the business was nationalised? Here we had two points of view. First, we don’t think the Russian state or the people closest to it would have the best interests of our people at heart. Second, we were uncomfortable that the Russian state should benefit from forced appropriation of major business assets. So, we decided we should do everything possible to avoid nationalisation, while leaving as quickly as possible.
Our guiding principles
In navigating the complexity of this situation and the dilemmas it poses, we created three guiding principles for our decision-making, which are aligned to our company values:
- Care and safety of local employees – we’ll do our best to secure the future livelihoods of our almost 1,800 employees. In addition to finding a responsible party to buy the business, this also means keeping the business afloat until the sale to avoid bankruptcy, which is particularly challenging since the Russia business is now self-funding with no money flowing in from HEINEKEN Group.
- No financial gain – we’ve financially ring-fenced the business – meaning no money is going into Russia and no money is going out. This means no royalties, no fees and no dividends are paid to the HEINEKEN Group from Russia. We don’t profit from the ongoing operations and we won’t profit from the transfer of ownership. We actually expect a loss of approximately €300 million.
- Keep our promise to leave Russia – we’re working hard to sell the business and aim to reach agreement with a new owner in the first half of 2023.
The challenge we face
We fully recognise that it’s frustrating that the sale is not yet completed. We’re also frustrated by how long the process is taking. It’s challenging to close a transaction in Russia at the moment as rules continue to shift. All business transfers need multiple approvals by the local authorities. We can’t control that timetable or process, but we’re working hard to do what is in our control. We’re not the only business struggling to exit – recent academic research shows that only 9% of businesses have left Russia.
What happens next?
We remain focused on announcing an agreement in the first half of 2023 followed by required Russian authority approvals. Meanwhile, we’re taking concrete steps to decouple the business from the HEINEKEN Group in preparation for the transfer.
Care for the people of Ukraine
When Russia invaded Ukraine, we partnered with Habitat for Humanity in a co-ordinated effort to help Ukrainian refugees find emergency accommodation and longerterm shelter in Ukraine’s neighbouring countries. Through a global fundraising effort, we contributed over €1 million which enabled Habitat to support over 4,500 refugees with free short-term accommodation, 1,200 with subsidised mid-term accommodation, and 10,000 with shelter services at the border. We also donated €700,000 to 20 local NGOs in the four neighbouring countries. Immediate relief efforts were focused on transport and legal assistance, accommodation in hotels and apartments, medical and psycho-social support, and access to reliable information. Employees also opened their homes to Ukrainian refugees and we provided support for Ukrainian colleagues to relocate their families. We thank all of our employees for their ongoing efforts to support the Ukrainian people.
We hope this clarifies our position on Russia but we know that there may be other questions that some consumers, customers and colleagues have. In the spirit of transparency, we answer the top questions we’ve received here.
Sarah Backhouse / Michael Fuchs
Tel: +31-20-5239-355 / +31-6-10280696