this post was submitted on 20 Jun 2024
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Global News

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After Vladimir Putin’s troops surged over the Ukrainian border in February 2022, the Coca-Cola Co. was among the first multinationals to pledge it would quit Russia in protest. Aiming to avoid the inevitable headaches of complying with expected Western sanctions on the Kremlin, Coke asked its partners there to pull its cans and bottles from stores, cease deliveries of syrup to soda fountains and stop producing its drinks.

Two years later, Coke’s distinctive red logo is still easy to find in supermarkets and restaurants across the country. And taking into account a newcomer called Dobry Cola—sold in cans with a remarkably familiar red tint and a taste few would be able to distinguish from the original—Coke by some meas­ures remains Russia’s leading fizzy drink maker.

That’s because Multon Partners, the Coke bottler in the country, is owned by a separate, London-listed company called Coca-Cola HBC in which the US mother ship owns a 21% stake. When HBC stopped making Coke after the invasion, Multon introduced Dobry Cola. It’s become the country’s most popular soda, with 13% of the market, according to researcher Prodazhi.rf. “The profits from selling Coca-Cola in Russia have merely shifted to Coca-Cola HBC, which has taken market share through the success of Dobry,” says Garrett Nelson, an analyst at CFRA Research.

And Coca-Cola itself is still widely available, imported from neighbors such as Georgia and Kazakhstan. Following the invasion, Russia passed a law allowing branded goods to be sold without the trademark owner’s consent. With trucks hauling countless cases across the border, Russians with a hankering for “the real thing” can still get it. Those imports alone have made Coke Russia’s No. 3 soda, with 6% of the market, according to Prodazhi.

That’s not to say Coke hasn’t suffered. HBC says its volumes in Russia grew 12% last year, but they remained almost a third below their level in 2021, when Coke was the top-selling soft drink, with 26% of the market. And while Coke does profit from Dobry’s popularity and Multon’s market-­leading juice business, the Atlanta company says it has recused itself from management of the operation.

Coke is far from alone in making a less-than-complete exit from Russia. PepsiCo Inc. in September 2022 said it had stopped producing and selling Pepsi, Mountain Dew and 7Up there, and its market share collapsed. But Pepsi soon added a new cola, Evervess, and boosted output of Frustyle (similar to fruity Mirinda) at its half-dozen plants in the country. Last year the Russian unit’s beverage sales jumped 12%, to 209 billion rubles ($2.3 billion), its reports to local tax authorities show. And revenue at its baby food and dairy business last year expanded 10%, to 129 billion rubles. PepsiCo declined to comment.

Since 2022 more than 1,000 multinationals have said they’re scaling back Russian operations, according to research from the Yale School of Management. But many have remained. Unilever Plc and Nestlé SA, with large production facilities there, were reluctant to sell at the massive discount the Kremlin demanded as an exit tax. Danish brewer Carlsberg AS and yogurt giant Danone SA saw their assets seized as they sought to leave, though Danone eventually negotiated a sale to a company the government favored. French supermarket operator Auchan, clothing retailer Benetton Group and restaurant chains Subway and TGI Fridays continue operating in Russia with no apparent plans to cut back.

For companies still in the country, repatriating earnings is tough, as they require hard-to-get permission to take out money. But the profits are substantial. Lifted by war spending, the Russian economy expanded 3.6% last year, helping drive ­unemployment to an historic low of 2.6% and sharply boosting wages. “There’s loose fiscal policy pumping record amounts of money into the public sector,” says Tatiana Orlova of Oxford Economics. “And Russia’s labor market is extremely tight.”

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