Both the timing and content of the press release were unusual. Late on Tuesday evening, Heineken said this week that it was “very concerned” about this reporting by research platform Follow the Money, which stated that the brewer was still investing in Russia, despite promises not to do so anymore. Last year there were even 61 new products launched. The news had provoked critical reactions throughout Tuesday, including from Foreign Minister Wopke Hoekstra, who called the alleged Russian investments “morally inexplicable”.
But according to Heineken, the report was “incorrect”, “absolutely untrue” and “misleading”. The billion-dollar group said it certainly intended to leave Russia – a fact Follow the Money had not disputed. The sale of the Heineken brand had indeed stopped there. Local employees only did “what they can to keep the business going”. Without these ‘reduced activities’ nationalization by the Russian government threatened.
Who was right here? Heineken announced at the end of March last year, more than a month after the Ukraine invasion, that it wanted to leave Russia. The company top had struggled with the decision, CEO Dolf van den Brink said last December in conversation with NRC. It shouldn’t be a hasty decision. “That is why we first said: we will stop exporting to Russia. That was easy. Stop investing, also easy. Stopping selling the Heineken brand was already a bigger decision, because that was the bulk of the profit we made there.”
Heineken wanted to find a buyer for the seven breweries in the country before the end of 2022. Until then, the 1,800 employees continued to receive their salaries. In the meantime, Heineken would no longer make new investments in the country or receive profits from Russia.
Four thousand cafes
Heineken thus told a very concise version of the truth. From an internal document that too NRC has been able to see, it appears that Heineken did indeed launch 61 new products on the Russian market in 2022. Thanks to these new products, sales grew by 720,000 hectoliters, which, according to data from Koninklijke Horeca Nederland, corresponds to the annual sales of more than four thousand cafés.
According to an internal presentation, sales of the Amstel brand in Russia reached “the results of the Heineken brand a year earlier”, which gives the impression that the brewer mainly replaced one brand with another.
The fact that Heineken nevertheless spoke of “reduced activities”, is because the withdrawal of three major beer brands left a gap of 1.5 million hectoliters, says CEO Dolf van den Brink in conversation with NRC. In addition to Heineken, the group also withdrew Miller and Guinness. “Net, the new products have therefore only filled half of that gap.”
Because existing local brands also ran faster, total beer sales in Russia remained “almost the same” last year, says Van den Brink. According to him, because the Heineken brand traditionally generates the most profit, the annual profit declined (Heineken does not provide further figures).
Heineken also hired 243 new people in Russia last year, according to internal documents. But according to CEO Van den Brink, this only concerns the production department. In the entire Russian subsidiary, the occupation decreased from 1,730 to 1,670 employees at the end of 2022.
Head above water
The brewer confirmed earlier this week NRC all the introduction of new products.
The launch of 61 new products cannot be characterized as ‘investments’, according to Heineken, because no financing from the head office was involved. Van den Brink: “We had it in the announcement of our departure about no new ones investments to Russia, so from abroad. We have adhered to that. We also said very explicitly that we would continue with the local operation. There’s nothing mysterious about that. Every operating company adds products to the portfolio or removes them every year.”
But Gerben Everts, director of the investor association VEB, who has previously been critical of Heineken’s departure plan, calls this “cowardly swabbing”. Everts: “Bringing brands into the world, tapping into new markets, developing activities that generate returns: that is investing. What Heineken is doing is a sparring of words to hide the fact that they didn’t leave Russia at all.”
In any case, the Russian subsidiary had sufficient capital to expand with its own money. Last spring there was 166 million euros in financial assets on the balance sheet, it appears Numbers from the brewer.
Official warning
Heineken was told immediately after it announced the departure plans that nationalization was threatening when the activities were phased out, says Van den Brink. “We received letters from Russian prosecutors, officially warning us that if our decision led to the suspension or closure of our company, it would be considered a deliberate bankruptcy. The Russian government was working on legislation that could make such deliberate bankruptcy grounds for nationalization. That legislation has not yet been passed, but we still consider this a significant risk.”
According to sanctions law specialist Heleen over de Linden, the proposed bill was indeed initiated last year. The law has not yet been finalized. According to her, the proposal means that the Russians can appoint an external director at companies whose management has suddenly left.
“When such a company seems to be out of control, the Russian government can appoint someone to take over management, as a kind of curator.”
Nevertheless, the risk of an unwanted nationalization is not great, she says. Russian Trade Minister Denis Manturov stated in July that the Kremlin has “no interest” in nationalizing foreign-owned companies. The seizure of the Renault factory in Moscow in March last year, this remains the only known example of a nationalized Western company.
Safety first
In the meantime, Heineken is still busy selling the Russian branch, says CEO Van den Brink. “Our main goal remains one exit achieve with the right party. By that I mean we won’t sell it to just any oligarch. The safety and well-being of our employees is paramount in the sales process.” The process has progressed “very far”, says Van den Brink. Heineken hopes to close the deal before the summer.
In retrospect, Van den Brink does not think that Heineken should have been clearer about what the brewer did and did not continue to do in Russia. “We have never gone into such detail before, but that is not usual. This is of course an exceptional situation. In our experience, we did exactly what we said.”
VEB chairman Everts disagrees. “They should have just said: we hand in the key. Heineken has been lingering. What came out this week is harmful to consumers and investors. This could go down in the books as the biggest PR blunder in history for Heineken.”
A version of this article also appeared in the newspaper of February 25, 2023