Why is French food firm Danone exiting Russia dairy business?

Danone will seek a buyer for the Russian operations of its dairy and plant-based unit, and a sale could result in a write-off of up to 1 billion euros ($978 million), the French food group said.The business, which owns the country’s top dairy brand, Prostokvashino, represented around 5% of Danone’s revenue in the first nine months of the year.The company suspended investment in Russia after Moscow invaded Ukraine in February, but is now making a more decisive move with the war in its eighth month. While many Western multinationals have pulled out of Russia, food companies have maintained some operations there, arguing they have a moral imperative to feed people. Nestle continues to import products like infant nutrition into the country, and British rival Unilever still has factories in Russia, having pledged to continue selling essential products.Danone shares rose as much as 1.4% Friday morning in Paris amid a rally in European stock markets.The unit Danone aims to sell is Russia’s largest dairy business, with 12 production sites and 8,000 employees. The French company entered the Russian market three decades ago and built up its position with the 2010 acquisition of Unimilk. However, the business has been underperforming, according to Bernstein analyst Bruno Monteyne.“Operating the business was already very complex, given all the restrictions,” he said. “Trying to improve the business at the same time, totally not possible.”The sale could be complicated by the fact that Danone sells both local brands and international ones like Activia. It’s unclear whether the new operator would sell Danone’s global offerings and under what terms.Western groups exiting Russia have often sold their business to local management, partners or state entities. Renault, for example sold its stake in carmaker Avtovaz to the Russian Central Research and Development Automobile and Engine Institute, with an option to buy in back in six years.Danone will continue exporting some specialized nutrition products into the country.