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Kraft Heinz sells Russian baby food business

Buying them is local beverage and snack manufacturer Chernogolovka

Kraft Heinz has decided to sell its baby food business in Russia to local beverage and snack manufacturer Chernogolovka according to which the deal will include two plants and the "Umnitsa" and "Sami s usami" brands. Neither Kraft Heinz nor Chernogolovka revealed the price or mentioned a buyback clause: the Russian daily Kommersant reported that Kraft Heinz estimates the value of the deal to be between 2.5 and 3 billion rubles, or a range of 29.4 to 35.3 million Euros, but the government has yet to approve the valuation.

"We expect to close the deal in the second half of 2023, that is, in the third quarter, and we will continue to work with Chernogolovka after the completion of the deal to ensure a smooth integration", a Kraft Heinz spokesperson stressed.

The deal, which is now subject to regulatory approval, was apparently in the works since before the conflict in Ukraine. "The decision to sell is a business decision in the interest of our employees and local communities that rely on local distribution of baby food products"-explains the Kraft-Heinz spokesperson. This agreed sale ensures that we can continue to keep baby products viable and accessible to all".

Transactions such as this one require the approval of a government commission that monitors foreign investment: just in the last few days the commission has declared that foreign investors from "hostile" countries selling goods in Russia will be obliged to donate at least 10 percent of the sale price to the Russian budget.

Chernogolovka is proving to be one of the biggest beneficiaries of the exodus of companies from Russia over the past year: it has already acquired the local operations of Kellogg Co. and is aiming for an exponential increase in its market share in the soft drinks sector, following the reduction of ties with Coca-Cola and Pepsi. The companies that are exiting are being forced to sell their Russian operations at steep discounts: many have been sold for a nominal amount and many have suffered severe write-downs. Companies often insert buyback clauses that could one day see them return.

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EFA News - European Food Agency
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