Oreo Cookie-Maker Mondelez Appoints New Management at Profitable Russian Business Amid Pressure to Exit the Country
Chicago-based Mondelez, the company behind Oreo cookies, has recently implemented changes in management at its profitable business in Russia, according to internal company memos. The move comes after months of boycotts and pressure from shareholders and activists to leave the country. While Mondelez suspended advertising in Russia, it has not fully exited the market. The company's Europe president, Vince Gruber, announced the appointment of a new general manager to lead the standalone Russia business. The general manager will report to another executive, who in turn reports to Gruber. Despite investor pressure and boycotts, Mondelez continues to sell its products in Russia.
Critics Slam Mondelez's 'Distinction Without a Difference' Workaround
Corporate governance expert Nell Minow criticized Mondelez's attempt to present its Russia operations as a standalone organization, calling it a "distinction without a difference." Minow argued that there is no valid justification for maintaining business connections in Russia for a company that sells cookies, as these products do not fall under any urgent health or supplies category. Mondelez responded by stating that its local business in Russia is now operating more independently, with products being produced and distributed locally, without any imports or exports from Europe.
Mondelez Faces Scrutiny Over Its Continued Presence in Russia
Mondelez's decision to maintain its business in Russia despite the ongoing war in Ukraine has attracted negative scrutiny from stakeholders. In its annual report released in February, the company acknowledged the risks posed by the conflict, including potential loss of life, physical damage, and destruction of its property. Mondelez also acknowledged that its operations in Russia could face questioning and negative scrutiny, despite its role as a food company and its public statements regarding Ukraine and Russia.
Russia Expansion Contrasts with Global Brands That Left After Ukrainian Invasion
While many global brands, including McDonald's and Starbucks, exited Russia following the country's invasion of Ukraine in 2022, Mondelez has chosen to remain. The company's rivals, such as Nestle, continue to operate in Russia as well. It is worth noting that food products are not subject to international sanctions.
Mondelez Restructures European Region Amid Tensions with Retailers
In addition to its Russia operations, Mondelez has also faced challenges in its largest market by sales, Europe. The company has been at odds with retailers in the region over price hikes. As part of its restructuring efforts, Mondelez plans to divide the European region into 14 commercial units, each responsible for smaller areas and individual countries.
Mondelez's Profitable Russia Business Continues Despite Pressure
Despite the boycotts and pressure to exit Russia, Mondelez's Russia business remains profitable. The company's annual report highlights the success of its operations in the country. Prior to the war, Mondelez executives in Moscow oversaw its operations in Ukraine as well. However, following Russia's invasion of Ukraine, the supervision of the Ukraine business was separated from Moscow.
Mondelez, which produces popular brands such as Oreo cookies and Milka chocolate, has appointed new management at its profitable business in Russia in an effort to address pressure to leave the country. The company's decision to maintain its operations in Russia has attracted criticism from corporate governance experts. However, Mondelez asserts that its local business is now operating more independently, with products being produced and distributed locally. While other global brands have exited Russia following its invasion of Ukraine, Mondelez continues to operate, emphasizing the importance of its role in providing food supplies to ordinary people. Despite facing questions and negative scrutiny, Mondelez remains committed to its Russian business, which it deems more profitable than before.
Analyst comment
Positive: Mondelez has appointed new management at its profitable Russian business and continues to sell its products in Russia despite pressure to leave.
Analyst view: The appointment of new management shows that Mondelez is committed to its operations in Russia. Despite boycotts and pressure, the company remains profitable and will likely continue to navigate challenges and maintain its presence in the Russian market.
