Carlsberg is dragging Russian brewers to an international court

The company continues to fight for its brands.
Origin source
Carlsberg announced its withdrawal from the Russian market back in March 2022. She wanted to sell her assets in Russia - the Baltika plants - but did not agree on a price with the buyer. Then Carlsberg tried to take away brand licenses from the Russian Baltika.

The Carlsberg group is threatening Russia with an international court over a legal dispute over the Baltika brands. The parties have been corresponding since August, the Danish company accuses Russia of violating international treaties, Interfax writes, citing sources.

The Carlsberg group announced its withdrawal from the Russian market back in March 2022. According to sources familiar with the progress of the negotiations, the Arnest group, which had previously bought Heineken factories for a symbolic 1 euro, wanted to act as the buyer of the Danish assets in Russia - the Baltika factories.

However, the deal failed. Carlsberg wanted to receive 71 billion rubles even taking into account the 50% discount. The deal dragged on to the point that the Danish assets in Russia went under the temporary management of the Federal Property Management Agency. Carlsberg called this an “illegal expropriation” and responded by attempting to take away brand licenses from Russia’s Baltika. However, she did not take into account that the Russian court has no reason not to take the side of Russian business, says partner of the Delovoy Farvater law office, lawyer Sergei Litvinenko:

— Carlsberg will most likely appeal to the International Court of Arbitration, and this court will make a politically motivated decision not in the interests of the Russian Federation. Either the Federal Property Management Agency or potential acquirers of this asset may appeal some of Carlsberg’s actions in the courts of the Russian Federation. And there will be parity in judicial decisions. In the future, perhaps, this asset will be transferred to a Russian enterprise.

— Can Carlsberg count on some kind of compensation or will there be nothing more?

— I think our authorities will take a principled position - not to pay any compensation in the current conditions, especially if the International Court of Arbitration makes a decision against the interests of the Russian Federation. Therefore, most likely there will be some kind of rebranding.

— Will there still be a rebranding?

— There is no urgent need for these brands. Moreover, we are already seeing a practice that is associated with the departure of many foreign partners, when a partner leaves and trademarks simply change their names. Perhaps some brands will remain, but I believe they will still take the path of changing names.

In the worst-case scenario, Baltika will be able to operate exclusively at its own capacity, says beer sommelier Yuri Susov:

“All the fuss is about these licensed brands, that is, Baltika, by and large, wanted to sell physical facilities and Russian brands, and not the right to produce drinks under license. Accordingly, our officials made a comment that they had transferred the company under state management because it was violating contracts. That is, most likely, what contracts are we talking about? In our country, all federal grocery chains are under strict surveillance, and Baltika is probably the leading player that supplied its beer products to federal grocery chains. Having sold the business, but not sold the licenses, we would have had a disruption in the supply of licensed products, like Carlsberg, like Kronenbourg (a French brand owned by Carlsberg - BFM) and other brands, their share is very significant on the shelves, and therefore Baltika was taken under state control . Baltika itself, of course, is a very strong brand, but Baltika, even with its entire line, will not be able to fill these shelves. And people are accustomed to these licensed products; Kronenbourg beer has been selling well for a long time and has its own audience. That is, the international court will most likely side with Carlsberg, and the Russian court will side with Baltika. Judging by the movements that are taking place, Baltika will continue to produce, at least for some time, licensed beer. Accordingly, additional financial sanctions will be imposed on Russia for failure to comply with this decision of the international court. From a production point of view, Baltika has its own malting plant and its own microbiological laboratories. “Baltika is a very cool, unique enterprise, they have almost a full cycle, they are independent of imported raw materials.”

The decree on the transfer of Baltika to the management of the Federal Property Management Agency was signed by the president in July of this year. After leaving the Russian market, the Carlsberg group noted that the prospects for the sale of its business here had become “extremely uncertain,” and at the end of October, commenting on the results of the quarter, it announced an “illegal takeover of business in Russia” and plans to protect its assets. The Danes estimated the accounting write-off of assets at almost $1 billion.

The Russian Ministry of Finance stated that Baltika “is not owned by the state,” that the Federal Property Management Agency was appointed only as a temporary manager and “the introduction of such management does not entail a change in the ownership structure.”

Baltika is the second largest brewing company in Russia and operates eight factories. The company's revenue in 2022 increased to 100 billion rubles, net profit almost doubled.