Pernod Ricard pulls Absolut vodka from Russia amid backlash
19 Apr 2023 --- Vodka brand Absolut will stop exporting its beverages to Russia “effective immediately, according to owners Pernod Ricard. This follows public criticism in recent weeks in Sweden by politicians, including Prime Minister Ulf Kristersson and calls to boycott by some restaurants and bars in the nation.
Swedish member of the European Parliament Karin Karslbro, said that supplying Absolut to Russia was a “nice gift to Putin,” a “crazy decision” and added that it is “unacceptable that Absolut Vodka supports Russia’s warfare.”
“There are no excuses for a Swedish company to undermine the international pressure against Russia in this way,” she highlights.
While exports of Absolut will be halted, Pernod Ricard warns that its drinks – as all drink brands – will be easily accessible through parallel market distribution (black market) in the country, which the company has no control over.
Protecting Russian employees
Pernod Ricard’s business in Russia accounted for 3% of its sales before Russia’s invasion of Ukraine, with the percentage decreasing in 2022.
“Since March 2022, in full compliance with all applicable international sanctions and local legal constraints, the Group’s activity in Russia has been strongly reduced and marketing investments have been stopped,” says a spokesperson for The Absolut Company.
“By ensuring the economic viability of its distribution subsidiary through limited supply, Pernod Ricard has been able to protect its local team from any local criminal liability, relating to ‘intentional bankruptcy’ in particular,” the spokesperson highlights.
The company fears that without minimal business activity in the country, Russia could take advantage of its bankruptcy laws and go after its employees. Furthermore, forceful nationalization of the company could be a risk.
Nonetheless, they will move forward to halt its business in the country. “Acknowledging also the duty of care toward our employees and partners, we cannot expose them to massive criticism in all forms,” the spokesperson explains.
Heineken has been dealing with similar issues. The beer business assesses the nationalization “risks as significant” as well as “criminal action” against its employees if they suspend its operations in the country.
The company explains that the F&B sector is not subject to sanctions which means the Russian authorities view a decision to suspend or close as “intentional bankruptcy’,” triggering risks of prosecution and nationalization.
“We’re also uncomfortable that the Russian state should benefit from the forced appropriation of major business assets. So, we decided we should do everything possible to avoid nationalization, while leaving as quickly as possible,” stated the company.
The Dutch company is looking to sell its business in Russia.
Russian vodka exports hangover
In 2022 there was a very significant reduction of Russian vodka imports by many countries.’
Data from UN Comtrade shows that Germany, the top importer of Russian vodka in 2021, decreased its purchases from US$43.4 million to US$7.5 million. Similarly, the UK only imported a quarter of what it used to import, buying US$5.5 million of vodka. Other countries like the US and the Czech Republic also significantly decreased their purchases.
On the other side, Israel is the outlier country as it quadrupled its buying efforts, purchasing US$24.7 million, up from US$5.7 million in 2021, becoming the largest Russian vodka importer.
By Marc Cervera
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