Company That Makes Oreos Is Strong as Ever in Russia as War Drags On

Oreo cookies at a Walmart store in Fort Worth, Texas, US, on Friday, Sept. 22, 2023. After conducting a successful trial, Walmart Inc. recently announced plans to expand samples to more than 1,000 locations as more retailers are discovering that samples provide something digital marketing can’t, a chance for shoppers to try products before buying them.

(Bloomberg) — On a wintry day in late 2023, an expat YouTuber offers a tour of a supermarket in a snow-covered Moscow suburb. In addition to the normal supermarket staples, there’s a healthy selection of western brands, from Lay’s potato chips to Belvita cookies and Alpen Gold and Milka chocolate.

“This is my favorite,” says the video narrator, pointing to a display of eight varieties of Alpen Gold — made by Chicago-based Mondelez International Inc., which has pledged to halt its investment and advertising in the country because of its invasion of Ukraine.

Despite an initial pledge to scale back operations, company documents and market data seen by Bloomberg show that Mondelez’s presence is actually growing by some measures.

“I used to be a big fan of Milka but the price of Milka has gone up a little bit in the last year,” says the narrator, who operates the “Travelling With Russell” channel.

A pan of the camera shows multiple varieties of Milka, right next to Toblerone chocolate, also made by Mondelez. A more recent online tour of a local corner store by the same YouTube channel shows a similar selection of products.

Between January and July of last year, Mondelez’s Russian business imported about 20 million kilograms (44 million pounds) of chocolate, biscuits and candies — a 2% increase from a year earlier, according to the most recent data from US-based trade data aggregator ImportGenius, which provides trade intelligence using data gathered from electronic bills of lading.

Oreo cookies at a Walmart store in Fort Worth, Texas, US, on Friday, Sept. 22, 2023. After conducting a successful trial, Walmart Inc. recently announced plans to expand samples to more than 1,000 locations as more retailers are discovering that samples provide something digital marketing can’t, a chance for shoppers to try products before buying them.

US and European companies face no good choices in Russia: Pull out and potentially hand over a profitable business to a government that’s looking to fund its war efforts, or stay and face condemnation.

“If we suspended our full operations, we would risk turning over our full operations to another party who could use the full proceeds for their own interests,” Mondelez said in a statement to Bloomberg. “It would mean cutting off part of the food supply for many families who have no say in the war.”

Food and essential items, including sugar-laden treats, aren’t under any international sanctions, and other US companies have continued to operate in Russia since it invaded Ukraine. The war has caused the deaths of at least 10,000 civilians, according to the United Nations; unofficial estimates put the death toll far higher.

Research Efforts

Mondelez has also recently conducted market research in Russia, according to internal company documents viewed by Bloomberg. The maker of Halls cough drops and Ritz crackers tested a change to its Milka products in October with market researcher Ipsos. In December, Mondelez presented the results of a Nielsen report on how post-pandemic behaviors in Russia have affected Milka, Alpen Gold and Oreo. Mondelez also examined the behavior of Russia’s Gen Z in a January Kantar report.

The tone in the reports isn’t consistent with a company that’s pulling back: One slide notes a rise in impulse buying after the pandemic. “Mondelez needs to exploit the momentum to win in this channel,” according to the presentation, dated December 2023.

It’s a departure from March 2022, when Chief Executive Officer Dirk Van de Put said Mondelez was “scaling back all nonessential activities in Russia.” Then, in June of that year, the company said it had “scaled down our activities, discontinuing new capital investments, new product launches and our advertising media spending in Russia.” Overall volume and import volume had declined, Mondelez said.

Mondelez’s operations in Russia accounted for a lower percentage of revenue in 2023 — 2.9% of consolidated net revenue, down from 4% the previous year — but the business is highly profitable. “Despite the decrease in revenues, the profitability of our Russian business in 2023 remained above historical levels,” the company reported in February.

More Autonomy

In its response to Bloomberg, Mondelez said it’s complying with sanctions while granting its Russian business more autonomy.

“Effective at year-end 2023, we have stood up our local business to operate more independently,” the company said. “Products sold in Russia are now produced and distributed locally, with no imports of finished goods from Europe into Russia or exports from Russia into Europe.”

It reiterated its condemnation of “the brutal aggression against Ukraine” and said that “last year’s profitability can be attributed to our stoppage of investment, combined with ruble strength and other factors.” Mondelez added it has invested to repair and rebuild manufacturing facilities in Ukraine.

Still, the moral imperative for companies to leave is clear, according to Nataliya Popovych, the founder of We Are Ukraine and a member of the steering committee of B4Ukraine, which aims to block any financial gains that could be used by Russia for the war. She said B4Ukraine has reached out to Mondelez multiple times about its concerns.

“The excuses they use to stay in the Russian market, we find them not viable, not substantiated,” Popovych said, noting that the company sells chocolates and cookies, which are food — but hardly essential. Instead, she said, the company pays taxes to the Russian government and is “normalizing life in a country that is waging one of the most horrible wars in the history of humankind.”

On Friday, Reuters reported that Mondelez had put new management in place in Russia, citing internal memos.

The market-research firms that Mondelez has worked with have also said they would wind down business operations in Russia. Nielsen said it was suspending consulting services in March 2022, and in response to an inquiry from Bloomberg, it said it complies with all sanctions but doesn’t share its customer list and “cannot comment on specific work carried out for clients.”

Kantar said in January 2023 that it had left the country and told Bloomberg that it hasn’t commissioned any new work there. “We do not recognize this as a Kantar piece of work,” a spokesperson said in response to a description of the research report. Paris-listed Ipsos didn’t respond to requests for comment.

Companies such as PepsiCo Inc., Unilever Plc and Nestlé SA have stayed in Russia, too, running factories and selling “essential” products including ice cream and chocolate bars. PepsiCo CEO Ramon Laguarta said in 2022 the company was suspending the sale of some international brands, such as 7Up and Pepsi. It continues to sell soft drinks with other names, as well as Lay’s chips, baby food and dairy products. It also sells local products, including the fermented beverage kvass.

PepsiCo, Unilever and Nestlé declined to comment.

Difficult Process

Companies that seek to leave Russia face a difficult process that often incurs large financial penalties that diminish what’s often already a deflated price for the sale of local operations. And those that announce an intent to depart risk having their assets taken over, which is what happened to yogurt maker Danone and brewer Carlsberg A/S last year.

The Russian economy has been resilient despite sanctions and is expected to continue to grow. The country has increased social benefits, lifting the incomes of the poorest decile of the population by more than twice the rate of inflation, according to Bloomberg Economics. That is seen driving demand for branded snacks and sweets.

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