How much power do foreign companies really have in Russia?
The global beer industry is as complicated as any industry can get in today’s world. Due in large part to both political and legal roadblocks, that aim to prevent monopolies, some of the world’s largest brewers have to settle for joint ventures, licensing agreements or exclusive rights in order for them to continue to grow their brands or acquire others.
Take the world’s largest beer company AB InBev, whose portfolio of brands encompasses renowned global brands like Budweiser, Stella Artois and Corona. As some of you may know, AB InBev does not own the rights to distribute and sell Corona in the United States. Those privileges fall in the hands of Constellation Brands, who in 2013 bought the rights for all of Grupo Modelo brands for the US market as part of the agreement from the acquisition of Anheuser-Busch from InBev at that time. AB InBev maintains the rights to the Corona name elsewhere in the world, but today due to that agreement AB InBev is suing Constellation Brands over a breach in their contract, more specifically over Corona Hard Seltzer. The lawsuit claims that Constellation Brands breached their exclusive rights contract when they began to manufacture a non-beer product under the Corona name, although Hard Seltzer may be similar to light beers in certain aspects they differ greatly in their manufacturing process and the ingredients used to produce them.
You may be wondering what does this little history lesson have to due with the current situation in Russia? Well the answer is, that some parts of this little debacle between AB InBev and Constellation Brands is very similar to what is happening right now with some brands, including Budweiser, in Russia. AB InBev’s presence in Russia is made up of a partnership between themselves and Turkish brewer Anadolu Efes, better known for producing the beer Efes, the controlling shareholder partner of their joint-venture. As western companies face backlash from consumers that demand that their favorite companies cut ties with the tyranny of Putin’s Russia, some of them have their hands tied because of past agreements that left them without a controlling interest or say in the day to day operations inside the country. AB InBev and Burger King are some of the companies that are facing extreme pressure from the world and there is really only so much that they can do.
So what can companies like AB InBev and Burger King do in he face of such adversity? Michel Doukeris, CEO of A-B InBev, emphasized in a statement that it does “not have a controlling stake at the joint venture and do not consolidate it in our accounts.” “We have requested the controlling shareholder to suspend the license for the production and sale of Bud in Russia,” he said. “Furthermore, we are forfeiting all financial benefit from the joint venture operations.” So the question really is: can Mr. Doukeris and AB InBev really do anything else other than ask nicely to it’s partner to stop distributing AB InBev products in Russia? The answer is: if Anadolu Efes really wants to continue their relationship with the world’s largest beer maker they will do as they are told, even if legally they don’t have to and figure out how to maintain their more than 7,000 employees in Russia. To make matters worse, the world’s second and third largest beer companies (Heineken and Carlsberg) have swiftly cut ties with Russia. Carlsberg Group, who through a subsidiary own Russia’s number one beer and Europe’s largest brewery Baltika, almost immediately stopped manufacturing and selling Carlsberg beer and their other brands in the country, and have decided to run Baltika Breweries as a separate business for the time being and all profits will be donated to relief organizations “Baltika Breweries will be run as a separate business, with the purpose of sustaining our employees and their families,” Carlsberg said.
I can bet you that in the near future not only AB InBev, but most international conglomerates will reassess their position in certain countries that either have an authoritarian regime or ongoing conflicts inside their borders. On top of that, mechanisms and safeguards must be put in place in order to ensure that parent companies’ will and image be better served in crisis’ like the one we are living in today. For now, AB InBev can only hope that Anadolu Efes feels as strongly against the war and Putin as they do.
“People don’t really believe in words. Or rather, people believe in words only for a stretch of time. Then they start to look for action” — Volodymyr Zelensky.
