Carlsberg CEO on nationalization of Russian assets and investment in Ukraine – interview

Jacob Aarup-Andersen, CEO of Carlsberg Group, one of the largest brewing companies in the world, for the first time in his life heard the sound of an air raid alert at 8 a.m., which suddenly triggered during his visit to Kyiv.

“I looked at Oleh [Khaidakin, managing director at Carlsberg Ukraine], who took out his phone, looked at the message and said that everything is fine. So, I wasn’t nervous either,” says the top manager.

He visited the Ukrainian capital for the first time since the full-scale Russian invasion and admitted that the reality was better than he had hoped. The seat in the train car was comfortable, the staff was friendly, and the tea was warm. And Kyiv itself, less than Aarup-Andersen thought, reminds of the fierce war for Ukraine’s independence, which is going on hundreds of kilometers away from the city.

His arrival to Ukraine coincided with high-profile news from Russia, namely the arrest of the Baltika Group’s top managers. The company belongs to Carlsberg Group but was nationalized and transferred to Russia’s Federal Agency for State Property Management or Rosimushchestvo. These included eight brewing plants in Voronezh, Novosibirsk, Rostov-on-Don, Samara, St. Petersburg, Tula, Khabarovsk, and Yaroslavl. The company estimated its share in the Russian market at 27%.

In an interview with NV Business, Aarup-Andersen talked about the loss of Russian business and investments in Ukraine.

NV: Carlsberg Group announced earlier this year that it’s ready to sell its Russian arm, the Baltika Group. However, the day before the transaction, the company’s assets were nationalized. How’s the situation unfolding now?

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Aarup-Andersen: We announced the sale of our business in Russia in June of this year. And in four weeks, while we were waiting for the regulator’s permission, we saw the announcement of the transfer of our assets under external management—de facto nationalization. They [Rosimushchestvo] now manage the business, it’s a shock for us. It all happened back in July, and since then we’ve been trying to figure out what the next step might be. Because we technically own the company’s shares, but at the same time we’ve lost all control over it. We left the Russian market and announced in October that we were revoking all production licenses for our brands in the country. So, we’re actually out of Russia. And we no longer take into account the activities of these plants in our financial reporting.

NV: Are Russian factories now bottling beer under Carlsberg brands?

Aarup-Andersen: Yes. They have several months to move production to release products under new brands. After that, it will be banned, and this is a big step on our part. We tried to talk to the external management, which is actually appointed by [Russian dictator Vladimir] Putin, about finding a way to give us control over the business and then sell it. However, they refused to look for such a solution. I can say 100% that we won’t enter into a deal that would make Putin’s nationalization of our business legal.

It’s important for us to take the right side in this story. That’s why we’re leaving Russia and that’s why we won’t enter into a deal with Putin. And, unfortunately, we failed to leave legally.

NV: Russian media reported the deal could amount to RUB 7 billion, which is about $78 million. Is it correct?

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Aarup-Andersen: We never give out numbers, and I wish I could tell you the details, but I can’t. In June, we entered into an agreement and were paid a small amount for our factories. It’s lower in business value due to special Russian rules that were invented after the war. In fact, the value of assets for those leaving the country is halved. We were ready to accept these financial losses as it’s more important for us to leave Russia from the point of view of values, from the point of view of ethics.

After the nationalization, of course, we got nothing. We aren’t allowed to sell our business and leave the country, and this is a unique situation.

NV: Two top managers of your Baltika Group have been detained in Russia over supporting Carlsberg Group, but not the new manager. For example, over the fact that some brands, such as Zatecky Gus, were leased to Carlsberg for 40 years. How did you react to this news?

Aarup-Andersen: This is terrible. Russia is going to extremes by attacking innocent people. One thing is to have a dispute with the company, but another with innocent Carlsberg employees in Russia. The conflict is moving to another level, and it’s very sad to watch. The stories about us that have been coming from the Russian propaganda machine for several months are fakes. All the accusations are made up and used to justify the illegal seizure of our business.

Carlsberg, of course, didn’t break any rules or laws while operating in Russia. We were one of the largest brewing companies in the country, very professional, with our own values. Of course, we’ll do everything we can to help our employees, even though this is a new situation for us. Helping our people remains our No. 1 priority, wherever we are.

NV: Ukraine is seeing a heated debate about how to deal with companies and banks that haven’t left Russia. Many of them are officially named sponsors of the war, although they continue to pay taxes in Ukraine, and some even invest in new enterprises. What would you advise both Ukrainians and those companies that haven’t left Russia?

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Aarup-Andersen: I won’t comment on what other companies do. Carlsberg has decided that it doesn’t want to work in Russia. Our founders built the 176-year-old company on strong values, integrity, and respect. We were always focused on human rights and couldn’t be part of what was happening in Russia. On the other hand, we’re strengthening our commitment to Ukraine, helping Ukrainian society with everything we can since the first day of the full-scale war. And the fact that the trip to Ukraine was one of the first big ones for me as the new Carlsberg Group CEO also underlines Ukraine’s importance for us. We’ve made it clear which side of history we want to stand on.

About investments in Ukraine

NV: In 2023, Carlsberg set up a production line for bottling beer in cans at its Kyiv-based plant, investing $40 million in this project. Why did you decide to invest in Ukraine during the war?

Aarup-Andersen: Ukraine is an extremely important market for us. We employ 1,300 people in this office, and about 20,000 employees in supplier companies working with Carlsberg. Therefore, we have a great stake in Ukrainian society. We’re also on the list of the Top 25 largest taxpayers in Ukraine.

And if you look at all this in combination with how interested we are in the local market and passionate about Ukrainian society, it immediately becomes clear that we’ll continue to invest in Ukraine. We’re now investing about UAH 2 billion ($55.5 million) not only in the production line for bottling beer in cans, but also in other commercial projects. Yes, we’re investing in equipment and plants during the war. We’re the leader of the Ukrainian beer market and want to remain so after the end of the war. Of course, we believe this war will end positively for Ukraine. That’s why we’re investing in the country.

NV: Were you prepared for Russia’s full-scale invasion and what consequences did you prepare for?

Aarup-Andersen: A company like ours, and we’re a global player as we work in 150 countries and sell 140 different types of beer, pays considerable attention to geopolitics. So, we were developing scenarios on how to respond to the situation, but we didn’t think that the full-scale war would break out. We hoped for de-escalation, but it didn’t happen. Despite this, our reaction was quick.

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We supported our people, taking care of their safety, housing and providing financial support. The work of our breweries in Kyiv, Lviv and Zaporizhzhya was suspended, but later resumed. However, the Ukrainian office had to completely rebuild its work. For example, the production of one of our key suppliers of glass bottles was destroyed at the beginning of the war. So, people had to work in crisis committees around the clock and solve these issues. I’m incredibly proud and in awe of how the team handled it.

These are superhuman capabilities, since Carlsberg employees in Ukraine have to deal not only with these problems during working hours, but also with significant psychological stress in their private lives.

NV: One of the Carlsberg plants in Ukraine is in Zaporizhzhya, a city regularly subject to artillery shelling. Do you plan to relocate it?

Aarup-Andersen: We have three large breweries in Ukraine, namely in Zaporizhzhya, Kyiv and Lviv. They’re all working now. We decided to continue our work in Zaporizhzhya. There is a reason why we’ve placed the breweries in three different locations. Ukraine is a big country, and it’s expensive to transport products over long distances. That’s why our productions are located in the west, east and center. Yes, it’s safer in Lviv now, and everyone knows it. However, the relocation of production will create logistical problems for us. So, we have no plans to relocate our plants.

Danish government initiative

NV: The Danish government has created a fund to cover the risks for those who invest during the war. Has the company insured its investments in Ukraine?

Aarup-Andersen: No. We invest directly and haven’t used these services. We don’t consider our investments in Ukraine particularly risky. I support the Danish government’s initiative as it will help new companies come to Ukraine.

NV: Under what conditions are you ready to continue investing in Ukrainian business?

Aarup-Andersen: The situation on the beverage market is improving, but sales are still lower compared to the pre-war period. Therefore, we expect further growth in the coming years. Why am I talking about this?

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You’re probably more experts than I, but some of those who left Ukraine during the war will return. I don’t know what percentage of citizens, but it will be a significant part. The country will receive large investments to restore infrastructure and many other things that were damaged during the war. Ukraine will receive a great economic boost, and therefore the demand for our products will grow.

If we talk about Ukraine’s accession to the European Union, I’m not an expert in these processes. All I know is that it will take at least a few years. However, this event would lead to an increase in investment and the number of companies, as we can see this effect in other countries joining the European Union. More EU companies will relocate to Ukraine.

NV: Do foreign investors interested in the Ukrainian market approach you? What are they interested in?

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Aarup-Andersen: Investors are interested in Ukraine. A significant number of company representatives come to Kyiv, attend conferences, and their task is to best study the Ukrainian market. Business leaders who don’t work here yet ask me if it’s the right time to invest now. We see that such an opportunity exists now.

Life in Ukraine is hectic, with air raid alerts and nightly shelling, but it’s an attractive market that you can easily start investing in right now. This is my message to international leaders. No one can predict when this war may end. Therefore, it’s better to invest today.

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