PepsiCo and Danone Rightly Busted by Russian Government
Agriculture minister claims the two companies substitute claimed ingredients for inferior imitations
This is a big deal, and long overdue.
What the minister is charging is in fact true.
In order to boost profits, the major dairy companies have introduced a lot of "dairy based drinks", misleadingly sold as "healthy", which are in fact full of sugar and additives with no proven evidence of any health benefits, in fact, more likely the exact opposite.
This article originally appeared at Business New Europe
On a visit to Omsk, Siberia on Friday, Russia’s agricultural minister Nikolai Fedorov claimed that both Danone and PepsiCo dairy products contained just a fraction of fresh milk.
“In these products a maximum of 20 per cent comes from real milk – the rest is a processed milk mixture with coconut, palm oil and other additives,” Mr Fedorov said, according to Itar-Tass, the state-owned newswire.
Mr Federov asked regional governors to start paying special attention to the activities of Wimm-Bill-Dann, which is owned by PepsiCo, and Unimilk, which is owned by Danone, “and not let them skim the cream off the cheap raw product that our poor peasants produce”.
He accused the companies of taking advantage of government subsidy schemes while passing on inferior products to consumers.
Danone and PepsiCo are two of Russia’s biggest foreign investors. PepsiCo entered the market during the Soviet period and in 2011 it paid $3.8bn for Wimm-Bill-Dann, the Russian juice and dairy group, the biggest foreign acquisition in PepsiCo’s history.
Danone created Russia’s largest dairy group after merging with local producer Unimilk. It currently operates 20 factories in Russia and employs 12,000 workers.
To counter western sanctions imposed because of the crisis in Ukraine, Russia in August implemented a ban on US and European meat, fish, dairy and produce, a move designed to both hurt western farmers and promote Russia’s own agricultural sector, which has lagged behind since the fall of the Soviet Union.
In a statement released over the weekend, Danone accused the agricultural minister of defamation.
“We are not only outraged by the official’s statements but regard them as defamation, causing damage to our reputation both in Russia and around the world,” the company said.
“Danone Russia demonstrates the highest industry quality standards and product safety, as confirmed by repeated inspections by Rospotrebnadzor [Russia’s consumer inspection watchdog ]. . .
We demand a public denial of these lies and this defamatory information.”
Analysts say that the domestic fruit, vegetable and milk sectors need government-sponsored incentives to help modernise. But they question government claims that the import ban will actually help local producers, noting that the sector’s broken logistics could take years to rebuild.
While the foreign import ban came in the form of a presidential decree signed by Vladimir Putin, lower-ranking officials and ministries have led their own ad hoc attacks on western companies, a campaign that may be implicitly encouraged by the Kremlin, if not officially sanctioned by it.
The most high-profile target so far has been McDonald's. Regional health officials shut down eight McDonald's outlets in August after alleging that the company had misrepresented the health facts of many of its dishes and also violated certain health standards. The company’s biggest Russian location by sales was finally allowed to reopen in November, after being shut for three months.
Click here for our commenting guidelines