Companies Defend Decision To Sell “Essentials” In Russia

Selling Daily Essentials

PepsiCo (PEP) is currently caught up in some of the debate concerning Russia-Ukraine. Although it agreed to stop selling Pepsi and 7UP in Russia, it’s continuing to produce milk, cheese, yogurt, baby formula, and potato chips there, considering those items “daily essentials.”

Other companies have been facing criticism for continuing to sell certain products. Unilever (UL) hasn’t stopped selling ice cream, cosmetics, or hand cream, for example. Ukrainian president Volodymyr Zelensky publicly criticized both Unilever and Nestlé (NSRGY) last week for continuing to sell their products in Russia.

Some Companies Say Hands are Tied

In addition to companies that say they’re selling essential items, other firms indicate they continue to do business in Russia due to franchise and joint-venture agreements. Makers of vaccines and medical equipment argue they have an ethical responsibility to keep making products, regardless of the circumstances. Companies have also been warned by Russian prosecutors that any decision to withdraw from the country could result in the seizure of assets, or employees being arrested.

Industrial conglomerate Koch Industries specifically cited the well-being of employees while defending its decision to continue doing business in Russia. It’s among the world’s largest private employers. President and COO Dave Robertson issued a statement saying the company won’t abandon employees or manufacturing facilities, adding that would only benefit the Russian government.

Pressure from Officials Around the World

In addition to Ukraine’s president and prime minister, leaders and economists from around the world have been outspoken concerning businesses operating in Russia. Some argue selling products there undermines the sanctions that are in place, and makes them ineffective.

New York’s state pension fund, one of the largest public pension funds with nearly $300 billion in AUM, recently turned the heat up on several companies. It called for Mondelez International (MDLZ), PepsiCo, and Kimberly-Clark (KMB) to think about the risks associated with doing business in Russia. It’s a delicate balance for many companies, as they face a difficult decision: protect established business relationships, or guard against public backlash?

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ABOUT Meg Richardson Meg Richardson is a writer specializing in markets, technology, and personal finance. She loves breaking down seemingly complex ideas and making them readable and interesting for everyone. She holds an MFA in writing from Columbia University. When she is not writing about finance, she enjoys running in Central Park and drawing cartoons.

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