Mondelez Restructures Russian Operations Following Declines from Ukraine War Impacts

Mondelez International, Inc. MDLZ plans to scale down its operations in Russia owing to the higher costs associated with the war with Ukraine.

The Chicago-based snack maker plans to discontinue new capital investments, product launches, and advertising media spending in Russia.

Mondelez plans to model the Russian business as a stand-alone entity with a "self-sufficient supply chain" before the end of the year. 

"This year, our overall volumes have declined double digits and both our import volumes and market share have significantly decreased," Mondelez said in a statement. 

Also Read: Sweet Success: Mondelez Rides High On Tasty Growth Drivers, Analyst Boost Price Target

In Russia, the company sells significantly fewer products currently, weighing on overall sales.

As of date, there are 3,000 colleagues and more than 10,000 farmers who depend on the company in Russia.

"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," the statement added. "It would mean cutting off part of the food supply for many families who have no say in the war."

Incremental Costs From Russia-Ukraine War: In the recently-reported Q1 2023 results, Mondelez said it had incurred huge costs due to the war in Ukraine. The company said it recorded $143 million of total expenses ($145 million after-tax) incurred directly from the war.

Earlier in March 2022, the company's two Ukrainian manufacturing facilities, Trostyanets and Vyshhorod, were significantly damaged. During the first quarter of 2022, the company evaluated and impaired these and other assets. 

Price Target: MDLZ shares were up by 0.45% to $73.46 at the close on Thursday.