In the rear of the sanctions war: how foreign companies survive in Russia

In 2014, the ruble revenues of the 50 largest foreign companies in Russia increased by only 13%.
01.10.2015
Forbes
Origin source
The complication of relations between Russia and the West in the spring of 2014 because of the events in Ukraine and annexation of Crimea did not prevent foreign companies to increase the volume of revenues of its Russian subsidiaries. How significant Russian market for global corporations and what is the size of the Russian business can be seen in a new ranking of Forbes - the 50 largest foreign companies in Russia.

At the end of 2014 the total revenue of the rating participants increased by 13%, up to 5 trillion rubles. In total revenues in the ranking of leading companies from Germany (1.1 trillion rubles), in second place - a French business (828 billion rubles), followed closely by the following companies from the USA (820 million rubles).

The share of Russian sales in total sales of the company in the lead of France (8%) and Japan (4.4%). The maximum growth in 2014 was at US agribusiness Cargill of (118%) and mechanical engineering Schneider Electric of France (100%). The largest drop in revenue showed car makers - Ford Sollers (35%) and GM (16%), which in 2015 left all of Russia.

First place in the ranking took the French "Auchan". For example, it can be traced back to the Kakiand the new challenges faced by foreign companies in Russia.
In the spring and summer of 2014 the European Union and the United States, do not recognize the occurrence of the Crimea to Russia, have imposed restrictions on the work of their companies on the Peninsula, in December, an additional package of sanctions was adopted. American "McDonald» (№26 in the rating) in April 2014 was forced to close restaurants in Simferopol, Yalta and Sevastopol. In January 2015, Apple (№20) shut off access to the online store App Store application from the territory of the Crimea and has ceased to supply to their gadgets.

But the hypermarket "Auchan" in Simferopol simply changed the jurisdiction - the store was transferred from the "Auchan Ukraine" to "Auchan Russia".

According to Maria Kurnosova, director of external communications, "Auchan", the question was solved within the group, without consultations with the EU, the governments of Ukraine and Russia. "This is an internal decision. Crimea became Russian territory, "Auchan Ukraine" will no longer have the opportunity to manage this store. We are worried not about politics, and the presence there of our customers and employees, - says Kurnosov. - We are up there with the localebubbled and Russian suppliers, Ukrainian products are considered imports. good "dynamics. Hypermarkets Metro (№2) in Simferopol and Sevastopol also remained, only now directly subordinate to the headquarters in Germany.

In the summer of 2015 "Auchan" suffered massive audits. In addition to Rospotrebnadzor with its scheduled inspection in hypermarkets descended Rosselkhoznadzor. Veterinary Office has come in "Auchan" check meat departments on behalf of the Deputy Prime Minister Arkady Dvorkovich in the framework of the campaign against African swine fever. The results were disastrous: a violation of the terms of storage, E. coli and Listeria in the semis, the DNA of horse meat in minced pork. "Auchan" for a day for disinfection plant shut-products in four stores, in parallel calling Rosselkhoznadzor publicly refute the information about the discovery of horse meat. Embassy of France, in turn, sent a letter to the Rosselkhoznadzor, and the media immediately linked with the retailer's high-profile test of France's refusal to buy "Mistral".

The activity of inspection bodies felt by other foreign comAANII of our ranking. So, the summer of 2014 shortly after the introduction of retaliatory sanctions Russia (the product of the embargo) as a result of the identified during the inspection violations Rospotrebnadzor "McDonald's" was forced to close for several months four restaurants in the center of Moscow, including a flagship on Pushkin Square. In the late summer of 2015 after testing Rospotrebnadzor banned the sale several products Procter & Gamble (№11) and Henkel (№36), do not correspond to "the regulatory requirements for the sanitary-chemical and toxicological parameters."

The sanctions gave rise to the powerful process of import substitution. After entering the product of the embargo to all retailers - in addition to the rating of "Auchan" and Metro were German and Globus (№30) and Billa (№50) - had to urgently find a replacement fallen under the ban Western products. Even more import substitution affected IT-companies, equipment providers, pharmacists. Ministry of Communications in March 2015 proposed to ban the purchase of software for the public sector for foreign companies who refuse to work in the Crimea. In summer, it enacted a law on the "odd man out" in the pharmaceutical industry -When there are two proposals from domestic producers, foreigners are not allowed to participate in tenders for the supply of medicines on the municipal and state order.

ranking members adopted new rules of the game. French Sanofi (№38) of the first international pharmaceutical companies started producing drugs from the list of essential medicines in Russia - its plant in the Oryol region produces insulin, and plans to begin export deliveries in 2016. The company recently signed a vaccine production agreement with "Rosnano" intent at "Nanolek" in the Kirov region, the sides plan to invest in the project about € 100 million. "The system of admission of drugs to the Russian market is significantly different from the European model. Nevertheless, Russia is among the top four strategically important markets for us, "- he explained in an interview with" Kommersant "the head of the French company Olivier charm. The State Duma is now increasingly introduced initiatives that restrict the ability of foreign companies.

In June 2015, for example, began the development of the billan import substitution of patented drugs. "We will be forced to violate international law with respect to those foreign companies who refuse to supply drugs in our country. This is a necessary step to protect the health of our citizens ", - quotes TASS Alexander Petrov, a member of the Duma Committee on Health. "We are closely following everything that happens outside, we study all the initiatives to be able to react quickly. It should be understood that the initiatives that give voice to individuals, and the fact that then assumed - a big difference, "- explains the reaction of the foreign companies on the many initiatives of Maria Kurnosov" Auchan ".

But the fall of the ruble - a real problem faced by the Russian divisions of global companies. According to a January survey (conducted CEEMEA Business Group) top managers of 125 Russian representative offices of foreign companies, the majority (55%) expect on the basis of 2015 decline in revenue in dollar terms, so 40% of companies plan to reduce investments in Russia, the vast majorityconsistency of (80%) is not going to index wages to inflation.
The main difference from local foreign investors in the companies that are to Russian only one possibility. Total revenues in the Russian companies rated 30 times less than their global revenues - 155.3 trillion rubles at average annual rates.