AB InBev warns of $1 billion loss from Russia’s exit

Belgian brewer Anheuser-Busch InBev is in talks to sell its stake in its Russian and Ukrainian joint venture to its Turkish partner, in a deal that could cause the world’s largest brewer to lose $1.1 billion.

Manufacturer Budweiser, Stella Artois and Corona are seeking to sell their non-controlling stake in the AB InBev Efes joint venture to Anadolu Efes.

However, it will still have an indirect holding in Russia because it holds a 24 percent stake in Efes, according to S&P Capital IQ, dating from its acquisition of rival SABMiller in 2016.

This is the first significant example of a Turkish company stepping in to fill the gap created by the migration of Western brands from Russia, said an analyst at a Turkish investment advisory group.

As part of the deal, AB InBev said on Friday it had requested a suspension of Budweiser sales in Russia. It said it would require $1.1 billion in non-cash impairment charges as a result of the deal.

The beer company’s decision to withdraw from Russia comes as many Western companies have left or scaled back their operations in the country in protest of its invasion of Ukraine, or because of sanctions and supply chain disruptions.

Turkey, a NATO member that has built close ties with Moscow and Kiev in recent years, has condemned the Russian invasion and has supplied armed drones to the Ukrainian army. But it has also sought to maintain what it describes as a “balanced” position, to avoid damaging its economic, defense and energy ties with Russia.

Turkish officials have said they will not sign off on Western sanctions packages against Russia, while some Turkish companies and executives have said they view the withdrawal of Western companies as an opportunity.

The investment advisory analyst said it was too early to say whether the acquisition would be beneficial to Anadolu Efes. “It is not clear how consumption patterns will change in the Russian beer market, and how the competitive environment will change,” they said.

Rating agency Fitch downgraded Anadolu Efes last month, citing “a challenging macroeconomic environment in the company’s two largest markets in Turkey and Russia, as well as in Ukraine.” Efes and AB InBev formed their joint venture in 2018.

Edward Mundy, an analyst at Jefferies, said AB InBev’s decision “was not surprising, following the announcements from Carlsberg and Heineken to exit Russia”.

Carlsberg, which owns Russian brewery Baltika and has a relatively greater opening to the country, with 9 percent of revenue, compared to its larger competitors, said it plans to sell its Russian operation over the next year.

The Danish brewer said it expects to write off $1.4 billion from the sale, while Heineken has indicated a write-off of €400 million from its Russian operation.

Household maker Reckitt Benckiser is also seeking to sell its Russia business, while other consumer product manufacturers, such as Nestle, the world’s largest food group, have reduced sales there to “essential” products.

Shares of AB InBev fell 2.9 percent by mid-afternoon to 55.84 euros, while shares in Anadolu Efes rose nearly 1 percent to 30.70 TL.