Kerry Group’s desperate attempts to keep its Russian food factory leave a bad taste

For weeks, Kerry Group stubbornly resisted media and political pressure over its investment in Vladimir Putin’s Russia, where it owns a factory and a regional development centre in Moscow.

As the Russian war machine unleashed misery on Ukraine’s population, and opposition and sympathy peaked in Ireland, the Tralee-headquartered food ingredients giant ducked and dived from the scrutiny and refused to shut its Moscow plant down. As recently as last weekend, Kerry was still clinging on.

But the intensity of international revulsion at the horrors of Bucha, a suburb of Kyiv from where evidence emerged late last week of Russian atrocities against unarmed civilians, has changed the game for those western businesses still harbouring notions about making good on their Russian investments.

Kerry Group's lumpen handling of the crisis has damaged it and it deserves little credit for the decisions it has taken

The pressure became too much for Kerry. Belatedly, on Monday, it pulled the plug. But its lumpen handling of the crisis has damaged it and it deserves little credit for the decisions it has taken. It has been completely shown up by CRH, another global Irish success story. The building materials group had the good publicity sense to walk away from its Russian operation days after the invasion.

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Even Kingspan and Smurfit Kappa, Irish multinationals that, like Kerry, appeared to bury their heads in the sand for weeks in the hope that public pressure would go away, are exiting Russia with more honour than the food company. Unlike Kerry, they have chosen to make a clean break.

Last Friday, as the apparent war crimes at Bucha reinvigorated western opposition to economic co-operation with Russia, Smurfit Kappa announced it was quitting the country. Significantly, it said it “stands in solidarity with the people of Ukraine and everyone impacted by the totally unjustified attack on Ukraine and its people”. That may as well be code for “we’re never going back there”.

Bridges burnt

Putin's government, which has tight legal control over foreign investors, would hardly be expected to overlook such impertinent and direct criticism of the regime by a foreign organisation, should Smurfit Kappa ever come knocking back. Mikhail Mishustin, Russia's prime minister, has already warned fleeing foreign investors that if they abandon Russia now, they won't get back in.

After such harsh words, Smurfit Kappa appears to be done with Russia for the foreseeable future – decision made, bridges burnt.

Kingspan, the Cavan-based insulation group, on Monday announced it is also leaving the Russian market after selling its two factories to their local management teams. In hindsight, much of its silence in recent weeks may have been to smooth the way for that deal. A sale would likely have required the imprimatur of Russia's government commission on monitoring foreign investment, chaired by Dmitry Medvedev, the former Russian president who kept Putin's seat warm in between terms.

Kingspan also chose to directly criticise the Russian regime upon its exit. The company said it is “deeply saddened by the growing humanitarian crisis as a result of Russia’s unjustified attack on Ukraine and its people”, aping Smurfit Kappa. It will not be welcomed back after that. Kingspan also donated $750,000 to help Ukrainian refugees.

Yet Kerry’s announcement, which came on the same day as Kingspan’s, shows that it is determined to keep its foot in the door. Firstly, Kerry announced only the “suspension” of its operation, not its exit from Russia and also Belarus, Russia’s ally that facilitated the disastrous and now aborted advance on Kyiv. This suggests that Kerry is not prepared to write off its Russian investment just yet.

Once the public pressure eases, Kerry will have the option to tip-toe quietly back to Moscow to reopen the factory and once again generate profits in Russia and pay taxes to the regime.

The company worked hard to open a facility in Russia in 2018, which it indicated would be a beachhead for expansion of its activities in the CIS commonwealth of post-Soviet states in the region.

Kerry’s annual report for 2021, released last month as the war was already raging, also lauded its “very strong growth” in Russia, which was a leading factor in 14.4 per cent growth in its emerging markets operations. Perhaps the company is not yet ready to give up on the potential for future returns from its Russian foray and, if so, it cannot afford to fall out with the regime.

Willowy wording

The statement it released on Monday about the “suspension” of its Russian operation is conspicuous for its lack of direct criticism of Putin’s actions. Smurfit Kappa and Kingspan were unambiguous in this regard and both were almost performative in their pointed criticism of Russia’s “unjustified attack”.

But Kerry said only that it is “horrified at the escalation of the humanitarian crisis” caused by the “unfolding situation in Ukraine”. Such willowy wording is unlikely to get it in much trouble with the Russian government. That may have been partially the point of it, regardless of any ethical revulsion at Russia’s aggression that Kerry executives may privately feel.

In digging in its heels to keep its options open, Kerry may feel it has its eye on a long-term prize

Another jarring aspect of Kerry's handling of the crisis is the pathetic justification it proffered for keeping the operation running before it made the call to suspend it. Kerry told journalists that it had a special responsibility to keep the operation running because it is a food company. RTÉ reported that Kerry believes it plays a "critical role in the food chain".

The suggestion appeared to be that if it pulled out, it might be unfair on ordinary Russians who still need to be fed.

Let’s get real here. Kerry’s Moscow factory primarily manufactures the external coatings for convenience products such as chicken and other protein foods. Chicken nugget batter is hardly a systemic pillar of the food chain. It isn’t all that far from fast food and Russians will easily cope with fewer goujons. In a city of 12 million people, Kerry’s lone factory is not that critical.

In digging in its heels to keep its options open, Kerry may feel it has its eye on a long-term prize: a second shot at building a worthwhile operation in Russia targeting the CIS states. That is not entirely without logic. The public’s attention, or at least the current intensity of it, eventually will move. Someday the war will be over and Russia may become a viable investment option once again.

But for now, as Russia bombs Ukraine’s food depots and grain stores to starve its populace into submission, there is something deeply unedifying about watching a lauded Irish agribusiness performing publicity gymnastics in a misguided attempt to save its Moscow investment.

Sometimes in business it is important to do the right thing. That is not always the same as the correct thing for the business. But when it comes to war and corporate ethics, it’s always better to be right than correct.