PepsiCo Explores Options for Russian Business as Ukraine Crisis Deepens

PepsiCo Inc.

PEP -2.28%

is exploring options for its business in Russia, including writing off the value of the unit, according to people familiar with the matter, a move that would mark a turn for a company that introduced American cola to the Soviet Union at the height of the Cold War.

Revenue from PepsiCo’s Russian unit was $3.4 billion in 2021, making it the third-largest market for the company after the US and Mexico. The impact of writing off the Russian unit would be minimal because it contributes little to PepsiCo’s earnings, some of the people said.

A growing number of Western companies have said they plan to pull out of Russia or make changes to their businesses there. Those moves came after Western governments imposed sanctions on the country in retaliation for its invasion of Ukraine, and financial firms took steps that could close off Russia from global markets.

On Tuesday, McDonald’s Corp.

said it was temporarily closing its roughly 850 restaurants in the country. Apple Inc.

has stopped selling iPhones and other products there. Boeing Co. has suspended parts and maintenance support for Russian airlines. British energy giant BP PLC said it would exit its nearly 20% stake in Russian government-controlled oil producer Rosneft.

New York State Comptroller Thomas DiNapoli, who oversees one of the largest public pension funds in the US, wrote last week to PepsiCo, McDonald’s and other companies, asking them to consider pausing or ending their operations in Russia.

PepsiCo has 20,000 employees in Russia. The company’s 24 plants and three R&D centers there make soft drinks, potato chips, milk, yogurt, cheese, baby food and baby formula. The bulk of its Russian business is Wimm-Bill-Dann, a dairy-and-juice company PepsiCo bought in 2011 for about $5 billion.

Officials at PepsiCo’s highest levels have discussed the geopolitical crisis in the region nearly every day since Russia invaded Ukraine in February, some of the people familiar with the matter said. For weeks they have evaluated different scenarios of how the business may be affected by supply-chain and other financial challenges stemming from the conflict and what steps PepsiCo may need to take, one of the people said.

PepsiCo could write down the value of its Russian business to zero, modeling the process it used for its Venezuelan operations in 2015, some of the people said. The Venezuelan unit is still operating—and PepsiCo still owns it—but it doesn’t contribute to the soda-and-snack giant’s earnings.

Since Russia invaded Ukraine at the end of February, the US and allied countries have imposed heavy sanctions on Russia. WSJ’s Shelby Holliday dives into how these sanctions are affecting everyone from President Vladimir Putin to everyday Russian citizens. Photo: Pavel Golovkin/Associated Press

If PepsiCo’s Russian unit manages to generate a profit as the Russian economy goes into a tailspin, PepsiCo is unlikely to be able to transfer those profits out of the country given the restrictions on transferring Russian rubles because of sanctions, one of the people said.

PepsiCo’s business there operates in rubles, uses locally sourced milk and potatoes and imports soft-drink concentrates. Its revenue has declined significantly since Russia’s 2014 invasion of Crimea, and it now faces supply-chain challenges as Western countries impose sanctions against Russia, some of the people said.

The company could take this opportunity to write off a business that hasn’t generated as much revenue as the company had hoped, some of the people said. At the same time, PepsiCo takes a long view on emerging markets, and doesn’t want to lose the goodwill of shoppers there, current and former executives said.

Pepsi was among the first American brands to take hold in the Soviet Union. In 1959, the company organized a booth at the American National Exhibition in Moscow. With the help of Vice President Richard Nixon, PepsiCo executive Don Kendall offered a glass to Soviet Premier Nikita Khrushchev, who agreed to several refills and declared it “refreshing.”

PepsiCo opened its first plant in the Soviet Union in 1974 after agreeing to a barter arrangement in which the beverage giant took its profits in Stolichnaya vodka. The deal made Pepsi-Cola the first Western-branded consumer product bottled in the Soviet Union and gave it a leg up on rival Coca-Cola Co., which wouldn’t enter the market for more than a decade.

PepsiCo furthered its push into the region in 1988 when it became one of the first Western advertisers to buy commercials on Soviet television, including a pair of TV spots featuring Michael Jackson.

Mr. Kendall—who was PepsiCo’s chief executive from 1963 to 1986 and later served as an ambassador for the company—believed that business could help build bridges between nations at a time of elevated tensions between the Soviet Union and the West.

“Trying to find a way through business to build relationships was something Don was very passionate about,” said Michael White, a former executive who led PepsiCo’s overseas business from 2003 to 2009 and once met Russian President Vladimir Putin with Mr. Kendall. “Unfortunately, it isnt what we all would hope.”

Write to Jennifer Maloney at and Emily Glazer at

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