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Swedish food packaging company Tetra Pak exits Russia amid mounting sanction-led supply chain pressures

Tetra Pak has become the latest big company to exit its remaining operations in Russia as the country faces increasing shortages under ongoing sanctions.

The Swedish food packaging firm’s decision comes as the latest blow to the Russian sector amid a mass exodus of foreign companies after its invasion of Ukraine, commenters say.

Problems with packaging

Russia has reportedly been seeking suppliers for baby food and dairy product packaging since March to counteract the supply chain pressures, according to industry website Packaging Gateway and Al Jazeera. Items such as usually colourful juice cartons – including those from Tetra Pak itself – are now being printed mainly in white as a result of the problems, Reuters reported.

Beside problems with food packaging, tightening wood supplies are also potentially limiting the availability of pallets – which, in turn, affects the transportation of products, the website Packaging Europe pointed out. The war had an immediate impact on the packaging sector, raising the costs of raw materials, it added in a March post, predicting “far-reaching” consequences.

Even analysts usually covering Russian food sectors have abstained. Ingredients Network approached Euromonitor, among others, for comments, but a spokesperson said it had “paused Russian, Belarusian, and Ukrainian data-sharing policy” due to the ongoing political situation.

‘No other option’ but to leave

Tetra Pak has been present in Russia for 62 years, the company said in a statement, and employed around 750 people in the region.

The decision was due to the “cumulative impact of the restrictions on exports to Russia leading to an unsustainable supply chain”, it added.

The Swedish government had also reportedly denied Tetra Pak’s request for an exemption from the EU’s sanctions against Russia and to continue exporting products, according to a June report in the Swedish newspaper Dagens Nyheter.

Tetra Pak added that it was “left with no other option than to exit the country”.

Essential food items only

The exit will happen via an agreement to divest the firm’s Russian business to local management, “with the intention of enabling business continuity for its customers, minimizing the impact on employees, and continuing to support consumers’ access to essential food”, according to the statement.

This is in line with Tetra Pak’s “strongly held commitment to the principle of people’s right to access safe food,” the company said.

Russian news agency Tass reported that the new company will continue to operate as an independent entity focused on the production of packaging at the Moscow facility, as well as on the development of “reliable supply chains with a growing share of local suppliers”.

The new entity will not be associated with Tetra Pak, the company stressed.

In May, Tass reported that the firm had denied rumours that it would completely leave the country. But Tetra Pak had already suspended all new investments and projects in the region in March, shortly after Moscow’s late-February invasion of Ukraine.

The company had previously pledged to donate all its Russian earnings to humanitarian causes in Ukraine and made a €10 million donation to the same cause, at the same time condemning the invasion.

Ethics important to consumers

Ethical decision-making is becoming an increasingly important trend for the packaging sector, according to Mintel’s Global Packaging Trends 2022 report.

Beside environmental responsibility, consumers’ ethical concerns also centre on social responsibility, with packaging offering incentives such as donations to charitable causes with every purchase, the analyst said. “While many brands have made their voices heard on controversial topics, consumers want to see measurable progress,” it added.

Being seen to stand against Russia’s military action against the Ukraine has become an important policy for business, say many commenters.

Tetra Pak’s exit from Russia was welcomed by the Economic Security Council of Ukraine. In a Twitter statement, the council urged: “We recommend those hesitating to follow Tetra Pak’s example.”