JDE Peet’s, a prominent player in the tea-and-coffee industry, faces uncertainty due to the impending new set of EU sanctions against Russia, which could potentially impact its control over its local business operations in the country. Despite previously announcing plans to halt sales of its international brands in Russia and transition to a local portfolio of brands, JDE Peet’s still maintains operations in the country. The company’s Russian arm has operated as a stand-alone business to the greatest extent possible, particularly following the onset of the war in Ukraine.

In a statement accompanying the release of its 2023 results, JDE Peet’s acknowledged on February 23, 2024 the possibility that the new EU sanctions, slated to take effect in June 2024, might affect its assessment of control over its Russian operations as per IFRS 10 rules. This uncertainty prompted the company to carefully consider the implications for its financial year 2024 onwards.

The decision to shift focus to local brands in Russia resulted in a non-cash impairment of €185 million related to the Jacob’s brand. Despite these challenges, CEO Fabien Simon emphasized the company’s commitment to long-term profitability, excluding Russia’s performance from its financial outlook for 2024. Simon anticipates organic sales growth to be at the lower end of the medium-term target of 3% to 5%, with a mid-single-digit growth in adjusted EBIT.

Simon highlighted the company’s transparency regarding its business in Russia and emphasized the importance of adapting to the unpredictable environment in the country. He described the transition to local brands as a strategic move to safeguard the equity of the company’s brand while focusing on growth opportunities in other regions.

In terms of financial performance, JDE Peet’s recorded organic sales growth of 3.9% in 2023, primarily driven by pricing, while volumes remained relatively flat. The European market witnessed a significant improvement in volume mix in the second half of the year, reflecting better performance and a favorable comparative base. Despite challenges posed by the pandemic, Simon expressed optimism about the company’s outlook, noting signs of recovery in global coffee consumption patterns.

Overall, JDE Peet’s remains vigilant in navigating the complex geopolitical landscape and adapting its business strategy to mitigate risks and capitalize on growth opportunities, particularly in light of the evolving regulatory environment surrounding its operations in Russia.