On a visit to Siberia last week, Russian Minister of Agriculture, Nikolai Fedorov, reportedly claimed that dairy products produced by Danone-owned Unimilk and PepsiCo business Wimm-Bill-Dann contain only a small amount of milk.
"In these products a maximum of 20% comes from real milk - the rest is a processed milk mixture with coconut, palm oil and other additives," Russian news agency, ITAR-TASS, quoted Fedorov as saying.
He also reportedly urged regional officials to keep an eye on Wimm-Bill-Dann and Unimilk and "not allow them to extort money from the regions, or skim the cream off the cheap raw materials that our poor peasants produce."
Danone and PepsiCo have rubbished the allegations.
Speaking on behalf of Wimm-Bill-Dann, which it has controlled since 2010, PepsiCo denied breaching Russian food laws.
"We produce a broad range of high quality dairy products in Russia, using milk from farmers across the country," a PepsiCo spokesperson told DairyReporter.com.
"Our products and practices fully comply with Russian legislation and we use cow's milk."
Reacting angrily, Danone, which acquired Unimilk in 2010, demanded Fedorov publicly retract his comments.
In a statement published on its website, Danone Russia said the allegations it is "rigging products and harming milk producers" are defamatory.
"We, Danone Russia, and all of our staff are deeply offended by this statement," said the company.
"We are not only outraged by such statements but regard them as a direct slander, causing damage to our reputation both in Russia and around the world."
"We demand a public refutation of false information discrediting us."
Approaching Fedorov's claims it products are made using a "milk mixture" Danone acknowledged that one item, that accounts for less than 0.4% of Russian sales, contains vegetable fats.
"Only one product in our portfolio is produced using vegetable fats - a glazed cheese, which is produced under contract by a third party," said the company.
"We declare with full responsibility that no Danone dairy factory in Russia has bought a single gram of vegetable oils."