Russian confectioners merge to tackle
sweet market
By Samantha Shields
MOSCOW, Feb 6 (Reuters) - Three of
Russia's biggest local confectionery
factories have merged to form a new
company, SladCo, which aims to become
the country's second largest sweet and
chocolate maker within three years, it said
on Tuesday.
SladCo, which means sweet in Russian,
comprises Confi in Yekaterinburg,
Volzhanka in Ulyanovsk and Zarya in
Kazan.
The group plans to produce 99,500 tonnes
of chocolates, sweets and biscuits this
year, up from 86,000 in 2000.
"We're aiming to take 10 percent of the
market eventually, that would make us
number two after Nestle [NESZn.S] in
Russia," Valerian Khubulava, SladCo's
President, told a news conference at a
Moscow trade fair.
SWISS NESTLE LEADS MARKET
Swiss-based Nestle's Russian subsidiaries
account for 23.5 percent of Russia's
chocolate sales, according to Moscow
analysts Middle East Marketing Research
Bureau.
Last year the three SladCo factories took
5.8 percent of the market.
The two biggest SladCo foreign investors
are Baring Vostok Capital Partners and
Capital International, who between them
have invested $40 million in the entity.
"We look at this as a long-term investment
because of the potential growth of the
confectionery market in Russia," Michael
Calvey, managing partner at Baring Vostok
Capital Partners, said.
SladCo's Khubulava estimated that
Russians would eat eight percent more
chocolates and sweets in 2001 than last
year, but Calvey said growth in profit
terms might be greater.
"As the rouble appreciates there will be
growth in dollar terms, and there'll be a lot
of consolidation in the market as smaller
producers are swallowed up," he said.
Ashley Dunster, Vice President of Capital
International, said SladCo would benefit
from the fact that Russians in the three
regions where the factories are based
already know and like their products.
"These are three strong regional brands
and we'll make new national brands," he
said.
The three SladCo chocolate factories are
hundreds of miles apart, and Khubulava
said the new company would sell its
products, ranging from high quality brands
to cheaper alternatives, all over Russia's
territory.
"We already export to Mongolia and we
plan to target Kazakhstan, Ukraine and
eventually Germany," he added.
NO VALENTINE'S DAY BOOM FOR
RUSSIA
But SladCo will not be able to count on the
February 14 Valentine's Day sales boost
enjoyed by European and U.S. counterparts
as would-be lovers try to woo partners
with sweets.
"In Russia you have to wait for
International Womens' Day on March 8 for
a post-New Year boom, it's like
Valentine's Day and Mothers' Day rolled
into one," Calvey said.
Russia's Confectionery Industry Research
Institute last year projected that the
country's output would increase steadily to
reach 2.85 million tonnes by 2010.
Russian factories produced around 1.65
million tonnes of sweets, chocolates and
biscuits in 2000.
((Moscow Newsroom, +7 095 941 8520,
fax +7 095 941 8538,
moscow.newsroom@reuters.com))
REUTERS Rtr 13:40 02-06-01
