Nestlé makes move on Ukraine

Nestlé continues to pursue its strategy of getting a foothold in just about every food market in the world. The recent purchase of Ukrainian food processor Volyn Holding is the latest in a list of acquisitions designed to cement the company's place in the Eastern European food processing industry.

Some analysts have suggested that the purchase of Volyn, which is a leading producer of ketchup, mayonnaise and mustard, represents a major shift in the company's strategy that has previously focused on chocolate and confectionary goods. But Nestlé corporate spokesman Francois Perroud disagrees.

"This is just part of our overall strategy of getting a foothold in new markets and expanding our presence there,"​ he said in an interview with the Novis Group. "The acquisition is quite typical. We often start with products such as coffee and milk, and then broaden our range."​

Perroud says that the investment will strengthen Nestlé's culinary range in the region. "This is the Nestlé way,"​ he says. "We begin by slowly extending into new areas, before steadily building up our profile."​

The acquisition certainly underlines Nestlé's ambitions. Volyn Holding controls 40 per cent of the Ukraine's mayonnaise market, 70 per cent of the ketchup market and 45 per cent of the mustard market through its Torchyn-Product brand name.

Volyn Holding expects its net income to increase to $3.5 million in 2003 from $2.5 million reported in 2002; the company's sales are expected to grow to $60.5 million in 2003 from $55 million in 2002.

The deal complements Nestlé's other Ukrainian assets, which includes Svitoch, the country's leading producer of chocolate and confectionery. "Once the Ukrainian market opened. We started immediately to build up our activities,"​ says Perroud. "We undertook import activities of all sorts right after the Soviet union imploded."​

The company's first Ukrainian acquisition was the 1998 purchase of confectionery company Svitoch. The company now owns 96 per cent of the sweet manufacturer, with other shares owned by Svitoch employees and individual investors.

Nestlé's expansion in the Ukraine - a country with a population of some 48 million - comes as the country's economy is beginning to shows sustained economic growth. According to the Ukrainian government, the economy is set to expand 7 per cent on year in 2003, up from 4.8 per cent growth in 2002. The country has been one of the more economically successful former Soviet Republics.

Foreign food companies have been quick to spot - and exploit - the perceived untapped potential of the country. Orkla Foods of Norway for example recently purchased a 15 per cent stake in Chumak, a major Ukrainian producer of ketchup and sunflower seed oil.