Nestlé invests in tough Russian confectionery market
competition has forced the firm to invest heavily in what is now
the world's fourth biggest confectionery market, reports Angela
Drujinina.
Nestle, the world's largest food company, has added two new flavours - champagne and cream-liquor - to its Palitra range, a sub-brand of market leading Rossiya-Shedraya Dusha.
The firm has also launched a new biscuit range - Karamelinye serdtsa - to its Nestlé Classic brand. The biscuits are short with a caramel flavour and are covered in milk chocolate. They will cost around US$1.6 (€1.3 or RUR45-50).
Nestlé refused to comment on what quantity of its new products it planned to sell. "We hope that our products will be successful on the market, and we cannot say more than this," said spokesperson Marina Zibareva.
The move is intended to bolster Nestlé in what has become one of the most competitive confectionery markets in the world. Russia's market has a volume of around 2.2m tons and is only smaller than the UK, US and Germany.
As a result, everyone is there. More than 50 per cent of the Russian market is controlled by international companies, such as Mars, Nestle, Kraft Foods, Dirol-Cadbury and Perfetti Van Melle. At the end of the year, Norwegian firm Orkla also arrived, leaping into the top five after buying SladCo and Voljanka confectioneries for around $75-100m.
In 2003, Nestlé's net income decreased by 18 per cent to $4.9bn and sales volume dipped 1.3 per cent to $69.88bn. The firm has invested heavily in its production facilities and distribution network - about $370m up to the end of 2004 - to try and move forward.
The firm has been helped through ownership of the Rossiya-Shedraya Dusha brand - estimated as number one on Russia's chocolate market. Analysts said 94 per cent of Russians know this brand and 29 per cent buy its products on a regular basis.
Nestlé can also take heart from predictions that the chocolate market will grow 30 per cent, up to 600,000 tons by 2010. A six per cent increase is expected in 2005.
Even so, Nestlé's market share could be improved. The firm holds around a 15 per cent stake compared to United Confectioners on 30 per cent, Kraft Foods on 18 per cent and Mars on 13 per cent.
Nestlé has operated in Russia since 1995. Its main production assets are: Confectionery union Rossia, Nestlé Jukovskoe morojennoe, Altay, Kamskaya, Hladoproduct ( in the Krasnodar region), Vologodky Zavod Detskogo Pitania and Sveatoi istocinik. The company manufactures drinks, ice-cream, confectionery.
