Raisio halts Russian margarine production

The Finnish food firm has struggled to remain profitable in recent times.

Its food division experienced a 'deeply unprofitable' 2006, struggling to cope with price increases and major restructuring.

However it is not seeing the closure of the plant - which will involve the loss of around 40 jobs - as a negative move for the margarine and flake business.

CEO Matti Rihko said: "We do not have a need for our own production capacity if it is not cost-effective… Raisio will continue to be one of Raisio's important market areas."

The company has said it will keep its own sales, marketing, logistics and administration functions in the country, and Rihko said the focus going forward will be on marketing of well-known brands and developing distribution.

Raisio claims a ten per cent share in the tub margarine market in Moscow and St Petersburg.

Its main brand is Dolina Scamdi.

However the volume of the tub margarine market has decreased in the last few years, according to Raisio.

"No significant growth is expected in the near future," it said.

For this reason when Raisio took its Benecol cholesterol-lowering brand into Russia last year, it chose to do so using dairy products such as yoghurt and milk as vehicles.

In flakes, on the other hand, the prognosis is more positive, with growth expected to continue.

It is not expected that the farming-out of margarine production to a subcontractor will affect the products, since the new, undisclosed manufacturer will adhere to Raisio's own recipe.

There is also a possibility that the change could lead to new development for Raisio in Russia, since the company said it is "studying different options for the future use of the Istra facilities".

Indeed, Russia is an important market for Raisio that accounts for some four per cent of annual turnover.

The group's turnover from continuing operations was €436.3 m, the company's operating result from continuing operations, excluding one-off items, came to -€6.0 million (compared to €9.1 m in 2005).

The operating result as reported in the financial statements came to €-38.5 million (-€10.9 million).

Earlier this month Raisio completed the sale of its potato business in Russia to Profood Oy in an effort to streamline business operations and improve performance.

When this sale was first announced in March Raisio said that while income from its food potato business had a minor, but positive, impact on the company's results, the company's overall target was to clarify the organisation structure and enhance operations.

In June last year the Finnish firm said it was to build a new oatmeal plant in Russia, a joint venture with agricultural firm Zolotoi Kolos in which Raisio own a 75 per cent share.

This move was said to be designed to strengthen its position in the nation's fast expanding food production market.