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Nestle eyes Russia for European growth

By staff reporter , 27-Mar-2008

Global food firm Nestle sees Russia as one of the most important areas for future European growth, the company said today.

The news signifies the continued importance of Eastern European markets for confectionery manufacturers, especially at a time when rising input costs are squeezing margins in developed markets such as Western Europe and the US.

 

 

 

Spokesperson Nina Backes told ConfectioneryNews.com that the firm recorded net sales of $1.6bn in Russia in 2007, and that it made important acquisitions such as the purchase of Ruzskaya Confectionery Factory (RKF), one of Russia's leading chocolate manufacturers.

 

 

 

Backes said that Nestle hopes to use the RKF acquisition to target growing demand for premium and luxury chocolate in Russia, where it now owns the Comilfo and Ruzanna brands.

 

 

 

Baby food will also be an important area of growth for the company, as consumption in Russia has not yet reached levels equal to the rest of Europe, she added.

 

 

 

Bernard Meunier, head of Nestle Russia, told Reuters yesterday that the company hopes to boost profit in the area by boosting prices for all categories of products in the country by two to ten per cent

 

 

 

He claimed that Russian consumers are willing to pay for food, saving on goods that they believe are less indispensable, the news agency said.

 

 

 

"It seems that salaries and incomes still grow faster then inflation and purchasing power has not apparently suffered," Meunier told reporters.

 

 

 

Nestle is not the only company which has invested in Russia in recent years, where the confectionery market is predicted to grow at much fast rates than in developed countries. According to Euromonitor, the market will grow yearly on average 14 per cent in value and 5.4 per cent in volume between 2006 and 2011, compared with a 2-3 per cent growth rate for the global chocolate market.

 

 

 

Swiss chocolatier Barry Callebaut said last November that Russia is a key area for its manufacturing capacities, building a new €25m factory with a capacity of 27,500 metric tones.

 

 

 

Cadbury also has an important presence in Russia, and opened its first plant in the country in St. Petersburg in 1996.

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