Ukraine's largest confectionery group Roshen is to take on its neighbours in the huge Russian market from early next year following the completion of a new production facility there, according to the Moscow-based consultancy Market Advice.
Roshen began selling its products in Russia in 2001, seeing, like several other Ukrainian confectionery groups, the significant potential there. But with Ukrainian confectionery rapidly taking a 40 per cent share of the Russian market - mainly through the simple fact of selling its sweets for less than local producers - domestic sweet makers persuaded the Russian authorities to introduce steep import duties in order to protect them from their cheaper rivals.
Undeterred, Roshen has spent the last two years - and tens of millions of dollars - constructing a new production facility in Russia near the town of Lipetsk, which, when it begins production in March next year, will instantly catapult Roshen into second place in the Russian confectionery market behind local player Obyedinennye konditery.
In fact, Roshen has been producing its confectionery products at Lipetsk since 2001 when it acquired a small production facility there. Its sales are around $1.5 million, according to Market Advice.
But the new facility at Lipetsk will take it into a different league altogether. The $50 million facility will have an initial production capacity of around 100 tonnes/day, but the planned installation of two more production lines there will increase this to 300 tonnes/day.
"If Roshen can meet this stated target of 100 tonnes per day right from the outset, it will immediately lift its market share in Russia by 9 per cent and overtake us," said Dmitry Shabanov, director of marketing at Sladko Holding, the current number two player in the Russian market.
Sladko has around 12-14 per cent of the market, some way behind Obyedinennye konditery which has around 34-42 per cent. Roshen is already the number one in its home market with a 25 per cent share according to Market Advice and sales of $205 million in 2002.
But Roshen is likely to be the first of several Ukrainian companies seeking their fortunes in Russia, according to Market Advice. The consultancy firm predicts that Kiev-Konti, the third-largest player in the Ukrainian market, will soon be in a position to begin Russian production, providing a further challenge to the local market leaders.