Danone 'to buy' Chupa Chups Russian unit

- Last updated on GMT

Related tags: Chupa chups, Russia

Danone is on the verge of buying the Chocks & Roll business of
Spain's Chupa Chups, one of its last remaining foreign units.
Evidence that Danone is still determined to pursue its expansion in
Russia despite failing to buy Wimm-Bill-Dann?

The French group is said to be on the verge of acquiring the Chock & Rolls industrial bakery unit of Spanish sweet maker Chupa Chups as part of the wholesale sell off of the latter's foreign businesses.

According to the reports, Chupa Chups is expecting to receive around $20 million for the business - although the company said that a definitive agreement had not yet been reached and that other potential buyers were still in the running.

Chupa Chups has had to take drastic action in recent months to recover from losses of €18 million in 2002, and has been seeking potential buyers for a number of units, as well as long-term partners in the industry to help give a sufficient critical mass to compete with global giants such as Cadbury.

Chock & Rolls produces chocolate rolls filled with jam and chocolate which are sold under the Tornado brand. It originally began life as a joint venture with another Spanish company, Ballabriga, but the baked goods group sold its stake in the business last year.

Based in St Petersburg, the unit is profitable, with sales of around $14 billion last year, almost 20 per cent of Chupa Chups' total Russian turnover in 2002. Total group revenues last year were €343.6 million, a 17 per cent drop.

But the sale of the Chock & Rolls business is not the end of Chupa Chups' presence in Russia: it will continue to produce its sugar confectionery products there at another St Petersburg facility. In fact, Russia has been the star performer for the family-owned group, with solid gains there partially offsetting the spectacular losses elsewhere in the world, notably in China, Mexico and Brazil.

In fact, the Russian plant is the only confectionery production facility outside Spain still owned by Chupa Chups, and the company is clearly hoping for further solid gains there. It has recently launched the Smint breath mint brand there, and it is hoped that this will offset some of the loss of income from the Chock & Rolls sale.

The company is also reported to be considering distributing third party products in Russia in a bid to make better use of its distribution capacity there.

Danone is gradually building a presence in Russia, having already bought a number of dairy product companies there and the Bolshevik biscuit manufacturer.

Chupa Chups is expected to end this year with losses in the region of €30 million - despite having received a loan facility of €35 million from the Catalan regional authorities to help it pay off its debts.

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