Tag Archive | "Russia"

Irish pig meat exporters may finally have access again to Russian market


pigsMuch to the joy of Irish pig producers  the World Trade Organization (WTO)  has  declared the Russian import ban on live pigs, fresh pork and other pig products illegal.

Russia imposed the ban on EU pig products more than two years ago in early 2014 following a limited number of African Swine Fever (ASF) cases in the EU close to the Belarus border.

A WTO panel has now ruled that Russia’s refusal to accept imports of certain EU products and the adapt EU-Russia import certificates accordingly amounts to an EU-wide import ban, and violates the world trade rules.

Pig production ranks third in importance behind beef and dairy in terms of economic value at the farm gate in Ireland. Much of this product prior to 2014 was destined for the Russian and Chinese markets. Since the Russian import ban in 2014, exports to Russia have dropped from   1300 tons to zero. Fortunately the Chinese market expanded by 41 percent in 2015 and is now one of Ireland’s main export markets.

Rosderra, Irelands largest pig meat producer, exported an estimated 40, 000 tonnes of pork produce to China last year, which accounted for between 13percent and 15precent of their total output.

While Britain remains the primary export market for Irish pork and bacon, and Chinese urban population continues to buy pork as their primary protein source and will provide significant growth over the next ten years, a reopening of the Russia market will provide a much needed alternative to exports to Britain as the Brexit market access issues unfold. In fact Russia is the larger global importer of pig meat importer, importing close to 200,000 tons of pork compared to the 150,000 tons imported by China per annum.

The WTO ruling  sends a “strong signal” to Russia, and all WTO members, about their obligation to respect international standards The ruling confirms that the measures taken by Russia against the EU have little to do with any real sanitary or health risks. EU products are safe and there is thus no need for any country to maintain unjustified import restrictions.

Whether Putin and his politburo colleagues will comply with the recommendation remains to be seen.

The pig meat ban  arose  initially as a political  counter measure  over the Crimea annexation  by Russian rather than a genuine food safety concern , hence it  is unlikely that the Russian government will  comply without  the UN sanctions imposed by the EU and the US  being lifted .

Already EU sources have stated that Russia has sent a list of demands, including removing Russian agriculture minister Alexander Tkatchev from the EU travel blacklist as a condition for lifting the pig meat ban.

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Russia’s Accession to WTO Welcomed by European Food Manufacturers


Following eighteen years of complex negotiations, Russia has become a member of the World Trade Organisation (WTO). This long-awaited moment marks the entry of the last remaining large non-WTO economy into the international rules-based trade system.

Russia has traditionally been an important export destination for EU food and drink products and remains the European Union’s second largest foreign market after the United States. However, despite substantial trade flows (exports worth Eur7.2 billion in 2011) and the existing level of direct investment worth billions of Euros, the Russian market until now has remained outside of the prevailing multilateral trade system.

President of FoodDrinkEurope, Jesus Serafín Perez.

Welcoming the development, the President of FoodDrinkEurope, Jesus Serafín Perez, says: “The accession of Russia to the World Trade Organisation is a welcome development for the world economy and for Europe’s food and drink industry. Increased transparency and reduced barriers to trade between Europe and Russia will open up new opportunities for Europe’s food business, stimulating some much needed growth in our economy at present.”

Living up to its WTO membership commitments, Russia should ensure that its food-related legislation develops in conformity with the Agreements on Technical Barriers to Trade and Sanitary and Phytosanitary Measures, as well as with other requirements of WTO law (eg non-discrimination and national treatment principles). Europe’s food and drink operators look forward to new opportunities that are unfolding in the Russian market, and welcome the expected increase in transparency in trade related policy planning in Russia and the future Eurasian Economic Union.

Other noteworthy benefits are a planned gradual reduction in the average tariff ceiling for agricultural products from 13.2% to 10.8%, the expected opening of tariff quotas for some agri-food products and the introduction of bilateral consultations with the EU on envisaged export restrictions on agricultural commodities.

European food and beverage manufacturers also welcome the efforts being taken by the Russian Government to simplify and facilitate customs procedures, stimulate innovation and infrastructure modernisation and further develop country’s investment climate.

WTO membership is expected to be a powerful catalyst for efficient growth and modernisation in EU-Russia trade relations for the benefit of all partners. Welcoming Russia as the 156th WTO member, FoodDrinkEurope hopes for a new balance of interests within the Organisation and for Russia’s constructive role in advancing the complex multilateral negotiating process.

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Destocking in Russia Impacts on Carlsberg’s Profits


Carlsberg Group has reported a 2.8% rise in revenue to DKr12.9 billon (Eur1.7 billion) but operating profit declined by 43% to DKr574 million for its first quarter as volumes falls in Russia, due to destocking, offset solid growth in Northern & Western Europe and in Asia.

Northern & Western Europe and Asia achieved operating profit growth in spite of slightly higher cost of sales and higher sales and marketing investments due to different phasing than last year. Profits in Eastern Europe declined mainly due to lower volumes, slightly higher cost of sales and different phasing of sales and marketing investments compared to previous year.

The Carlsberg Group grew market shares in Northern & Western Europe and Asia during the quarter. InEastern Europe, its Russian market share improved slightly compared to Q4 2011 but declined as expected versus Q1 2011.

Jorgen Buhl Rasmussen, chief executive of Carlsberg Group, comments: “2012 is a year where focus, prioritisation and efficiency are key in everything we do. We are focusing our commercial activities behind our most important brands and events. We are putting significant resources behind the EURO 2012 sponsorship, which will be a key driver behind the support of the repositioning and the growth of the Carlsberg brand in 2012. In addition, the rejuvenation of the Tuborg brand will support the brand growth through improved performance in existing markets, as well as through introductions into new growth markets such as China.”

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Russian Wine Company is Floated


Abrau Durso, the largest sparking wine producer in Russia, has been floated on the Russian stock exchange. The IPO is expected to raise $15 million for a 15% stake by the end of April.

The proceeds will be used to develop tourism in the Krasnodar region of Russia, where Abrau Durso is based. Abrau Durso also plans to double production up to 34 million bottles by 2015.

The company was founded in 1870 and has been majority owned by SLV Group since 2006. Following modernisation Abrau Durso increased production from 4 million bottles in 2005 to 14 million in 2008. Abrau Durso became the first Russian wine company to receive an award at the International Wine Spirit Competition in 2010.

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Carlsberg to Delist Baltika


Baltika Breweries has filed an application to have its shares delisted from the Russian stock exchange as soon as possible. The delisting reflects Carlsberg Group’s aim to increase its ownership in the Russian brewer from around 85% to 100%. The move is costing up to DKr6.5 billion with a net cost for the Carlsberg Group in 2012 and beyond of maximum DKr4.4 billion (Eur590 million) due to a positive impact from financial arrangements.

Russia is the world’s fourth largest beer market and the Carlsberg Group firmly believes in the longterm market and profit pool growth opportunities. The transaction is in line with the Carlsberg Group’s strategy of having 100% ownership of its most important subsidiaries to achieve greater operational flexibility.

By having 100% ownership of Baltika, the company can be fully integrated into the Carlsberg Group which will speed up the implementation of decisions and also make Baltika a vital part of the back-end integration which the group has accelerated recently. Carlsberg Group expects the transaction to be immediately earnings-enhancing when completed.

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Carlsberg to Acquire Full Control of Baltika


Carlsberg Group intends acquiring the remaining 15% stake in its Russian subsidiary, Baltika Breweries, for up to DKr6.5 billion (Eur870 million). The move will involve a delisting of Baltika.

The net cost to Carlsberg for increasing its ownership from around 85% to 100% in 2012 and beyond will be a maximum of DKr4.4 billion due to a positive impact from financial arrangements. Full ownership of Baltika will give Carlsberg greater operational flexibility. When completed, the transaction is expected to be immediately earnings-enhancing.

Russia is the world’s 4th largest beer market and Carlsberg firmly believes in the long-term market and profit pool growth opportunities. The transaction is in line with the Carlsberg’s strategy of having 100% ownership of its most important subsidiaries to achieve greater operational flexibility.

By having 100% ownership of Baltika, the company can be fully integrated into the Carlsberg Group which will speed up the implementation of decisions and also make Baltika a vital part of the back-end integration which Carlsberg has accelerated recently.

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$400 Million Investment in Russian Grains and Dairy Farming


Olam International, a leading global, integrated supply chain manager and processor of agricultural products and food ingredients, has formed a partnership with the Russian Dairy Company (RUSMOLCO) for the large scale development of dairy and grains farming in thePenza region of Russia.

The first step under this partnership is the investment of up to $75 million by Olam in exchange for 75% of the equity of RUSMOLCO, which is a growing player in the Russian dairy industry. In the first phase of expansion spread over the next four to five years, RUSMOLCO will invest to expand the area under grains cultivation from the current 52,000 hectares to 106,000 hectares. In addition, four new modern dairy farms will be constructed, taking the total milking cow population from the current 3,600 heads to 20,000 heads. The total investment required for Phase 1 will aggregate up to $400 million to be spent over the next four to five years in a phased manner.

RUSMOLCO plans to establish a training and development centre aimed at inculcating best practices in international farming and milk production. Initially, the centre will focus on training of RUSMOLCO’s own staff, which later may be expanded into a national centre to promote adoption of best practice and latest technologies across Russia.

In Phase 2, Olam and RUSMOLCO envisage further investments which could include the enhancement of the area under cultivation to 130,000 hectares, increasing the milking cow population to 50,000 heads of cattle, investing in sugar cultivation, milling and refining as well as other adjacent initiatives that are aligned with Olam’s strategic plan.

Olam has been in Russia since 1993, with operations across grains origination, domestic trading and exports, imports and distribution of cocoa and cocoa products, green coffee and soluble coffee, edible nuts, dairy products as well as domestic trade and import of raw sugar, toll refining and distribution.

Russia is one of the most attractive markets for dairy farming today and this partnership is aligned with Olam’s dairy strategy of selectively investing in attractive value chain activities, such as upstream dairy farming in geographies that provide a potential for profitable growth.

The attractiveness of the dairy sector in Russia stems from the following factors:

* A high demand for milk and a large and growing demand-supply gap, makingRussiaone of the largest importers of milk in the world;

* A strong need for a modern, reliable supplier of high-quality milk;

* Low cattle-feed cost driven by availability of fertile agricultural land at competitive prices; and

* Increasing emphasis and direct support by the Russian government on enhancing private investment into the agriculture sector as well as local dairy productivity and output.

Grain farming inRussiaprovides an attractive investment opportunity with a potential for generating excess returns on account of the following factors:

* Low cost of farm land: Yield-adjusted agricultural land cost in the US/Western Europe is 14-15 times more expensive than in Russia;

* Soil and agro-climatic conditions are favourable for grain cultivation; and

* Inland and port logistics are well developed and provide a smooth and cost effective route to export grains from Russia.

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Bonduelle Closes in on Russian Acquisition


Bonduelle Group, the world leader in processed vegetables, has concluded negotiations regarding the acquisition of the agro-industrial and commercial assets of French co-operative CECAB in Russia and in the countries of the Confederation of Independent States (CIS). The acquisition, which was announced last October, should take effect in the first quarter of 2012 for the start of the sowing season for the 2012 harvest. It is however still subject to the agreement of the Russian competition authorities.

Bonduelle has had a commercial presence in Russia and in central and eastern European countries, where it enjoys a leading position in canned vegetables, since the 1990s. Bonduelle currently supplies its markets in the region from three factories: two in Hungary. and one in Russia, which is currently operating at maximum capacity.

In 2007 the CECAB group, which has been present inRussia since 2001, invested in the construction of a factory in Timachevsk, 30 kilometres from the Bonduelle plant. The acquisition will provide Bonduelle with obvious synergies, resulting from the geographical proximity of the two Russian plants.

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Arla Foods Moves into Cheese Production in Russia


Arla Foods has taken another significant strategic step into Russia by agreeing a joint venture for the production of yellow cheese with Molvest Group, the country’s third largest dairy company. The agreement is in keeping with Arla Foods’ ambitions to become one of Russia’s leading dairy companies within yellow cheese.

Following several years of growing exports to the Russian market, Arla Foods now intends to set up local production in Russia for the first time. Production will be centered on the city of Kalacheevsky in south-west Russia, where Arla Foods’ Russian subsidiary – Arla Foods Artis – in partnership with the Molvest Group will be converting one of  Molvest’s existing dairies to yellow cheese production. The two parties have agreed on terms for joint production at the dairy. The terms and conditions are subject to approval from the Russian Federal Antimonopoly Service (FAS).

Peder Tuborgh, chief executive of Arla Foods.

Molvest will be responsible for collecting the milk from farms in the area as well as weighing-in and processing the milk at the dairy. Arla Foods will subsequently buy the milk and with its experience and expertise from its Scandinavian operations will be responsible for the production of yellow cheese at the dairy. The finished products will be distributed and sold by Arla Foods. For Arla Food, the conversion of the dairy represents an investment of DKr25 million (Eur3.4 million).

Arla Foods and Molvest anticipate joint production will begin in early 2013. Initially, the aim is to produce approximately 6,000 tons in 2014, with a subsequent annual volume increase of 10%.

”As Russia is one of our strategic growth markets this agreement is important because it provides us with the opportunity to combine our export business to Russia with local production,” says Peder Tuborgh, chief executive of Arla Foods. “This is unlikely to be our final expansion into the Russian market but this agreement alone is expected to double our turnover in Russia before the end of 2015.” Arla Foods’ Russian business grew by about 30% in 2011 to DKr500 million – growth that was largely driven by exports of Lurpak butter, Castello speciality cheese and cream cheese under the Arla Natura brand.

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World Grain Production Down But Recovering


World grain production fell, exacerbating a global food situation already plagued by rising prices, according to new research published by the Worldwatch Institute. Despite record rice and maize yields around the world, global wheat production dropped substantially enough to bring total grain output to just below 2008 levels.

 

Maize, wheat, and rice provide nearly two-thirds of the global human diet and serve as critical inputs for both animal feed and industrial products. The significance of these crops guarantees that a decline in production will produce ripple effects throughout the global economy, particularly as increased food prices continue to take a toll on the world’s neediest populations. Overall, rice and wheat production have tripled since the 1960s, and maize production has quadrupled, despite global acreage of these crops increasing by only 35 percent.

 

“Production increased worldwide, but there was greater reliance on irrigation, synthetic fertilizers, and pesticides – all of which take resources, can be costly, and may cause substantial environmental degradation,” says contributing researcher Richard Weil.

 

Nevertheless, preliminary data for 2011 indicate that grain production is recovering from the 2010 slump. The United Nations Food and Agriculture Organization (FAO) recently forecast that cereal output in 2011-12 will be 3 percent higher than in 2010-11.

 

“Grain remains the foundation of the world’s diet, and the failure of harvests in recent years to keep pace with growth in meat consumption and population is worrisome,” comments Worldwatch president Robert Engelman. “It’s important that we identify and implement more inventive and sustainable strategies in grain production. Reducing the proportion of grain harvests lost to weather disasters and waste or diverted for corn ethanol production and animal feed is among such strategies. It’s also important that we prioritize grain availability for those who need it most.”

 

Recent growth in agricultural production has been uneven. In many regions, climate change has brought irregular weather patterns such as rising temperatures, violent storms, and flash flooding. In Russia, where severe drought has plagued large farming regions, overall wheat yields plunged 40 percent in 2010, compared to a decline of only 5 percent worldwide. Subsequently, Russia – the fourth largest wheat exporter in 2009 – banned all wheat exports, severely disrupting world grain markets. Poor weather took its toll elsewhere as well: El Nino in the west Pacific, for example, brought rice production down significantly in thePhilippines, already the world’s largest food importer.

 

Rising demand for ethanol fuel, which in the United States is produced almost exclusively from corn feedstock, is having an impact on grain prices as well. “According to the CBO, about 20 percent of the increase in maize prices between 2007 and 2008 was due to domestic ethanol demand,” says Weil. Demand for grains is also rising in countries such as China and India, where growing middle classes are adopting more diverse diets.

 

“Farming has always been an uncertain business that depends in large part on the weather, and it could be entering an even more difficult phase,” adds Weil. “As the global climate changes, the warmer, less stable atmospheric conditions could be detrimental for food production.” In an already fragile economy, continued volatile prices and unpredictable weather-induced shortages are sure to negatively affect both producers and consumers in developing countries.

 

Stanford Universityresearchers who created a model to determine how changing weather patterns affect crop yields found a 2.9 percent increase in global rice production as a result of greater precipitation, but losses of 3.8 percent for wheat and 2.5 percent for maize.

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Kraft Foods to Invest $100 Million to Expand in Russia


Kraft Foods plans to invest $100 million to more than double the capacity of its coffee production plant at Gorelovo in the Leningrad region of Russia. Kraft Foods, which owns the Jacobs and Maxwell House brands, is the second biggest player in the expanding Russian coffee market with a share of 19%, behind Nestle with 28%.

 

The investment will increase annual coffee production at Gorelovo to 16,900 tonnes in 2013 and to 23,000 tonnes by 2015, from a current level of 10,500 tonnes. Kraft Foods has already invested in excess of $150 million in developing the factory to date.

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Nestle Expands Russian Coffee Factory


Nestle has completed a SFr240 million (Eur195 million) expansion of its soluble coffee factory in Timashevsk, Russia. Located in the Krasnodar region, the site is Nestle’s largest soluble coffee factory in Europe. It is also the company’s biggest investment project in Russia so far.

 

The factory uses advanced freeze-dry technology to make Nescafe coffee products for consumption in the Russian market and for export to other Commonwealth of Independent States (CIS) countries. Nescafe is the leading soluble coffee brand in Russia; the world’s biggest market for soluble coffee.

 

The expansion of the Timashevsk site, announced in 2008, has equipped the factory to produce Nescafe Gold freeze-dried coffee from raw material processing through to packing. It will also produce other soluble coffee products including Nescafe Gold Mild, Nescafe Gold Strong, and Nescafe Montego.

 

The factory, which employs 1,200 people, was alreadyRussia’s first “full-cycle” production site for soluble coffee. It has produced Nescafe Classic coffee ever since the first phase of its construction was completed in 2005.

 

“This factory is a perfect example of our long-term commitment to Russia and its consumers. It highlights our ongoing investment in the country,” says Paul Bulcke, chief executive of Nestle. “We have invested more than one billion US dollars (around SFr885 million) into manufacturing and distribution facilities in Russia over the past 15 years.”

 

Russia plays an important role in Nestle’s European operations, particularly in central and eastern Europe. The company’s brands in the country include Comilfo, Nescafe, Mega, Maggi, Perrier and Purina.

 

Currently, Nestle Russia employs more than 10,000 people and operates 12 production sites, ten sales offices and ten distribution centres. In August this year, the company announced it will invest more than SFr38 million to double pet food production at its Purina PetCare factory in Russia’s Kaluga region. This followed an investment of SFr60 million in 2010 in a new factory for Maggi products in the Vladimir region. The first phase of construction is expected to be completed by the end of 2011.

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Unilever Strengthens Russian Presence


Unilever is expanding its presence in Russia and enhancing its personal care portfolio with the acquisition of 82% of Concern Kalina, the leading Russian beauty company. The transaction, which is pending required regulatory approvals, values the equity of the total business at RUB21.5 billion (€500 million). Concern Kalina is Russia’s largest local personal care player with leading positions in skin and hair care and an expected 2011 turnover of around RUB13 billion (€303 million).

 

“This will transform Unilever’s personal care business inRussia, giving us leading positions in skin care and hair care, as well as establishing a presence in oral care. It will also strengthen and re-balance Unilever’s portfolio and competitive position in Russia, an emerging market with considerable potential and one of our priority countries,” comments Paul Polman, chief executive of Unilever. “Organic growth remains the cornerstone of our ambition to double the size of Unilever whilst reducing our overall environmental impact. Acquisitions such as Concern Kalina supplement organic growth and add powerful new brands to our portfolio.”

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Coca-Cola System to Invest $3 Billion in Russia


The Coca-Cola Company and its bottling partner, Coca-Cola Hellenic, have announced a new Russian investment programme of $3 billion over the next five years, commencing 2012. The announcement was made at the official opening of Coca-Cola Hellenic’s newest plant in Europe, located in the Rostovregion of Russia. Indeed,Russia is the largest marketplace in Coca-Cola Hellenic’s business, which incorporates operations in 28 countries, serving a population of more than 560 million people.

 

The Coca-Cola Company and Coca-Cola Hellenic have already cumulatively invested over $3 billion in Russia. Investment in the Coca-Cola Hellenic Rostov facility, which has a production capacity of 450 million litres of beverages per year, and is located within a 26.5 hectare area, has to date amounted to over $120 million.

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Nestle Invests SFr38 Million in Russian Pet Food Factory


Nestle will invest more than SFr38 million (Eur33m) to double pet food production at its Purina PetCare factory in Russia’s Kaluga region. The investment in the new manufacturing building at the factory – located in the village of Vorsino – follows the installation of a new production line earlier this year.

 

Creating around 60 new jobs, it will enable the factory to produce almost the entire range of Purina pet food products for sale in Russia and for export to other Commonwealth of Independent States (CIS) countries. “With this latest investment, we expect to double wet pet food production within the next three years,” says Laurent Freixe, executive vice president for Nestle and head of Zone Europe.

 

Nestle Purina PetCare offers a wide range of pet food products inRussia, including Friskies, Darling, Felix, Gourmet, Pro Plan, Dog Chow, and Cat Chow. The company opened its first local factory in Vorsino in 2007 to produce its Friskies and Darling brands.

 

In 2009, Purina expanded the factory with an investment of more than SFr29 million to produce wet pet food under the Friskies brand. Earlier this year, it opened both a new production line and a new distribution centre at the Vorsino site. The distribution centre was built with an investment of almost SFr15 million, and employs around 50 local people.

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Declining Russian Beer Market Undermines Carlsberg’s Profits


The continuing decline in beer consumption in Russia, Carlsberg’s largest market, has impacted the Danish brewer’s financial performance in the first half ended June 30th 2011 and forced a review of its full year projections. Although Carlsberg achieved beer volume growth  of 5% and increased net revenue by 8% to DKr31.3b (Eur4.2b) during the period, operating profit declined by 5% to DKr4.7b.

 

Despite an improved Russian macro economic environment, the beer market in Russia declined by approximately 1% for the first six months and by 2% in the second quarter. Over the past 18 months, consumer prices on beer have been increased by an average of 30% reflecting the duty increase. Russian consumers have not yet fully adjusted to these substantially higher price levels resulting in an extended period of declining consumption delaying the overall recovery of the Russian beer market. Furthermore, unfavourable weather conditions during the second quarter also impacted consumption negatively.

 

Jorgen Buhl Rasmussen, chief executive of Carlsberg.

Overall, Carlsberg’s group beer volumes grew by 5% to 58.3m hl with 4% organic growth but with large variations between regions. Northern & Western European volumes grew organically by 1% and Eastern Europe by 5%. Asia continued its strong expansion and delivered 10% organic beer volume growth.

 

As expected, operating profit was impacted by higher input costs and sales and marketing investments across the group. Eastern European operating profits were further impacted by higher logistics costs and the Russian market development being below expectations. The Asian and Northern & Western European regions delivered good organic operating profit growth in both the first and second quarters. Group net profit was DKr 2.2b compared to DKr2.7b in the corresponding period in 2010.

 

Carlsberg is now forecasting a low single-digit decline in the Russian market for 2011 (against previous growth expectation of 2-4%). As a result of this, the brewing group has revised its 2011 earnings expectations. Group operating profit before special items is now expected to be around DKr10.0b compared to DKr10.25bn in 2010 and against previous expectation of high single digit percentage growth. Similarly, adjusted net profit growth is now expected to be 5-10% against previous expectation of more than 20%.

 

“With the adjustments we’re making to our local portfolio, channel approach and forward pricing strategy, I’m confident that our Russian business will return to growth,” says Jorgen Buhl Rasmussen, chief executive of Carlsberg. “At the same time, I’m pleased with the performance of the rest of the group. In the first six months we have continued our relentless focus on driving efficiencies as well as long-term sales value growth.”

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Strong First Half Sales Growth at Danone


Reflecting solid performances across all its business categories and geographical regions, Danone increased consolidated sales by16.3% to Eur9.73b in the first half of 2011 and trading operating income by 6.9% on a like-for-like basis to Eur1.39b. Danone has confirmed its full year targets for 2011.

 

Excluding the impact of changes in exchange rates and the integration of Unimilk, Danone’s majority owned fresh dairy product businesses in Russia and other CIS member countries, organic sales growth was 8.7% – a 4.0% increase in sales volume and a 4.7% growth in value.

 

Danone’s trading operating margin (EBIT) stood at 14.35% in the first half, down 23 bp like for like from the same period of 2010, but in line with group targets. The decrease mainly reflects the basis for comparison of Unimilk’s margin for the first half, prior to the very steep increase in milk prices in summer 2010. Excluding Unimilk, trading operating margin decreased only by 8 bp, due entirely to the catastrophe inJapanin March 2011 and its impact on Danone’s Fresh Dairy Products operations. Excluding these developments, trading operating margin held steady in the first half of 2011, even in face of the sharp increase in raw material prices, notably milk and PET.

 

Franck Riboud, chairman and chief executive of Danone.

The rise in raw material prices was offset by cost reduction initiatives that generated savings of Eur246m over the six-month period, as well as competitive price increases applied in the first half of the year in the Fresh Dairy Products, Waters and Baby Nutrition divisions.

 

“Danone has once again met its targets in a persistently difficult environment shaped by trends in consumption and rising raw material prices. Sales show remarkable growth in the first half, with our Waters division doing particularly well,” comments Franck Riboud, chairman and chief executive of Danone. “We have also met our margin targets, countering steep rises in raw material costs with major efforts to raise productivity and fine-tune pricing. Finally, Danone-Unimilk is on track to achieve its targets and its priorities.”

 

Danone has reaffirmed its targets announced at the beginning of the year. These include a 6% to 8% increase in sales on a like-for-like basis, and an increase of around 0.20% in trading operating margin, like for like, which will be fueled by all group activities, but especially by Unimilk and synergies from integration. Danone is also projecting·an increase in free cash flow in keeping with the Eur2b target set for 2012.

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Cherkizovo Group Starts Meat Processing in Kalingrad Region


Cherkizovo Group, one of Russia’s leading integrated and diversified meat producers, has commenced operations at the meat processing plant in the Kaliningrad region, which it acquired in 2010. The first production line is for smoked sausage and has a production capacity of 10 tonnes per day or 300 tonnes per month.

The plant was acquired in September 2010 with the aim of focusing its operations on the production of delicacy meat products. Part of the planned modernisation includes the installation of new equipment manufactured by Italian company, Travaglini. This newly renovated meat plant will produce smoked sausages, using the best Russian and European technologies. Investment in the first stage of the project is $2.9m.

“We will continue the modernisation process at the site and by the beginning of 2012, we plan to launch a second production line for delicacy products and hams,” says Sergey Mikhailov, chief executive of Cherkizovo Group. “One of the most important benefits of this site is its location in the free economic zone, where it receives special customs preferences. This advantageous position will enable Cherkizovo to leverage opportunities for the effective distribution of value added products in the European part of Russia.”

Cherkizovo Group has been restructuring its meat processing business to reduce costs. “Last year’s acquisition of the meat processing plant in the Kaliningrad region was another significant step towards increasing efficiency and securing a strong resource base for this segment,” he adds.

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Heineken Starts Amstel Brewing in Russia


Heineken has commenced the brewing of its Amstel brand at its St Petersburg brewery in Russia. Heineken is reported to be aiming to capture a 1% share of the Russian beer market for Amstel by the end of the year as consumer demand for premium beer brands, such as Heineken and Zlaty Bazant, recovers.

During the past decade the Russian beer market has expanded by more than 40% and is now the fourth largest in the world. However, a 200% increase in beer tax imposed by the Russian Government in 2010 dampened demand.

Five brewers – Baltika Breweries, SUN InBev, Heineken, Efes and SABMiller – control over 80% of the Russian beer market. Calsberg’s Baltika Breweries is the clear market leader with a 40% share.

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Cargill Expands in Russia


Cargill, the global food, agricultural, financial and industrial products and services group, has further expanded its presence in Russia by opening a new animal feed facility in Efremov. The facility has the capacity to produce 50,000 tonnes of swine and poultry feed products and will operate under the LNB brand in Russia.

The new facility forms part of Cargill’s cluster of operations at Efremov (pictured), which include corn and wheat sweeteners plants; a vegetable oil refinery and bottling facility; a malt plant and an animal feed mill. A previously announced poultry processing plant is also in construction at present.

Natalia Orlova, head of Cargill in Russia, says: “Since we acquired the Efremov site in 1994, we have continued to expand and upgrade operations. The overall investment in Efremov industrial site is about $400 million to date. This addition reinforces our commitment to both the economy of the Tula region and to primary processing in Russia.”

“In recent years, we have seen a significant increase in meat consumption and meat production in Eastern Europe,” notes Luis Masroua, general manager of Cargill’s animal nutrition business in Russia. “This investment will enable us to leverage our global expertise, technology and knowledge to support the growth of the local feed industry in Russia. Our main goal is to help Russian farmers use high quality feed to get the best results.”

Cargill began its activities in Russia in 1991 with the opening of a representative office in Moscow, although a prior trading relationship with Russian-based organizations dates back some 30 years. Today, aside from the company’s significant grain and oilseeds activity, a large number of other Cargill businesses operate in Russia, in locations including Voronezh, Efremov, Krasnodar and Rostov.

The company employs over 1,500 people and is one of the most significant foreign investors in Russia with over $700 million invested in the local agriculture and food industries. Main activities in Russia include grain processing and trade; production, processing and packing of oils; starches, sweeteners and other ingredients production; an animal feed mill and consultations to specialists in the meat, confectionary and other food businesses.

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PepsiCo Europe Gets Greener


PepsiCo’s Frito-Lay manufacturing facility in Azov, Russia, has been officially awarded LEED Silver by the US Green Building Council (USGBC). The manufacturing facility is the first site in PepsiCo’s European network to receive the prestigious LEED certification for New Construction/Major Renovation, bringing the total number of LEED certified PepsiCo facilities around the world to 27.

LEED certification is an internationally recognised distinction for the design, construction and operation of high performance green buildings. To achieve LEED certification, the Azov facility boasts a number of impressive sustainability results including:

* More than 18% projected energy savings,

* More than 40% projected water savings for installed plumbing fixtures,

* 100% reduction in potable water use for landscape irrigation,

* High performance electric lighting and daylighting for more than 75% of the building spaces,

* Increased ventilation rates and low toxic materials for improved air quality,

* Occupant control of lighting, temperature, and indoor environment.

PepsiCo’s 27 LEED certifications, include its Frito-Lay North America headquarters in Plano, Texas, Chongqing plant and office in China, PepsiCo Plaza and Sustainability Center in Chicago, City of Industry manufacturing facility in California, and Frito-Lay plants in Casa Grande, Arizona and Killingly, Connecticut.

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Moscow Brewing Company to Produce Kirin Beer


Moscow Brewing Company has signed a 20-year deal with Kirin Holdings of Japan for the licensed production of Kirin Ichiban beer in Russia. The brand will be produced at the Moscow Brewing Company’s state-of-the-art brewery in Moscow.

Founded in early 2008, Moscow Brewing Company is one of Russia’s leading producers and importers of beer and beverages. Its beer and beverage manufacturing facility was commissioned in October 2008 and is located in Mytischi, Moscow Region.

Moscow Brewing Company also brews and distributes the Coors Light brand in Russia for Molson Coors Brewing Company, the North American beer group.

With consumption per capita at around 71 litres and a market size of approximately 100m hectolitres, Russia is the fourth largest beer market in the world by volume and has seen significant growth in beer sales in the past decade. International premium brands that are locally produced, in particular, have grown in popularity in Russia and despite the recent imposition of new taxes, the category shows signs of even greater growth potential in the coming years.

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EBRD Acquires Stake in Russian Cake Manufacturer


The European Bank for Reconstruction and Development has invested Eur10m to acquire a minority stake in Hlebprom, a leading Russian cake and biscuit producer which has developed its own national distribution system. The funding will mainly be used to upgrade the privately-owned company’s existing plants so as to increase efficiency and productivity.

The acquisition by the EBRD, a significant investor in Russia’s agribusiness sector, will encourage Hlebprom to purchase more raw materials from domestic suppliers, particularly cream and butter, thus stimulating the development of higher-grade products by Russian dairy farmers in order to meet the company’s quality standards.

“This transaction is a good example of how the EBRD can stimulate primary agricultural production in Russia through its investments in processing and other segments of the agribusiness sector,” says Gilles Mettetal, the EBRD’s director of agribusiness.

Hlebprom, founded in 1982 and privatised in 1994, specialises in producing flour-based confectioneries and chilled cakes which are mainly sold through supermarket chains. The company’s main plant is in the city of Chelyabinsk, in Russia’s industrial heartland.

In the agribusiness sector alone the EBRD has directly committed over Eur6.4b (in over 420 projects across Central and Eastern Europe and the Commonwealth of Independent States since 1991).

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SABMiller’s Lager Volumes Down in Europe


Global brewer SABMiller has reported that its lager volume in Europe declined by 3% in the 12 months to March 31st 2010, reflecting a particularly challenging first half impacted by generally weak economic conditions. Fourth quarter volumes were up 2% benefiting from a weak comparative period due to prior year excise increases in Russia and the Czech Republic.

Poland’s volumes were down 4% for the year with the market impacted by widespread flooding and alcohol sales restrictions during a nine day national mourning period in the first half, as well as significant competitor discounting in the economy segment. In the Czech Republic SABMiller’s volumes were down 6% due to continued weakness in the on-premise channel, further downtrading into lower value segments and increased competitor discounting.

Russia’s full year volumes were 1% ahead of the prior year as a result of a stronger second half supported by a gradual economic recovery, and despite competitor price reductions in the local premium segment. In the fourth quarter Russia’s volumes grew by 17% reflecting lower volumes in the fourth quarter of the previous year following significant buy-in ahead of the January 2010 excise increase.

Volumes in Romania were down 8% as the market remained in recession and continued to be impacted by government austerity measures.

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Rusagro Seeks London Listing


Moscow-based Rusagro, the Russian sugar, pork and agribusiness group, is seeking to raise $30m through an initial public offering of about 17% of its equity on the London Stock Exchange. The IPO will value Rusagro, which controls about a sixth of Russia’s sugar production and owns the country’s fifth largest pig farm, at up to $2.08b.

Rusagro incorporates six food processing plants and 38 agricultural companies in the Belgorod, Tambov and Voronezh Regions. Rusagro is also engaged in dairy farming and hog farming in Belgorod Region.

The money raised will be used to fund Rusagro’s expansion strategy. Rusagro is 95% owned by founder and Russian billionaire Vadim Moshkovich and his family.

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Restructuring at Atria


Finnish meat processor Atria is launching an efficiency improvement programme to achieve annual savings of approximately Eur4m at it production plant at Nurmo in Finland. The group has also appointed Juha Grohn as its new president and chief executive with immediate effect.

Juha Grohn was previously managing director of Atria Scandinavia and deputy group chief executive. Atria is the largest meat processor in Finland and one of the leading food industry companies in the Nordic countries, Russia and the Baltic region.

Atria’s net sales in 2010 were Eur1.3b and it employs about 5,800 people. The group is divided into four business areas – Atria Finland, Atria Scandinavia, Atria Russia and Atria Baltic.

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Agrana to Invest €27.6m to Expand Russian Fruit Preparation Plant


Austrian group Agrana is to invest Eur27.6m to expand its Russian fruit preparation plant at Serpuchov over the next five years. Agrana is one of the leading producers of fruit juice concentrates in Europe, and the top global manufacturer of fruit preparations for the dairy industry.

The expansion programme will boost the factory’s production capacity by 63% from around 38,000 tonnes to 62,000 tonnes per year when the project has been completed, allowing Agrana to capitalise on the potential of the growing market for fruit preparations in Russia and the CIS states.

Agrana began operations at the Serpuchov site with two production lines in May 2005 and has tripled its volume of sales since then in the course of two earlier expansion phases. With 238 personnel and annual revenues of around Eur55m, this subsidiary currently has a 48% share of the regional fruit preparations market, which, in addition to Russia, also includes several other CIS states and a total of approximately 217 million consumers.

Fruit preparations are used primarily in the dairy products industry in the production of fruit yoghurts but also for cakes and pastries as well as ice cream. With a current estimated pro-capita consumption level of around 3.5 kg per year, the CIS yoghurt market offers considerable growth potential compared, for example, with Poland, where this figure is approx. 8.5 kg, or Western Europe, where consumption amounts to around 16.5 kg of yoghurt per year.

“Fruit yoghurts are becoming increasingly popular in Russia and the neighbouring states as prosperity and health consciousness are rising. This expansion phase in Serpuchov is key to our being able to profit from the forecast growth of around 50% in demand for fruit preparations from a current level of 82,000 tonnes to 124,000 tonnes per annum by 2014/15, and to consolidate our excellent market position as the quality, service and innovation leader,” says Johann Marihart, chief executive of Agrana Beteiligungs.

In addition to fruit preparations and fruit juice concentrate, Agrana is also a leading sugar company in Central and Eastern Europe. It is the leading supplier of specialised starch products in Europe, as well as being the largest producer of bioethanol in Austria and Hungary. In its 2009/10 business year, Agrana recorded revenues of approximately Eur2b. Agrana employs around 8,000 personnel at 52 facilities in 25 countries around the world.

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Orkla Brands Merges Russian Confectionery Companies


Norway-based Orkla Brands has decided to merge its Russian chocolate and confectionery companies – Krupskaya and SladCo – into one entity named Orkla Brands Russia. The integration process has already started. Headquartered in St Petersburg, Orkla Brands Russia will have about 3,350 employees and a turnover of approx. RUB6.8b (Eur170m).

Vadim Ter-Israelyan has been appointed chief executive of Orkla Brands Russia and the chairman is Paul Jordahl, chief executive of Orkla Brands International.

“Combining the best of both organisations, we will improve our competitive position in a demanding Russian market. The establishment of Orkla Brands Russia is an important step in our long-term commitment in the Russian chocolate and confectionery business. We will keep and develop the local brands, thereby maintaining the Russian tradition and proud history,” says Paul Jordahl.

SladCo has been owned by Orkla since 2005. In 2010, the company had net sales of RUB3.8b and 2,100 employees. SladCo is the market leader in Urals and South Volga, with production in Ekaterinburg and Ulyanovsk.

Krupskaya was acquired by Orkla in 2006. The company is located in St Petersburg, and is the market leader in Northwest Russia. The company had net sales of RUB3.0b in 2010, and 1,250 employees. Over the past years, Krupskaya has fortified its position in Northwest Russia by acquiring several companies and trademarks.

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Challenging Year For Carlsberg


Reflecting a highly challenging year in Russia, its largest market, Carlsberg increased net revenue by 1% to DKr60.05b (Eur8.0b) and operating profit by 9% to DKr10.25b in 2010. However, revenue fell 3% organically during the year with volume down 2% and a 1% decline in price/mix. Favourable currency factors were responsible for 8% of the rise in operating profit and organic growth was 1%.

Net profit grew by 49% to DKr5.35b but included special items of DKr598m related to step acquisitions. The group’s beer volumes were down by 1% to 114m hectolitres and the organic volume decline was 2%.

Carlsberg is focusing intensively on driving profitable market share growth, while simultaneously improving efficiencies across the group. This is a continuous process and an integrated part of the Carlsberg strategy and business model. During 2010, Carlsberg significantly intensified investments behind its key brands, including innovations, new products, media, digital, consumer and customer activities. The Danish brewer also invested in innovations to be launched in 2011 and beyond.

Market Trends

According to Carlsberg, overall beer market trends improved in 2010 compared to 2009. The overall beer market in Northern & Western Europe declined by an estimated 2-3% – a slightly improved trend compared to the estimated 5% decline in 2009.

Jorgen Buhl Rasmussen, chief executive of Carlsberg.

Carlsberg continued to strengthen its position in the UK growing value and volume market share in both the on-trade and off-trade channels. In a UK market, which declined by 4%, the group grew volumes and added 110bps to take its market share to 15.4%.

The Russian market was stronger than anticipated. At the beginning of the year, Carlsberg expected a market decline of low double-digit percentages following the sharp rise in excise duty in January 2010, as consumer price increases of approximately 25% were needed to offset the duty increase. However, due to favourable weather conditions, overall faster and ongoing recovery of the Russian economy and improving consumer sentiment, the Russian beer market picked up in the second half of 2010 leading to a decline of approximately 4% for the year.

The other Eastern European markets improved significantly compared to 2009. The Asian beer markets, which were largely unaffected by the economic crisis in 2009, continued their very strong growth pattern.

“2010 was an extraordinary year for the group due to the substantial excise duty increase in our largest market and we are very pleased with the strong 2010 performance. The improved market share in a large part of our businesses demonstrates our ability to strongly execute on our plans,” comments Jorgen Buhl Rasmussen, chief executive of Carlsberg. “For 2011 we believe market dynamics will improve slightly, not least in Eastern Europe where we anticipate the Russian market to return to growth. In our efforts to balance profitable growth with continuous efficiency improvements we will roll out innovations and market tools to support growth during 2011.”

In 2011, Carlsberg is projecting low single-digit decline in Northern & Western European beer markets, growth of 2-4% in Russia and continued growth in key markets across Asia. The impact from increased input costs will be mitigated by higher sales prices in all regions. In Eastern Europe, the input impact will be higher than the group average and consequently operating profit margin in the region will be impacted negatively for 2011.

For 2011, Carlsberg expects market share growth in markets representing two-thirds of its business, high single-digit percentage growth in operating profit and adjusted net profit growth of more than 20%.

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Leadership Change at Wimm-Bill-Dann Foods


Tony Maher, chief executive of Wimm-Bill-Dann Foods, will leave the Russian dairy and food group on May 1st 2011. His decision to step down as chief executive follows the successful conclusion of the landmark sale of Wimm-Bill-Dann Foods to PepsiCo. An announcement on Tony Maher’s successor will be made in the coming weeks.

“The last five years as chief executive of Wimm-Bill-Dann have been some of the most exciting and satisfying of my career. I am pleased that I have accomplished almost everything I set out to do when I joined the company,” Tony Maher comments.

Tony Maher.

He continues: “I was lucky to have had a rare professional opportunity to shape the future of one of Russia’s most advanced companies and have a strong influence on the overall development of the Russian consumer market. My focus has always been to develop the company, its people and its products for the long-term. I have had the privilege of working with a fantastic team of people on every level of the company. Now I really believe Wimm-Bill-Dann and its remarkable people have a great future ahead as part of a more global organisation.”

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Strong 2010 Performance by Danone Gives Confidence for 2011


With all of its divisions and regions posting gains, global food and beverages group Danone achieved a 14.2% rise in underlying net income to Eur1.67b on sales ahead by 13.5% to Eur17.01b for 2010. Excluding the impact of changes in exchange rates (+6.0%) and acquisitions, total sales were up 6.9%. This organic growth reflects a 7.6% rise in sales volume and a 0.7% decrease due to price mix.

Fresh dairy sales were up 6.5% to Eur9.73b with volume growth of 7.5%. The water business increased volume by 7.8% and sales by 5.3% to Eur2.87b. Baby nutrition sales rose 8.9% to Eur3.36b and volume growth was 7.6%. Danone’s medical nutrition division was the fastest growing with sales up 9.0% to 1.06b and volume growth was 8.7%.

Danone’s trading operating income rose 7.1% to Eur2.58b and the trading operating margin (EBIT) improved by 3 bps to 15.2% in 2010, despite the steep rise in raw material prices, particularly milk. The increase in raw materials was primarily offset by various cost-cutting measures that generated record savings of over Eur500m during the year.

Danone completed a number of major transactions in 2010. In October, Danone sold its 18.4% stake in Wimm Bill Dann Foods, Russia’s leading food and beverage company, for $470m. In November, Danone agreed to acquire YoCream, the leading producer of frozen yogurt in the US, for around $103m.

Also in November, Danone and Unimilk finalised the merger of their fresh dairy product businesses in Russia and other CIS countries, creating the region’s market leader in fresh dairy products. Indeed, Russia is now Danone’s largest single national market, with France.

Outlook

Danone expects the trends which were evident in 2010 to continue in the months ahead. Consumer spending in both the industrialised world and emerging economies shows no sign of either significant improvement or worsening, However, raw material prices remain on a volatile upward path.

Franck Riboud, chairman and chief executive of Danone.

The French group expects total raw material and packaging costs to increase by 6% to 9% on average over the year, with a steeper increase in the first half reflecting the comparison with figures recorded in 2010. Danone plans to manage these increases through consistently high productivity and will also continue to use pricing to maintain a competitive edge.

Another priority for 2011 will be the integration of Unimilk’s operations in Russia and CIS countries, with sales and cost synergies set to boost Unimilk’s operating margin from the second half on.

Danone’s targets for 2011 include a 6% to 8% rise in sales on a like-for-like basis and an increase of around 0.20% in trading operating margin, also on a like-for-like basis. This will be fueled by all the group’s activities, but especially by Unimilk and synergies from its integration. As a result, the rise will only take shape in the second half, with first-half trading operating margin down slightly from the same period of 2010. A rise in free cash flow will be in line with the Eur2b target set for 2012.

“The strength of our group, businesses, brands and teams, and our exposure to regions with robust growth prospects mean that we can look to 2011 with confidence,” says Franck Riboud, chairman and chief executive of Danone. “We will aim to outperform our competitors in organic sales growth, margin, and cash generation.”

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Surge in Sales at PepsiCo


Driven by gains across its worldwide snacks and beverage businesses, and from the acquisitions of its anchor bottlers earlier in the year, PepsiCo has reported a 34% surge in net revenue to $57.84b for 2010 with net income up 6% to $6.34b and ahead by 15% on a constant currency basis.

The successful integration of its two anchor bottlers to create more-efficient and effective beverage businesses in its key North American market and in Europe, allowed PepsiCo to deliver more than $150m in synergies from the acquisitions in 2010, above target for the year. The strong pace of synergy realisation and the identification of additional synergies have led PepsiCo to increase expectations for total synergies through 2012 to more than $550m.

During the year, the US-based soft drinks and snacks group acquired Wimm-Bill-Dann, Russia’s preeminent food and beverage company, to significantly strengthen its competitive position in Russia and Eastern Europe, while also providing a strong foothold in the attractive dairy category.

Indra Nooyi, chairman and chief executive of PepsiCo.

“The underlying performance of our businesses remained solid despite a challenging macroeconomic environment,” says Indra Nooyi, chairman and chief executive of PepsiCo. “We posted broad-based worldwide gains in both snacks and beverages, our businesses deftly balanced a delicate price-value consumer equation, and we aggressively managed costs and productivity to deliver top-tier financial results.”

She continues: “Importantly, we are entering 2011 an even-stronger, more-capable organisation. Our core global snacks and beverage businesses benefit from strong brands, world class go-to-market systems, and innovative and differentiated products and we strengthened these advantages in 2010 through targeted investments.”

While encouraged by the momentum of the businesses entering 2011, she is mindful of a weak consumer landscape given the poor macroeconomic picture, especially in key developed markets, the high levels of cost inflation for the coming year, driven by broad and pronounced commodity inflation, and a potentially difficult competitive pricing environment, particularly in beverages.

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PepsiCo Gains Russian Approval For Wimm-Bill-Dann Acquisition


PepsiCo has received Russian regulatory clearance for its acquisition of 66% of Wimm-Bill-Dann Foods, Russia’s leading branded food and beverage company, for $3.8b. The US-based soft drinks and snack foods giant now plans to close the acquisition on or about February 8th, 2011. After closing the acquisition agreement, PepsiCo will own approximately 77% of the total outstanding ordinary shares of Wimm-Bill-Dann.

The transaction will make PepsiCo the largest food and beverage business in Russia and will strengthen the group’s position in the fast-growing Eastern European and Central Asian markets. It also will raise PepsiCo’s annual global revenues from nutritious and functional foods from approximately $10b today to nearly $13b. This moves PepsiCo closer to its strategic goal of building a $30b nutrition business by 2020.

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Roshen’s Sales Jump by Almost a Third


Sales at Roshen Confectionery, the Ukrainian confectionery manufacturer, surged by 32% to exceed $1b during 2010. Production volumes rose by 12.7% to about 410,000 tons.

During last year, Roshen commenced construction of a new confectionary plant at Vinnitsa in Ukraine. The first phase of building has now been completed. When completed the site will become the largest milk production facility in Ukraine and will incorporate the production of milk powder, condensed products and butterfat.

The first phase of the modernisation of Roshen’s Klaipeda factory has also commenced. Here Roshen is investing in the installation new lines for manufacturing high-boiled candies and increasing the energy efficiency of the plant.

In 2011, Roshen plans to invest $250m in building a new production complex in the Lipetsk region of Russia. It will be Roshen’s third factory in Russia. Construction of the 230,000 sq m complex, which will incorporate a factory and depot, will start this year and will be finished in 2016. The factory will specialise in the production of high-quality chocolate goods.

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Carlsberg Increases Stake in Belarus Brewery


Baltic Beverages Holding, Carlsberg Group’s brewing business in Russia, Ukraine and the Baltic countries, has, through a series of transactions, increased its ownership in Belarus-based OJSC Olivaria Brewery to 67.8%. Earlier in the summer of 2010, BBH increased its holdings in Olivaria from 30% to 47%.

Olivaria is now a full member of the Carlsberg Group and can obtain further access to the international expertise within sales and marketing as well as brewing technologies.

OJSC Olivaria Brewery produces 15 sorts of beer under brands such as Alivaria, Brovar and Data 1864. The brewery was founded in 1864 and currently employs 475 people. Olivaria Brewery is ranked third in the Belarus beer market. The second major shareholder of OJSC Olivaria Brewery is European Bank of Reconstruction and Development. The remaining shares are owned by individuals.

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Wimm-Bill-Dann Foods Continues Eastward Expansion


Wimm-Bill-Dann Foods, the largest manufacturer of dairy products and a leading producer of juices and beverages in Russia, is continuing its eastward expansion with the acquisition of Kungur Dairy Plant in Perm region for an undisclosed sum. The plant is the region’s leading dairy producer and is recognised as one of Russia’s most technologically advanced dairy facilities. The transaction is subject to preliminary approval by the Russian Federal Antimonopoly Service.

The purchase of Kungur Dairy Plant is in line with Wimm-Bill-Dann’s strategy of expanding its business through the selective acquisitions of successful companies with strong market positions, established brand portfolios and a sustainable raw-materials base. Situated in the southeastern part of Perm region, Kungur has excellent access to raw materials in the region. The plant supplies the wider region and its products enjoy strong consumer recognition in both Sverdlovsk and Chelyabinsk regions.

“This acquisition in Perm region is in line with our strategy of expanding eastward and increasing our leading positions in the fast-growing Urals,” says Silviu Popovich, head of the WBD Foods business unit. “We are buying a state-of-the-art facility in the right location with a highly skilled and experienced local team that will significantly strengthen our market presence in a key geography for us. Its high quality products represent an excellent fit with our existing portfolio. The Kungur plant complements our existing manufacturing base and moves us to a whole new level in the Urals in terms of competitiveness and market reach.”

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Nestle Streamlines Russian Confectionery Business


Nestle is reported to have sold its Altai Confectionery business in Russia to local private company Corminus Enterprises for an undisclosed sum. The Altai plant produced about 17,000 tonnes of confectionery products, including brands Altai and Savinov, in 2009.

The disposal will allow Nestle in Russia to focus resources on its well established core confectionery brands such as Kit Kat, Rossiya-Schedraya Dusha and Nestle.

Over the past 15 years, Nestle has built up a strong presence in Russia and currently operates 13 production facilities, ten sales offices and employs around 10,000 people. With double-digit growth rates and sales of around SFr2b in 2009 in Russia, Nestle is market leader in coffee, chocolate, infant cereals and culinary products.

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PepsiCo to Acquire 66% of Wimm-Bill-Dann For $3.8 Billion


PepsiCo is acquiring a 66% stake in Wimm-Bill-Dann Foods, Russia’s leading branded food and beverages company, for $3.8b, pending the required government approvals. Wimm-Bill-Dann is a leader in both traditional and value-added dairy products, with a solid position in juice.

The transaction will establish PepsiCo as the largest food-and-beverage business in Russia, make it a leader in the country’s fast-growing dairy category and build its presence in key markets in Eastern Europe and Central Asia. It will also raise PepsiCo’s annual global revenues from nutritious and functional foods from approximately $10b today to nearly $13b. This moves the US-based beverages and snacks group closer to its strategic goal of building a $30b nutrition business by 2020.

“Adding Wimm-Bill-Dann to PepsiCo’s portfolio is financially attractive and gives us a strong, high-growth platform in the dairy category,” says Indra Nooyi, chairman and chief executive of PepsiCo. “It also gives us clear leadership in the food and beverage industry in Russia, a fast-growing, strategically important market offering abundant opportunity. At the same time, Wimm-Bill-Dann’s strong, value-added dairy business immediately advances our global nutrition strategy to provide consumers around the world nutritious foods and beverages that are accessible, affordable and advantaged by science. Dairy has a huge, untapped potential to bridge snacks and beverages. We see the emerging opportunity to ‘snackify’ beverages and ‘drinkify’ snacks as the next frontier in food and beverage convenience.”

Wimm-Bill-Dann was founded just 18 years ago with a handful of employees. Today the group employs over 16,000 people and operates 38 production facilities.

The integration of Wimm Bill Dann is expected to yield pre-tax annual synergies of approximately $100m by 2014. The completed transaction will bring together PepsiCo’s large global food and beverage brands (Pepsi-Cola, Lipton and Lay’s), its Russian juice and water brands (Fruktovi Sad, Ya, Tonus, Hrusteam and Aqua Minerale) and Wimm-Bill-Dann’s portfolio of leading dairy and juice brands (Domik v Dorevne, Chudo, Imunele, J7, Lubimy Sad, 100% Gold Premium and Agusha).

Upon completion of the full Wimm-Bill-Dann acquisition, PepsiCo’s brands will rank first among food and beverage companies operating in Russia, with approximately $5b in revenue. PepsiCo will have six of the twenty largest food and beverage brands in Russia.

PepsiCo will be approximately twice the size of its nearest food and beverage competitor in Russia, with an unmatched distribution platform for its products. PepsiCo will employ approximately 31,000 people in Russia, Ukraine and Central Asia and have 49 manufacturing facilities, making the company one of the largest food and beverage employers in the region.

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Danone and Unimilk Finalise Merger


Danone and Unimilk have completed the merger of their fresh dairy products businesses in Russia and other CIS member countries. The new entity, controlled by Danone with a 58% equity interest and in which former shareholders of Unimilk own 42%, is the new leader for dairy products in the CIS area. Russia is now Danone’s largest market.

The board of directors of the combined business comprises three members, including the chairman, Andrey Beskhmelnitsky, representing Unimilk, and four members, including Bernard Hours and Pierre-Andre Terisse, representing Danone.

Filip Kegels, previously general manager of Danone Fresh Dairy Products in Eastern Europe and Central Asia, is in charge of operational management.

An integration committee has been set up to coordinate Danone and Unimilk teams during the integration phase and ensure that business targets are met. The new entity will be consolidated in Danone financial statements from December 1st, 2010.

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Milkiland Moves Closer to Public Listing to Fund Expansion


Dairy company Milkiland, which operates in the Ukraine and Russia but is registered in the Netherlands, has commenced its public offering of over 22% of its shares as it prepared to list on the Warsaw Stock Exchange. “We expect that our integrated business model, our strong position in the Commonwealth of Independent States, one of the largest and fastest growing markets, as well as the high profitability of our operations, will make the public offering an interesting investment proposal for investors in Poland and abroad,” says Vyacheslav Rekov, chief executive of Milkiland.

Milkiland owns Milkiland-Ukraine, one of the largest dairy companies in the Ukraine with 16 production sites, as well as a 75% stake in Moscow-based Ostankinsky Molochny Combinat, one of the largest dairy enterprises in Russia.

Milkiland intends to reinforce its position in the CIS by focusing on its operations in Russia and Ukraine. The high fragmentation of the market and growth potential provide significant expansion opportunities for the company in both countries. Milkiland intends to participate in the process of market consolidation and to strengthen its position among the leading dairy producers.

The gross proceeds from the sale of new shares, estimated at about Eur72m, will be used primarily to carry out the group’s investment programme going forward and to finance acquisitions and new projects, including investment of Eur10m to upgrade the Okhtyrsky cheese plant in Ukraine to increase its production capacity by 7,000 tonnes, and Eur10-13m to modernise the whole milk products plant at Ostankino in Russia.

The total value of the group’s planned investments in 2011–2013 is estimated at Eur83–106m, including acquisitions. In 2007–2009 Milkiland invested a total of over $70m, including $41m for acquisition of the Ostankino plant in 2008.

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Warsaw IPO For Milkiland


Dairy company Milkiland, which operates in the Ukraine and Russia but is registered in the Netherlands, is seeking to raise about $100m via an initial public offering of 20-25% of its equity on the Warsaw Stock Exchange. The funds are expected to be used for acquisitions.

Established to develop dairy processing businesses in Eastern Europe, Milkiland owns Milkiland-Ukraine, one of the largest dairy companies in the Ukraine with 16 production sites, as well as a 75% stake in Moscow-based Ostankinsky Molochny Combinat, one of the largest dairy enterprises in Russia.

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PepsiCo Continues to Invest Heavily in Emerging Markets


Having recently unveiled plans to invest $140m to build its tenth plant in Russia as part of a $1b investment programme in the country, PepsiCo has announced that it will construct a $73m beverage facility in Vietnam. The move marks the first phase of a $250m investment programme in Vietnam. The new plant in the northern Bac Ninh province will become the global soft drinks and snacks giant’s biggest production site in Vietnam.

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Danone Completes Russian Dairy Deal


Danone has finalised the sale of its 18.4% stake in Wimm Bill Dann Foods, the Russian dairy and food group for $470m. Danone has held the stake since Wimm Bill Dann Foods’ IPO in 2002.

The closing of the transaction was subject to the grant of the required regulatory approvals for the merger of Danone’s fresh dairy products operations in Russia with those of Unimilk, Russia’s second largest manufacturer of dairy products and baby food. Established in 2002, Unimilk operates 28 production plants in Russia, Ukraine and Belarus and has 14,000 employees. Unimilk’s sales in 2009 amounted to Eur1b (up 7% on 2008).

Wimm-Bill-Dann will fund the purchase of its shares from Danone from existing resources and will not require additional financing. Founded in 1992, Moscow-based Wimm-Bill-Dann Foods has grown rapidly to become the largest producer of dairy, baby food and beverage products in its native Russia and the CIS. The group employs over 16,000 people across 37 manufacturing facilities in Russia, Ukraine, Kyrgyzstan, Uzbekistan and Georgia. In 2005, Wimm-Bill-Dann became the first Russian dairy producer to receive approval from the European Commission to export its products into the European Union.

Since 2002, Wimm-Bill-Dann Foods has been expanding its geographical footprint by acquiring successful businesses in Russia and the CIS, and investing heavily in modernising its production facilities. Its strategy is to produce its core products in the regions where they are sold.

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PepsiCo Plans to Invest $140 Million in New Beverage Plant in Russia


Global soft drinks and snacks giant PepsiCo plans to invest $140m to build its tenth plant in Russia. The new plant will be constructed in the city of Azov, where the company recently completed a snacks plant.

Indra Nooyi, chairman and chief executive of PepsiCo.

Both plants in Azov are part of PepsiCo’s $1b investment programme in Russia, announced in 2009. In the previous ten years, PepsiCo invested $3b in Russia. Placing both plants on the same property will allow for more efficient logistics and leverage the advantages of production processes and technologies that save water and energy.

“Russia is one of our most exciting growth opportunities, and our $250m total investment in two plants in the Rostov region reflects our commitment to this key market,” says Indra Nooyi, chairman and chief executive of PepsiCo. “Our goal is to build a premier food and beverages company in Russia, and we are actively investing in manufacturing and logistics infrastructure to achieve that. Consistent with our ’Performance with Purpose’ vision, we also are broadening our portfolio by adding healthier products, implementing new environmental initiatives and taking steps to support the growth and development of our employees.”

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Roshen Plans New $250 Million Russian Factory


Roshen, the Ukrainian confectionery manufacturer, plans to invest $250m in building a new production complex near by Cosyrevka town in the Lipetsk region of Russia. It will be Roshen’s third factory in Russia.

Construction of the 230,000 sq m complex, which will incorporate a factory and depot, will start in 2011 and will be finished in 2016. The factory will specialise in the production of high-quality chocolate goods.

The planned 63,000 sq m five-storey factory building will house around 40 production lines. The production capacity will be 253,000 tonnes per year. The new 70,000 sq m depot facility will store raw materials and prepared products for the new factory, and for other Roshen factories in Russia.

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Campari Acquires Liqueur Brands From William Grant For €128 Million


Italian drinks producer Gruppo Campari is acquiring the Carolans, Frangelico and Irish Mist brands from William Grant & Sons, the Scotch whisky distiller. The acquisition reinforces Campari’s position as a fast growing company in the US and key international premium spirits markets.

The enterprise value of the acquired business is Eur128.2m, corresponding to 7.5 times the pro forma EBIDTA 2009 (inclusive of the distribution margins of the Frangelico brand in the US). The transaction is expected to close on October 1st 2010 and the consideration will be fully self-financed. Overall the acquired business is expected to contribute about 1 million nine-litre cases and net sales of Eur50m on an annual basis.

Bob Kunze-Concewitz, chief executive of Campari.

“With Carolans, Frangelico and Irish Mist we add a high-quality and profitable business with upside potential and further enhance the group’s premium offering. In particular, we increase our critical mass in the highly-profitable US market and strengthen our exposure to a number of key international markets, including Australia, Russia, Canada, Spain and the UK,” says Bob Kunze-Concewitz, chief executive of Campari. “This acquisition represents a perfect fit in our acquisition framework, in business and financial terms. Moreover, it will benefit from low risk and easy integration, as we already account for 60% of the acquired portfolio volume and we are the global source for Frangelico.”

The Carolans, Frangelico and Irish Mist brands only recently became part of the William Grant portfolio following the company’s Eur300m acquisition of the spirits and liqueurs business of Irish and UK cider maker C&C Group in July 2010. The acquisition netted William Grant Tullamore Dew, the world’s second largest Irish whiskey brand with sales of over 600,000 cases worldwide, which has now become the Scotch group’s sixth core brand.

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Nestle Continues Expansion in Central and Eastern Europe With New Service Centre in Ukraine


Nestle is creating a new service centre in Ukraine to facilitate its continued expansion in the emerging markets of Central and Eastern Europe.

The world’s biggest food group will invest SFr25m (Eur19m ) over three years to establish the Shared Service Centre in the Ukrainian city of L’viv. The new facility will support more than 20 countries in the region such as Russia, Poland, Romania, Hungary and Bulgaria.

L’viv was chosen for its location due to its local transport infrastructure, employee talent potential, real estate and office space availability. In addition, the city is also home to Nestle’s Svitoch confectionery factory.

The L’viv centre is set to become the third internal Shared Service Centre worldwide led by Nestle Business Services (NBS) – an international unit under the Nestle umbrella that performs a standardised and cost-effective way of running financial and HR services.

The centre will reflect the model of two other internal NBS Shared Service Centres that support the Latin American region and the Asia, Oceania, Middle East and South Africa region – with a centre based in Ribeirao Preto in Brazil since 2006, and a centre in the Philippine capital, Manila, since 2008.

At the Brazil centre, around 400 employees support 21 Latin American countries in financial services and employee services focusing exclusively on accounting activities, HR administration and payroll. While in the Philippines, a workforce of around 550 employees support countries from Australia to Vietnam in the same categories.

Bringing together financial and human resources transactional activities as a single entity, the L’viv centre will be the first of its kind to make its mark in Central and Eastern Europe.

NBS aims to form partnerships with some of the 12 universities in the L’viv region to develop specific curriculums including foreign languages and international finance, to align with the Shared Services industry. As part of this goal, Nestlé has already commenced talks with Ivan Vakachuk, Rector of L’viv National University.

Mainly focused on business, law and management, the university partnerships will follow similar learning initiatives already implemented by Nestle in Malaysia. Since 2006, the Malaysian programme has focused on the development of local Nestle executives into first line managers. This has upgraded workforce competencies in order to meet the needs of the company and challenges of the global market.

Nestle in Ukraine

Established in 1994 with its head office in Kiev, Nestle has built up a strong presence in Ukraine over the past 16 years and currently employs 4,500 people there. Acquiring confectionery brand Svitoch in 1998 and culinary brand Torchyn in 2003, Nestle Ukraine also offers internationally recognised brands such as Nescafe, Nesquik, Nuts, Kit Kat and Lion.

In January 2010, Nestle acquired Ukrainian brand Mivina, a market leader in instant noodles, instant mashed potato and dehydrated seasonings. The acquisition enables Nestle to complement its culinary portfolio in Ukraine and boost its presence in one of the fastest growing segments of the Ukrainian food market.

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Emerging Markets Drive Heinz


Emerging markets such as China, India, Indonesia, Latin America and Russia are expected to deliver at least 20% of Heinz’s total sales by 2013, more than double their contribution of just five years ago, according to William Johnson, chief executive of the US-based global food group.

“Emerging markets are key to unlocking future growth because their economies are growing at a significantly higher rate than developed markets; the middle-class in emerging markets will eventually outnumber the combined populations of the US and Europe; and per capita consumption of packaged foods in emerging markets has significant upside,” he explains.

Record Sales and Profit

Heinz achieved record sales of $10.5b, up almost 5%, and record gross profit of $3.8b in its 2010 financial year, despite having to navigate “the most difficult economic environment in decades.” William Johnson adds: “Our record sales were driven by solid results in our Top 15 brands and most importantly, by accelerating double-digit growth in emerging markets, our most powerful growth engine.”

With emerging markets generating organic sales growth of almost 22% in the first quarter of the 2011 fiscal year, Heinz is on track to deliver its financial targets for the full year, even though the consumer and economic environment remains challenging.

Indeed, William Johnson says the global economy is in the worst state he has seen during his 35 years in the consumer goods industry. “The near-term economic outlook for the US and Europe remains pretty dreary, marked by high unemployment and low consumer confidence.” He adds “Many consumers have gone into what I like to term as economic hibernation, eating at home more often, eating out less, reducing spending and worrying more about the future.”

Heinz is not spending much time looking for M & A opportunities in the US and Western Europe but instead is focusing almost entirely on the emerging regions of the world.

Heinz expects to deliver another year of strong results on a constant currency basis, with sales growth of 3 to 4%, operating income growth of 7 to 10%, and earnings per share growth of 7 to 10%. Heinz also projects operating free cash flow of more than $1b for the second consecutive year.

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Interim Profit Surges at Arla Foods But a Challenging Autumn Ahead


Increased prices in the global market, rising foreign exchange rates as well as strict control of costs have allowed Scandinavian dairy group Arla Foods to post a hugely increased profit of DKr697m (Eur93m) on a turnover of DKr23.8b for the first half of 2010, while still increasing the ongoing payment to its co-operative owners. This compares with a 2009 interim profit of DKr263m on a net turnover of DKr22.3b.

“Arla Foods has had a good half-year during which we increased the milk price paid to our owners three times,” says Frederik Lotz, chief finance officer of Arla Foods. “Last year’s extensive savings campaign trimmed the group’s costs and we’ve succeeded in maintaining the low cost levels achieved by the savings campaign in 2009. The accounts demonstrate that we have a sound platform for growth.”

He continues: “We are maintaining good market positions in our biggest markets in the UK, Sweden and Denmark, and the significant part of the growth in the first half year was also created by external factors such as the positive foreign exchange rate developments for our key export currencies. We are continuing to see increasing growth in markets such as Russia, China and the Middle East as well as the potential for further growth in a number of our markets going forward.”

Having recently decided that its annual results should represent 2.5% of turnover (compared to 2% previously), Arla Foods has revised this year’s profit target from DKr950m to DKr1.2b.

Although both turnover and earnings increased in the first half of the year, Arla Foods expects the next six months to be challenging. The first half of the year was characterised by higher prices in international commodity markets where Arla Foods sells butter, cheese and powder to industrial customers. However, it is not anticipated that these high prices will continue for the remainder of the year.

”We have to expect lower earnings from the commodity markets in the second half of the year and at the same time we will see the full effects of the increases in the Arla price,” Frederik Lotz points out. “A decisive factor will be how consumer confidence develops. European consumers still bear the scars of the economic recession – many are still cautious and prefer discount products to brands and this obviously impacts on earnings.”

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First Half Improvement at Wimm-Bill-Dann Foods


Russian dairy, food and beverages group Wimm-Bill-Dann Foods increased net income by 7.1% year-on-year to US$69.5m on revenue up 17.1% to US$1.26b for the first six months ended June 30th 2010. EBITDA rose marginally to US$159.7m from US$158.3m in the same period of 2009.

The revenue increase was driven by volume growth in the group’s dairy, beverages and baby food segments and favorable pricing across all segments. Group revenue in rubles increased 6.6% versus the same period a year ago. However, gross margin declined 400 basis points to 29.9% as a result of the continued pressure of raw milk costs in the first six months of 2010.

Tony Maher, chief executive of Wimm-Bill-Dann Foods.

“Our performance continues to be strong, with significant improvements in market share across our dairy, beverages, and baby food segments, as demand resturns back to levels we have not seen since before the global economic crisis,” says Tony Maher, chief executive of Wimm-Bill-Dann Foods. “However, we continue to face the challenges in raw milk procurement, which adversely impacted our gross margins in the dairy segment in the second quarter. Despite some temporary input difficulties, we are favorably positioned across our segments to achieve our objective of expanding profitability through efficiency gains and a greater share in high value categories.”

Wimm-Bill-Dann Foods is the market leader in dairy products and children’s food in Russia and one of the leading players in the market for non-alcoholic drinks in Russia and the CIS. The group operates more than 35 production facilities in Russia, Ukraine and Central Asia.

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Nestle Opens Premium Chocolate Production Lines in Russia


To consolidate its operations in the Russian and Eurasia region, Nestle has opened two premium chocolate production lines. Creating 149 new jobs, the two production lines, which were transferred from the Tuchkovo factory in the Ruzsky district, Moscow, to the Confectionery Union Rossiya facility in Samara region, will produce Comilfo, the premium chocolate brand.

The transfer of the Comilfo production lines allows Nestle to concentrate its chocolate manufacturing facilities in Russia and strengthen the Confectionery Union Rossiya factory as a key competence centre for confectionery products in Europe.

The Swiss food group also recently announced investment of SFr240m (Eur180m) to expand the Nestle Kuban factory in Timashevsk in order to replace the current packaging process with a full-cycle production of Nescafe Gold coffee. The facility, due to start production in the third quarter of 2011, will benefit from Nestle’s state-of-the-art freeze-dry technology which already exists in many of its other factories around the world.

“The Russian soluble coffee market is the largest in the world and has major potential. That is why we are making a strategic investment to increase our capacities in Russia using our most advanced company technologies and our wide experience in producing premium soluble coffee since inventing it in 1938,” says Laurent Freixe, executive vice president and zone director for Europe at Nestle.

Nestle operates 13 production facilities in Russia with 10 sales offices and employs around 10,000 employees.

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Stronger Second Half Performance Drives Growth at Diageo


A stronger second half performance has helped global alcoholic drinks giant Diageo to increase reported operating profit by 6.5% to £2.574b, aied by exchange rate movement, for the year ended June 30th 2010 as gains in developing international markets offset declines in the mature markets of North America and Europe. On a reported basis, net sales increased by 5% to £9.78b during the year. Organic growth in both operating profit and net sales for the year was 2%.

Exceptional operating costs amounted to £177m, up from £170m in 2009, and included a net charge of £142m in respect of restructuring programmes. These costs included £85 million (2009 – £166 million) for the global restructuring programme announced in February 2009, £93 million (2009 – £nil) for the restructuring of Global Supply operations announced in July 2009 principally in Scotland, £12 million for the restructuring of brewing operations in Ireland announced in 2008, and a £48 million net credit (2009 – £nil) for the restructuring of the wines business in the US.

Diageo’s profit before taxation increased by 12.5% to £2.24b in the year.

Paul Walsh, chief executive of Diageo.

“As expected this has been a year of challenges and opportunities. Our performance was much stronger in the second half than in the first – our performance in the developing markets drove overall growth while markets in North America and Europe remained weak. However, even though markets and categories have been affected in different ways and to differing degrees, we have been consistent in our focus to deliver growth and build a stronger business for the future,” says Paul Walsh, chief executive of Diageo.

“The impact of the global economic crisis varied by market and the strength of the recovery appears to be equally variable. However, as we demonstrated this year, the global diversity of our business, together with the strength and range of our brands and the agility we have demonstrated gives us confidence that in fiscal 2011 we will be able to improve on the organic operating profit growth we have delivered this year.”

Mixed Fortunes in Europe

 

Europe remained a challenging region, impacted by weak consumer confidence and economic uncertainty. Diageo’s volumes rose by 1% but net sales declined by 2% and operating profit by 1% as marketing spend was cut by 6%.

Solid results were delivered in Great Britain where volume and net sales were up 9% and 5% respectively. Diageo also achieved a strong performance in Russia with double-digit growth in both volume and net sales. This led to a significant increase in share in Scotch whisky as Diageo extended its leadership position.

However, net sales declined 8% in Ireland but Diageo gained share and the rate of decline in the beverage alcohol market slowed. Trading in southern European markets remained particularly difficult. The on trade continued to decline in Spain and increased excise taxes and reduced consumer spending led to a sharp slowdown in Greece in the fourth quarter.

The weaker trade conditions in Southern Europe and Ireland impacted overall marketing spend as campaigns were reduced in line with consumer trends. Marketing spend was allocated to proven campaigns on key brands such as Captain Morgan in Northern Europe and Smirnoff in Great Britain. A small reduction in gross margin but lower marketing spend led to the operating profit decline of 1%.

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Efes Breweries Shows Improvement in Russia


Despite the continued adverse economic climate and the significant excise tax increase in Russia, one of its key markets, Efes Breweries International, which operates in the Commonwealth of Independent States (CIS), Eastern Europe and the Balkans, has reported higher volumes, revenues and EBITDA in the first half to June 30th 2010, marked by a major improvement in the second quarter. Volumes increased by 13.2% to 7.6m hectolitres in the first half compared to the corresponding period in 2009, net revenues grew by 13.2% to $472m and EBITDA by 9% to $91.1m, although the margin fell 75bps to 19.3%. However, operating profit declined by 2.2% to $40.2m compared to the first half of 2009.

“In the second quarter of 2010, higher volumes as well as an another price increase by the beginning of April in Russia to reflect higher taxes eased the pressure on margins and EBI’s operating profitability improved significantly compared to the first quarter of the year. In addition, lower input costs and a stronger Ruble versus US Dollar in 2010, largely absorbing the negative effect of excise tax hikes and higher operating expenses, continued to help us to achieve better margins in this quarter,” says Alejandro Jimenez, chief executive and chairman of EBI. The group has revised its outlook for 2010 upwards and is now forecasting to complete the year with high single digit volume growth and flattish gross and EBITDA margins.

In Russia, which accounted for 78% of EBI’s sales volume in the first half, volume increased by 12.2% to 5.9m hectolitres, as EBI once again managed to show positive momentum. EBI expects an 8-10% volume contraction in the Russian beer market in 2010, mainly due to the substantially higher beer prices to reflect the significant excise tax increase in addition to the challenging economic conditions.

Having commenced its operations in 1999 with two breweries in Kazakhstan and Russia, EBI’s current operating territory consists of Russia, Moldova, Kazakhstan and Serbia, where it has ten breweries with a total annual brewing capacity of 24.6m hectoliters and an annual malt production capacity of 139, 000 tonnes. EBI’s operating territories include some of the largest or fastest growing beer markets in Europe and Eurasia, all of which possess significant potential for further growth due to their improving macroeconomic trends and consequently higher purchasing power as well as the low base of per capita beer consumption across these countries.

EBI is a majority-owned subsidiary of Anadolu Efes, the leading beverage company in Turkey listed on the Istanbul Stock Exchange.

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Synergy Widens International Reach


Synergy, one of the leading distilled spirits producers in Russia, has signed distribution agreements for exports of Beluga vodka to Iraq, Vietnam and India, the growing vodka markets in Middle East and Asia and strengthen brand visibility in the European Duty Free by signing a distribution agreement with one of the world’s leading duty free operators.

Synergy already distributes Beluga vodka to Lebanon, Jordan and Israel. In the first half of 2010 20% of Beluga sales were generated from exports, up from 17% in 2009. For the first six months of 2010 the company’s duty free sales grew by 90% compared to the same period last year.

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