Responding to high duties on imported candy, major Ukrainian producer buys plant in Russia
After Russian stepped steep duties on imported candy , Ukraine`s largest confectioner began looking for ways to retain – and increase – its share of the Russian market without sacrificing its domestic growth.
For Roshen, which is part of the sprawling Ukrprominvest conglomerate, one solution was to sidestep the import question by buying a plant in Russia.
The company made a name for itself keeping Ukrainians well‑stocked with caramels, candies, cakes and cookies. By 2001, it had a firm grip on 27 percent of the domestic confectionery market. However, with competition from 27 large plants across the country and dozens of smaller operators, the company saw that its best opportunities for growth lay in the export market.
Roshen Development Director Yevhen Vovchanovsky said that competition on the domestic market had threatened to choke the company’s plans for growth.
“The domestic market became too tight for us. The Russian market, on the other hand, is more diversified, and we can sell candies at moderate prices there,” he said. “That is why we found the Russian market very interesting.”
With four plants in Ukraine, including Kyiv’s Karl Marx plant, and the addition of the Likonf plant in Lipetsk, Russia, the company has positioned itself to supply domestic and export markets, and continue its aggressive growth.
“If we manage to produce high quality sweets at a low cost at the Likonf plant, we will be able to compete successfully with Russian factories,” Vovchanovsky continued.
After less than a year in Russia, Roshen has boosted the plant’s output tenfold, to 2,000 tons a month. The company plans to increase that to 2,500 tons by November.
“That’s just the first step,” said Vovchanovsky. “We may buy additional plants in Russia or build a new plant there.”
To increase production at the Russian plant, the company installed equipment taken from its Ukrainian factories.
At its plants in Kyiv, Mariupol, Kremenchuk and Vinnytsya, the company produces more than 200 varieties of candy, chocolate, caramel, wafer cookies, jellies and cakes – more sweets than any other confectionery company in Ukraine, according to Vovchanovsky. Use of automated machinery has kept the firm’s payroll modest – just 300 people are employed by the corporation throughout the country.
The company’s products are well‑known to Ukrainian consumers. Earlier this month, Roshen was named the country’s favorite candy manufacturer in the Choice of the Year contest, which was conducted by a consumer research firm.
Last year, Roshen factories produced 169,000 tons of products, 6,000 tons more than in 2000. That same year, sales hit Hr 1.02 billion, a slight improvement over the year before. In 2001, Roshen logged net profits of Hr 3.2 million.
The company has embarked on a steady path toward modernization. Its long‑term investment plan involves upgrading equipment, regular expansion of its plants and diversification of its product line as quality improves.
Last year Roshen invested Hr 56 million in its Kyiv‑based Karl Marx plant alone, and the company has either upgraded or replaced half its equipment since 1995.
“We’ve purchased as much new equipment as all other Ukrainian confectionery manufacturers combined,” Vovchanovsky said.
This year, Roshen has installed new lines from Swiss, German and Italian equipment manufacturers. Some are fully automated, which is in keeping with the company’s goal of eventually becoming a fully automated manufacturer.
“This is not a whim,” said Vovchanovsky. “We want to match world standards, and this is only possible with an automated line.”
But qualified workers will always be required to operate it, he added.
The company is presently exporting to several countries outside Ukraine and Russia, including Poland, Israel, Germany, the United States, Kazakhstan, Moldova, Turkmenistan, Estonia, Latvia and Mongolia. During the first nine months of this year, it exported 51,000 tons of products.
But despite its import duties, Russia remains by far the company’s largest export market. Russians consume fully 30 percent of Roshen’s production.
Vovchanovsky said that the company’s marketing policy, which is to produce high quality products while keeping down costs, will enable it to compete against its major domestic competitors – AVK, Kyiv‑Konti, Svitoch and Kraft Foods Ukraine.
