Russia’s United Confectioners plan multi-million investment in Chinese expansion

A significant expansion of operations in China is being planned by Russian-based United Confectioners, with investment totalling around $50 million expected over several years, reports Eugene Gerden for Confectionery Production 

Plans from United Confectioners are to include localisation of production within the key Chinese territories, according to recent statements of leading Russian producers and senior officials of the Russian Ministry of Industry and Trade. The company produces established brands within the region including Alenka and Babaevsky.

While a production site has not been disclosed, the Chinese Ministry of Commerce expects new factory facilities for the Russian business will have the capacity to produce up to 30,000–35,000 tonnes of confectionery per year at the initial stage, with the possibility of its expansion in due course. This comes amid a backdrop of market growth in confectionery within China that has prompted other Russian manufacturers to consider establishing facilities there.

As previously reported by Confectionery Production, China has already proved successful for a number of confectionery brands and equipment manufacturers, with Gerhard Schubert among the most recent to establish facilities in the country.

Vladimir Morozov, an official spokesman of United Confectioners in China, said: “Thanks to their rich taste and excellent quality, Russian sweets have good prospects in the Chinese market. In 2017 the United Confectioners Holding sold 1,850 tonnes of products in China, the main markets for which became the Heilongjiang, Hunan and Sichuan provinces. However, the company plans to further expand its presence in the Chinese market and to significantly increase its sales here.”

According to assessments of producers, localisation of production could be beneficial, as will help reduce the cost of the final product and to increase their share of the regional market.

As an official spokesman of Ascond, a public association representing confectionery producers in Russia, recently said that China remains the second largest importer of Russian confectionery products after Kazakhstan.

In the meantime, according to Elizaveta Nikitina, an executive director of the Confectionery Market Research Center, one of Russia’s leading analyst agencies, Russian confectionery producers do not have their own production facilities in China, but believed there was potential for further investment in the country in terms of production opportunities to serve the local market. Nikitina said that in 2018, exports of Russian confectionery to China grew by 14.2%, compared to 2017, up to 52,100 tonnes. In value terms, shipments grew by 24.5%, to $120.6 million.

Euromonitor International estimates the overall Chinese confectionery market in 2018 at 2.07 billion tons and a turnover of 111.16 billion yuan. Analysts of the Russian Ministry of Industry and Trade believe the project may bring serious benefits to its investors, taking into account that, Russian confectionery products are currently in the list of the most recognisable and best-selling products in China, confirmed by a number of surveys.

According to latest Russian media reports, KDV Group, another leading Russian confectionery holding, owned by a local billionaire Denis Stengelov, is also studying the issue of building a confectionery factory in China, while a final decision, regarding with this issue, is expected to be taken by the company later this year.

At present the United Confectioners is part of Guta Group, an investment group, owned by a Russian billionaire Yuriy Gushchin. The company includes 19 factories in Russia, including such well-known as Moscow Red October, Confectionary Concern Babaevsky and the Rot Front.

In 2018, according to its own data, the holding produced 348,000 tonnes of confectionery products. The Russian Ministry of Industry and Trade has said this places it 17th in the global ranking of confectionery companies, with revenues of $1.7 billion in 2018.

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