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Sweet Taste Of Success

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Last Updated : Jan 07 1998 | 12:00 AM IST

Under the Soviet planned economy, chocolate was in permanently short supply and the quality and range of products was poor and paltry. All chocolate recipes try. All chocolate recipes had to be approved by a ministry in Moscow, which then instructed producers what quantities of which range to manufacture - irrespective of demand. Guns rather than cocoa butter was the order of the day.

But in recent years Russian consumers have been able to choose from an increasing array of chocolates from most of the worlds sweet-toothed nations. Every taste and price bracket now appears to be satisfied.

Such are the unexplained wonders of the Russian distribution system that even rundown kiosks in remote provincial towns appear to stock everything from luxurious French liqueur chocolates to plain and cheap chocolate slabs.

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Some nationalist Russian politicians have railed against this influx of foreign goods, complaining about the snickerizatsiya (Snickerisation) of the economy after the US Mars group flooded the country with its Snickers bars in the early 1990s and bars in the early 1990s and filled the airwaves with its advertisements.

But, encouragingly, there are signs that domestic chocolate makers are responding to the increased competition and exploiting the expanding market.

Several confectioners have invested in new manufacturing and packaging lines to match international levels of quality and presentation and are busy learning marketing skills. They are also beginning to launch fresh and improved brands, drawing on national tastes and traditions.

One such factory is the Rossiya chocolate plant in Samara, 800km south-east of Moscow, in which Nestle, the Swiss foods group, the invested about $40m and built up a shareholding of more than 90 per cent.

Clothed in a pristine white coat and hat, Alexel Khomiakov, Rossiyas general director, beams with pride as he conducts visitors on a rapid tour of his companys sweet-smelling plant, gleaming with modern processing equipment.

The plant churned out 25,000 tonnes of chocolate tablets and bars in 1997 and aims to increase output to 30,000 tonnes this year, reinforcing its position as Russias biggest dedicated chocolate maker.

Although the Rossiya plant produces some Nestle lines, such as the Nuts bar, the bulk of its output is accounted for by traditional Russian chocolate assortments. It has also launched new lines, developed in conjunction with Nestle, such as the Shock bar, named after the abbreviation for the Russian word for chocolate.

The taste of chocolate is learned in childhood and this memory stays with a person for the rest of their life, Mr Khomiakov says, Russians like bitter, dark chocolate with a high cocoa content and it will take time and time and time to change that mentality.

Mr Khomiakov says the Rossiya plant was forced to look for a foreign partner three years ago because of the lack of domestic sources of funding. Rossiya talked to several foreign companies before striking a deal with Nestle in 1995.

We were very careful in choosing a partner. We did not wish to commit corporate suicide, he says. For us, Nestles great attraction was that they believed in local management and understood how important traditions are in a countrylike Russia. They wanted to improve the range of products with which the local population is accustomed.

In spite of Nestles helping hand, the Rossiya plant faces stiff competition as several western greenfield plants in Russia.

Mars has opened a chocolate factory as part of a $500m investment project at Stupino, in the Moscow region. Cadbury Schweppes, the UK confectionery group, this summer sank $120m into building a confectionery plant near Novgorod. And Stollwerck, the German chocolate manufacturer, opened a $28m plant last July near Vladimir east of Moscow.

Kraft Jakobs Suchard, the US-owned chocolate maker, has invested n the Konfi confectionery plant in Yekaterinburg while other long-established domestic manufacturers, such as the Rot Front and Krasny Oktyabr (Red October) plants in Moscow, are also installing new production lines and planning to increase output.

Despite this rising competition a recent report from Flemings, the London-based stockbroker, suggested that the increased activity of western confectionery companies in Russia has helped increase the overall size of the local confectionery market, creating sub-markets that never existed before.

For example, Russians may now, snack on Mars bars as they wait at bus stops when they would never have bought chocolate before. But there is still a strong and growing demand for the traditional boxes of Russian-made chocolates for those more considered moments of indulgence.

Chocolate is a popular product - especially given our weather, says Mr Khomiakov. Chocolate has a high calorific content, is tasty, and is very convenient.

Today the Russian people buy about 3kg of chocolate and chocolate sweets per person per year. In England and Switzerland it is more than 10kg. If we can stimulate demand and close that gap then we can all benefit.

Russias chocolate makers, at least, realise that competition may indeed be a good thing.

John Thornhill reports on Russias growing love affair with chocolate and the development of domestic manufacturers

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First Published: Jan 07 1998 | 12:00 AM IST

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