Ritter Sport Ends Local Production

VedomostiWorkers making chocolates at the Korkunov chocolate plant. Ritter Sport was making chocolate at the same plant.
German chocolatier Alfred Ritter said Thursday that it was moving its production back to Germany because of high prices for quality ingredients.

The company has been producing its Ritter Sport bars at the Odintsovo Confectionery Plant, located outside Moscow.

Ritter Sport Chocolate, the company's Russian branch, said in a statement that production would be relocated to Stuttgart and that the popular Ritter Sport bars would be exported to Russia.

"Unfortunately, it was impossible to find raw materials that meet the high standards of the company in the Russian market," it said. "As a result, we have had to resort to importing all ingredients needed for production."

"A sharp increase in the price of raw ingredients would inevitably lead to higher production costs," Alexei Yarovoi, the company's local general director, said in the statement.

Ritter signed a deal with the Odintsovo factory in 2002, with both sides promising to invest $10 million in facilities there. The Wm. Wrigley Jr. Company, the world's largest chewing gum producer, paid $300 million last year to acquire 80 percent of chocolate maker A. Korkunov, which owns the Odintsovo plant, and said it would buy the remaining 20 percent over time.

A Ritter Sport executive in Russia said Thursday that Wrigley's takeover of the Odintsovo plant has made it difficult for the company to continue production here.

"We had no agreement with the plant, only with its owner," said the executive, who spoke on condition of anonymity. "With the arrival of new owners, we are no longer welcome."

Ritter Sport's chairman, Alfred Ritter, said the company had been able to win consumers' trust over its seven years in the country. Sales topped 290 million euros ($422 million) in Russia last year alone, Ritter said.

"However, the company's strategy -- quality without compromise -- dictated the need to move production to Germany," said Ritter, who arrived in Moscow on Tuesday to "underline the importance of the Russia market."

Yarovoi said the company would continue to strengthen its brand in Russia as well as improve its distribution.

Ritter Sport bars are a common sight at grocery stores and retail outlets in Moscow, and analysts said moving production at a time of high demand did not appear to make much sense. Some said Ritter's move could hardly be justified by economic reasons.

"Generally, production cost is lower in Russia than in Western Europe," said Andrei Verkholantsev, a consumer analyst with Antanta Capital. "Moving production away from such a lucrative market as Russia to Germany would in itself require huge capital outlay."

Verkholantsev said the cost of importing cocoa beans, the main ingredient for chocolate production, was not much higher in Russia than in Europe.

Korkunov spokeswoman Ilona Tarasova confirmed that the production of Ritter Sport had been halted at the Odintsovo factory, but said there was no link to the acquisition of Korkunov by Wrigley.

"They stopped production because our contract with them expired," Tarasova said.

Wrigley's Moscow office could not be immediately reached for comment Thursday.