. Last Updated: 07/27/2016

Baskin-Robbins Opens Moscow Plant

Ice cream giant Baskin-Robbins opened a $30 million factory in Moscow's Ostankino district Tuesday, hoping that producing domestically will help it win the hearts and sweet tooths of Russian consumers.

The new factory is the ice cream maker's largest in Europe and its first facility in Russia, a market it entered in 1988. It alone will turn out 70 tons of the firm's trademark "31 flavors," close to half of what Moscow's ice-cream makers currently produce, said Yury Abramyan, the factory's general director.

"On the Russian market there is room for both," Abramyan told a press conference, explaining that Baskin-Robbins would not pose a threat to Russia's domestic ice cream industry.

Although much foreign investment is now on hold as Western businesses await the outcome of the June election, Allied Domecq, the British multinational which is the parent company of Baskin-Robbins, had planned the factory in the Soviet era, Abramyan said.

The plant was completed "despite inflation and the difficulties of the transitional period," he said, adding that Allied Domecq owns 70 percent and Russian government partners hold a 30 percent stake. The plant employs about 200 people, 80 percent of them Russians.

Among dignitaries at the opening ceremony were Moscow deputy mayor Viktor Malyshkov and Prince Michael of Kent. The British nobleman, whose grandmother was Russian, made remarks in fluent Russian and said the new factory reflected "the improved economic climate [that] has led many Western companies to Russia."

Michael Kadenacy, vice president and general manager of Allied Domecq's CIS operations, said Baskin-Robbins is now aiming for a 10 percent share of the Russian market. He did not say what the company's current market share is, but independent experts have put all Western brands' total at about 16 percent in 1995.

The`company has been importing all its ice cream from the United States and Canada since 1988 because "Russian sources of supply do not meet Baskin-Robbins standards," Kadenacy said.

Even now, the factory -- a converted, upgraded and expanded Russian plant -- will use all imported ingredients, including powdered milk from New Zealand, although it hopes later to move to Russian suppliers, he said. The company last year announced plans to set up its own Russian farm to produce milk.

With a major plant in Moscow, Baskin-Robbins now also hopes to expand its presence in Russia's regions through franchising, officials said.

Baskin-Robbins' Western-style taste -- generally lower in fat and sugar than Russian ice cream -- could face an uphill battle winning over Russian palates used to leading domestic brands, industry experts said.

According to the food industry magazine Vitrina, market research shows that 59 of 100 Muscovites prefer Russian-made ice cream. Lower prices also favor domestic brands.

But in the country where Winston Churchill observed that people were either the craziest or the toughest in the world for lining up to eat ice cream in the winter, companies feel there is plenty of demand for any taste.

"If we get all our basics right, delivering choice and quality, this will become a major, if not the most important market for Allied Domecq," Kadenacy said.

Baskin-Robbins' major Russian competitors are a handful of khladokombinats, or freezer-combine plants, but officials quoted in Vitrina said they could not produce enough ice cream because of distribution problems.

Baskin-Robbins hopes its advanced franchising system will conquer any distribution difficulties. All of the cafes and kiosks in Russia that sell Baskin-Robbins ice cream are franchises, which must supply their own equipment but can use the name for free, said Tony Hales, Allied Domecq's chief executive.

The new factory has a capacity of 70 tons daily, Abramyan said, against 150 to 170 tons for all of Moscow's existing factories. It has an annual production capacity of 16,000 tons, later to be expanded to 20,000 to 30,000 tons with a new packing line, he said.