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. Last Updated: 07/27/2016

Nestle to Invest $30M in Russia




Swiss-based multinational Nestl? will this year pump a further $30 million into its six Russian factories, looking to capitalize on the advantages its earlier investments gained when last year's ruble devaluation sent prices for imported goods soaring out of reach for domestic consumers.


"The crisis gave us the courage to expand our local production," Andreas Schlaepfer, president of Nestl? Food LLC, the company's Russian-based subsidiary, said Monday at a news briefing held at his firm's stand at the Prodexpo '99 trade fair.


Imports still account for about half of Nestl?'s Russian sales, but the company is looking to increase the share of locally produced goods to more than 90 percent of sales for all categories of goods except coffee, Schlaepfer said. Coffee is fully imported.


Nestl?, which had already invested more than $100 million over the past three years in its Russian production facilities, is even hoping to begin exporting from Russia by the end of this year. The company is planning to export Nesquik beverages and its lower-priced ice cream varieties, focusing on former Soviet states such as Ukraine and Kazakhstan, Schlaepfer said.


"With our enhanced production, we're ready not only to supply the local market but also to export an important part of our production," he said.


Last year, the company's turnover in Russia grew to $500 million, Schlaepfer said.


That growth in turnover came despite massive industry-wide drops in Russian sales of coffee and chocolate after the crisis. Coffee sales fell 57 percent, and chocolate sales dropped 53 percent between July and November last year, according to Yelena Novikova, marketing manager at ACNielsen, a consumer market research company.


Nestl? accounts for about 40 percent of Russia's coffee market, according to Schlaepfer.


The company employs more than 5,000 people in Russia, importing and producing locally a wide variety of food products, including confectionery, drinking water, baby food and breakfast cereals. Nestl?'s local production concentrates on chocolate, candy, biscuits and ice cream.


A full third of this year's investment will go into Nestl?'s two factories in the Volga River city of Samara. These two facilities have been churning out Nestl?'s latest brand, Rossiya, introduced after the crisis in an attempt to capitalize on domestic consumers' new-found interest in buying Russian goods.


Not so long ago, multinationals like Nestl? were more likely to stress the foreign nature of their products, picking up on locals preference for "Western" goods that were perceived as likely to be of superior quality to locally made items that often came from the same factories that once poured out huge numbers of shoddy Soviet products. Today, buying foreign goods is often seen as unpatriotic, as well as being harder to afford.


Nest?'s Rossiya candy boxes and chocolate bars have already captured about 10 percent of the market in Moscow and St. Petersburg in the three months since they hit shop shelves in those cities, Schlaepfer said.


The Moscow region's Zhukovsky ice cream plant will also benefit from the investment program. A new production line for Maggi bouillon cubes will be added at the factory, Schlaepfer said.