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. Last Updated: 07/27/2016

Russian Crisis Forces Del Monte Out

The weak ruble has claimed another foreign victim. Britain's Del Monte International, a major producer of fruit juices and canned fruit, is pulling out of Russia.

The managers of two Russian factories that have been making Del Monte juices said Thursday that production had stopped, and the company's distributors say they are selling out the last of their stock.

"It is all over now," said a senior manager at Continental Beverages Central, or CBC, Del Monte's partner responsible for distributing its products in Russia. The joint venture between Del Monte and CBC, set up in 1996, is in the process of liquidation, the manager added.

Both Del Monte's Moscow office and its head office in Great Britain declined to comment on the company's plans for Russia. But the CBC manager said the reason for Del Monte's planned withdrawal was that its import costs have exceeded its sales revenues since the ruble crashed last year. Even for the juices that the two Russian factories made for Del Monte, concentrates and packaging had to be imported.

Unlike some other foreign juice makers, such as Italy's Parmalat with its expensive Santal brand, Del Monte was competing for the medium segment of the Russian market with local heavyweights like Moscow's Wim Bill Dann. The Russian company, known for its J7 brand, appeared better able to adapt to the changed market conditions, using more domestic raw materials.

Besides, Wim Bill Dann, which by some estimates controls 60 per cent of Moscow's juice market, had been around longer than Del Monte: The British company was a latecomer to the Russian market in 1996. Del Monte just did not have the time to build up an efficient enough distribution network and a strong enough production base, said Natalya Buslova of the market research company A.C. Nielsen.

"To avoid losses, [Del Monte] would have needed to hike their price up to 30 rubles for a liter of juice, but then the juice would have to be sold only in expensive supermarkets, where few people would be able to afford it," the CBC manager said. J7 juice retails for about 20 rubles a liter.

Del Monte had arranged for local production at the Amtel plant in the town of Korolyov near Moscow and at the Depsona factory in Tula, 200 kilometers southwest of the capital.

According to Amtel general director Mikhail Dalalayev, his factory has no new contract with Del Monte for 1999.

Depsona's executive director Ernesto Ponsiglione said his plant had stopped working for Del Monte last August, immediately following the ruble's collapse. The factory as a whole took a huge hit from the devaluation, because Depsona brand juices also depended heavily on imported raw materials.

According to Ponsiglione, the sales of Depsona brand juices dropped from a monthly average of 700,000 tons before August to "just a few tons a month." Then the factory struggled to rebuild its customer base by offering juice to wholesalers on credit. Now, Ponsiglione says the situation is somewhat better, but he dreads another devaluation.

"What worries me most is what is going to happen to the ruble," he said. "If it goes down really low, the juice market will have no chance to survive."

Unlike Depsona, Del Monte has apparently decided to take no more chances. Market statistics seem to justify that decision. According to A.C. Nielsen, Moscow's juice market had been growing fast before the ruble collapse, but has shrunk by 60 percent since August.

Del Monte juice is still sold in Moscow stores, but sales are slow. Andrei Avdonin, a sales manager at the Novoarbatsky food store in central Moscow, said shoppers buy only "liters" of Del Monte as opposed to "tons" for Wim Bill Dann's J7.

"The remaining stocks in the warehouses will last another three or four months," the CBC manager said.