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. Last Updated: 07/27/2016

Red October Moves Back Into Black

MTRed October?s flower bed, planted outside the Kremlin, is a part of the company?s strengthened emphasis on advertisement.
Times are sweetening up for Red October.

The Moscow-based candy maker moved into the black with a net profit of 36.9 million rubles ($1.34 million) in the first half of 2001 after suffering a loss of about 17 million rubles over the same period last year. Net sales grew 15 percent to 1.03 billion rubles.

"We are seeing a clear growth in net sales that is due to a growth in selling price rather than the volume of sales," said Alexei Krivoshapko, an analyst at United Financial Group.

This, in turn, is due to changes in Red October's product mix with a redistribution of volumes from toffee-based products to more expensive chocolate, Krivoshapko said.

"This is not due to what the management of the company is doing but because of the environment," he said. "This year, it produced less toffee. It's a more competitive market and less profitable."

Red October's production costs increased 16.4 percent to 808.5 million rubles. The candy maker's pretax profit soared almost 300 percent to 50 million rubles.

Red October faced a tough ride last year, with production dropping 32 percent from January to June 2000 compared to the same period the previous year. The candy maker blamed insufficient advertising for the slowdown.

Red October said early this year that it was adopting a new business strategy that would add 20 new retail outlets to its existing chain of 15, and place a stronger emphasis on advertising. Red October advertisements have popped up on television and billboards. The company recently also planted a flowerbed near the Kremlin, celebrating its 150th anniversary.

Red October is 23.5 percent owned by the Moscow city government, while foreign firms have a combined 39.9 percent.