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. Last Updated: 07/27/2016

Finland's Atria to Buy Meat Firm Campomos

Pigs-to-pizza sausage maker Campomos, the first Western meat processing company to be established in the country after the fall of the Soviet Union, is being sold to Finnish food giant Atria for 75 million euros ($117 million).

Atria, a meat and meat products firm with interests in St. Petersburg, said Thursday that it had agreed to buy the loss-making company from Spain's Campofrio Alimentacion. Atria said in a statement that it would benefit from Campomos' "well-functioning distribution network" in Moscow and St. Petersburg, and the good location of its Moscow plant.

Campomos, like other processed-meat firms, has been forced to adapt to the tightening of government quotas on imported meat and more affluent and health-conscious Russians increasingly switch to fresh meat from products such as frankfurters and kielbasa, analysts said Thursday.

Christian Poschik, general director at Campomos, said Thursday that sales of processed meat have continued to grow and that while it is true that Russians are buying more fresh meat, they have not lost their taste for franks and kielbasa.

The firm's customers are now demanding higher quality products, along with convenience foods like pizza, Poschik said.

His firm still produces 10,000 tons of hot dogs a year for the domestic market, which he estimates to be worth $11 billion a year.

"Like a couple of other companies in the Russian meat industry, we have had to restructure our assortment because of extremely high material costs mainly due to government import restrictions," Poschik said. "There are quota restrictions in place, which for the whole Russian meat industry is a big problem."

To solve the import problem, the firm started a pig farm outside of Moscow and now breeds and slaughters 50,000 pigs per year, Poschik said.

Along with Campomos' brand recognition, the pig farm was one of the main reasons Atria was interested in acquiring the firm, he said.

More mergers and acquisition activity can be expected in the sector, Poschik said, as pressure to consolidate from a changing market and government restrictions grows. "There will be fewer producers and they will be bigger," he said.

"Atria [used to import] all its unprocessed meat to their plant in the Leningrad region," said a Finnish consumer analyst who covers Atria.

Buying Campomos for equal to the firm's sales was "quite high and will have a negative impact on Atria," the analyst said on condition of anonymity, because he was not authorized to speak on the record. "But the main thing is to gain access to market and infrastructure. The price they've paid shows that Atria expects to see turn around at Campomos."

Fresh meat sales are hitting the sale of processed meats, "which was once a really basic food, [but has] been declining year on year," said Viktor Dima, a retail and consumer analyst at Renaissance Capital.

"A generation of educated, young professionals with more disposable income is eating more fresh meat at the same time that they are seeking healthier lifestyles," Dima said, but added, "Sausage, kielbasa and hot dogs will never disappear because they are a relatively cheap protein compared to fresh meat."