Russian bakery market target for 'old' Europe

- Last updated on GMT

Related tags: Bread

Danish bread and cake firm Hatting has expanded into the growing
Russian market, investing millions of euros at a new production
facility in the Moscow area.

Part of Cerealia, one of the largest food groups in the Nordic countries, Hatting Bakery will inject €8.1 million in capital into the bakery, the largest investment the Swedish-Danish bread company has ever made.

According to an article in Borsen​, the Swedish-Danish bread company said the new subsidiary, Cerealia Russia, will be the first fast food industrial bakery in Russia, and will be supplied with hot dog bread, baguettes and burger buns from Hatting.

"To begin with, the production facility will primarily service the catering sector, but in the long term it will deliver directly to the retail sector as well,"​ said Hatting Bakery CEO, Bent Pultz Larsen.

Moscow, where Russia's population and wealth is concentrated, is undergoing a retail invasion as western companies seek to carve a position in this burgeoning market. Observers estimated that people in the region have $10 billion per year to spend shopping for food and home furnishings, one-third of the national market for those products.

During the past year, the number of supermarkets in Moscow has increased by half, while outdoor markets dwindled by about 20 per cent, according to the market research firm A.C. Nielsen.

European retailers from Germany (AVA and Metro Cash and Carry) France (Auchan), Finland (Kesko) and the Netherlands (Spar) are all in the process of opening stores in Moscow - setting the scene for bakery firms such as Hatting to move into the area and to start supplying the local market.

Hatting has been present on the Russian market since 1992 through export from the production facilities in Denmark, Germany and Poland. However, the largest Russian customer demands local production, claims the Borsen article.

As such the bakery had the choice to either back out of Russia or to follow the market, which it did. "I believe that in three years, we will have three production lines at our disposal in Russia,"​ said the Hatting CEO.

Production is slated to start in the early summer of 2005.

A recent report from Market Advice​ highlights the phenomenon where Russian bread-bakers appear to prefer home grown options. The consultancy firm claims that production of bread using domestic yeast still dominates the Russian market. A trend that continues despite attempts by international companies such as French firm Lesaffre to increase the amount of yeast and improvers that are imported into the country.

The report, assembled after contacting 200 industrial bakers across the country, found that 94 per cent of bakers used Russian packaged yeasts. Only 7 per cent claimed to use imported packaged yeasts and 15 per cent used imported instant yeasts. Russian company Kurgansky drozzhevoy zavod was considered to provide the best quality yeast, while Le Saffre was the highest-placed foreign firm.

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