Cerealia's Unibake business will start building the factory next year with Finnish food producer, Primula, which has agreed to be a co-investor in the plant in return for Cerealia's investment in Primula subsidiary, Baco.
The plan is to manufacture a range of frozen and long shelf-life products, including burger buns, baguettes and pita breads for fast-food restaurants and the foodservice industry in Moscow.
Soren Landtved, Cerealia's project manager for Russia, believes the market potential in this area is now "huge" and claimed that "every chain we talk to is interested in entering the market".
He said fast-food chain Burger King was preparing to launch, while US chain Kentucky Fried Chicken was already there and expanding. A number of domestic chains were also performing very well.
Moscow's fast-food market has an estimated value of $400 to $700 million. The sector suffered badly from a drop in consumer spending power during the Russian economic crisis of the late 1990s but has now recovered well with a projected 20 per cent annual growth over the next few years.
"According to recent market research, half of men and women between 16-50 buy fast food at least once a week," said the US-based School of Russian and Asian Studies (SRAS), adding that many younger people were attracted by the cheaper prices.
Landtved said that Moscow was like many other major cities such as London, Rome or Paris in that people were eating quickly on the move and disposable incomes were on the rise.
He said Cerealia would try to use 'international' bread types such as baguette, pita and ciabatta to supply Moscow's convenience food sector and that many Moscow businessmen had become more accepting of such products through business trips to other European cities.
Cerealia Unibake already supplies frozen bread to this sector in Moscow but wants to raise its stake by moving closer to the market through local production, enabling the company to offer more competitive prices by decreasing costs.
"Right now we are exporting [to Russia] from Denmark and that's expensive because of the high transport and customs costs," said Landtved.
The company faces competition from a number of international brands, such as Delifrance and Schulstad, but as yet there are few major domestic manufacturers of frozen bread; although Russian firm Valentine 2000 now supplies frozen burger buns to MacDonald's and others are beginning to see potential in the frozen sector.
Landtved said that Cerealia aims to have enough orders to fill up the full capacity of its new bakery within around five years and has already received a lot of interest. Initially the company will focus on Moscow and the surrounding areas, but is keen to expand in other regions if things go well.
Landtved added that Cerealia may also consider a move in to the retail bread sector but that was a second priority and some time away.