European bank invests €10m in Russian cake maker

By Helen Glaberson

- Last updated on GMT

Related tags: Corporate governance, Russia, Management

The European Bank (EBRD) has bought a €10m stake in Russian cake and biscuit producer Hlebprom, a partnership that will have financial as well as strategic benefits for the bakery manufacturer, said the bank.

A p​roducer of flour-based confectionaries and chilled cakes,​Hlebprom is a regional company with its main production site in Chelyabinsk (Urals), Russia.

“We welcome EBRD as our new partner, helping us to finance improvements to our production facilities, which will allow us to improve our product offering to consumers all over the Russian Federation”, ​said Anton Gubkin, general director of Hlebprom.

Although it has gone a long way in growing its operations and building an impressive logistics network, Hlebprom has now reached a stage where it needs a stable, reliable and long-term investor to improve corporate governance, said Christian Kleboth, banker in the EBRD's agribusiness team

“The company will not only benefit from fresh capital, but alsofrom the fact that EBRD is joining as an equity investor,” he added.

Kleboth, who led the Hlebprom deal, told BakeryandSnacks.com, that as the EBRD is one of the largest investors in the region, it has “a very good knowledge of the market and contacts throughout the food chain.”

Improving plant efficiency

According to the banker, the funding will mainly be used to update Hlebprom’s manufacturing plants, by investing in new, automated equipment.

Hlebprom​will replace old equipment, such as ovens and chillers, with more energy efficient alternatives. This will have a positive impact on the company’s carbon footprint and reduce energy bills, he explained.

The improvements will also shorten the production cycle and consequently increase the freshness of Hlebprom’s cakes, he added.

Local sourcing

EBRD said it will also try to encourage Hlebprom to purchase more raw materials from domestic suppliers, in particular cream and butter.

“This will stimulate the development of higher-grade products by Russian dairy farmers in order to meet the company’s quality standards,” ​said the bank.

Hlebprom is also making a commitment to streamline its corporate structure and raise corporate governance standards by adopting various best practices, said the EBRD.

A formal board of directors was established and a strong shareholders agreement was signed between the existing shareholders and the EBRD.

“EBRD has very high corporate governance standards and demandsthat Investee companies adjust their corporate governance to international standards, which include, among other things, the protection of minority rights,” said ​Kleboth.

As part of the investment agreement, Hlebprom also said it will implement an Environmental and Social Action Plan at its facilities, as agreed with the EBRD.

EBRD ​is a significant investor in Russia’s agribusiness sector and​since 1991 has pumped €6.4bn into 420 projects in the Agribusiness sector, according to the bank.

Related topics: Manufacturers