The French food conglomerate BSI, which has been importing its Danone yogurt to Moscow and selling it at artificially low prices, plans to open a factory here within the next two years.


The company has been selling its product for the last few weeks at its store on Ulitsa Tverskaya.


Jacques Vincent, a director of BSI, who launched the shop and announced the strategy at a press conference last week, said at the moment the store had set its prices as if it were producing here.


Danone had estimated the likely unit cost that would apply when the local factory was opened and used them as the basis for its pricing.


He said the shop was designed to test the Russian market and prices had been set to reach as wide a section of the Moscow public as possible.


Prices at the hard currency section of the store, which currently accounts for about 20 percent of sales, are higher but there are no queues for the product.


The shop is owned by MosDanone, a joint venture with the Moscow city Government but with BSI as major shareholder.


BSI produces the Eviari mineral water and Kronenburg beer brands and is the world's second biggest biscuit maker.


Vincent said the main problem in opening a factory was ensuring an adequate supply of high-quality milk. Russian milk, he said, does not taste right and does not keep for more than one or two days, whereas dairy products need a shelf-life of five or six days.


BSI will invest in refrigerated storage, but Vincent said farmers had to be trained and motivated to observe basic hygiene rules.


"There's no great mystery about it. We do it all over the world and we can do it here", said Vincent, although he did not specify the company's planned investment.


He explained that it would take about two years to build the factory and resolve the milk supply problem.


Meanwhile, in the interests of testing Russian tastes, Danone has begun distributing yogurt products for free across Moscow.


Vincent said BSI had chosen Danone, its yogurt brand, rather than a beer or biscuits, as it flagship for entering Russia because it wanted to reach the child and youth markets,


While the press conference conjured


visions of supermarket shelves stacked with Danone yogurts and desserts, a Russian journalist added a note ofreahty. Would the Moscow city government have enough supplies to ensure food through the cold Russian winter?


Yevgeny Panteleyev, Moscow City's director on the MosDanone board,


said supplies seemed adequate and there would be no hunger.