Kraft Foods and the Leningrad region signed a land-lease agreement Tuesday for a 10-hectare plot in the town of Gorelovo where the company intends to build a coffee production plant this year, the new plant's production manager said.
The company plans to invest more than $10 million into the new plant and hopes the factory's opening will strike a blow against counterfeiters, production manager Mikhail Sokhnov said Monday.
"There aren't that many counterfeiters on the market right now, but their likelihood will be reduced even further when [we can] control the source of the product," said Sokhnov. "Local production will simplify control."
Kraft's Gorelovo plant is set to open this fall and will launch production of Maxwell House and Jacobs coffee brands next year. The plant has a planned output capacity of 8,000 metric tons per year, and is set to produce 5,000 tons of coffee in its first year.
Sokhnov said the plant's output will account for two-thirds of Kraft's 2001 Russia coffee sales, while imports will make up the final third.
For now, the company is keeping secret the future packaging design and has not yet announced who it has chosen to pack its locally produced coffees. Sokhnov said the coffee will be packaged in Russian-made glass jars and tin cans.
Although the use of domestic packers will reduce production costs, Kraft is not planning to lower prices on its locally made coffees.
"Local production will make it possible to maintain the low prices that the company has set especially for the Russian market. Right now Kraft Foods' activities in Russia are not bringing in a big profit," Sokhnov said. "[The new plant] will make it possible to lower production costs and increase profits."
Turkish construction company Soyak won the tender for building the plant, which is expected to employ 75 people. Construction will be managed by Lockwood Green International.
The plant is being constructed according to a modular design that will allow Kraft to expand its production facilities as needed. And Kraft Foods may very well need it, say press representatives from the Leningrad region as the company intends to set up a complete production cycle - from roasting to packaging - at the plant.
According to figures from the COMCON marketing agency, Maxwell House is recognized by 20.8 percent of St. Petersburg consumers and is purchased by 6.2 percent of the city's consumers. Jacobs Maxima controls about 2.3 percent of the market and enjoys 14 percent brand-name recognition. Other Jacobs-brand coffees account for 3 percent of the market and have a combined 13.9 percent brand-name recognition.
Kraft's main rival, Nescafe Classic, meanwhile, leads the market, accounting for 44.3 percent of St. Petersburg's coffee sales and enjoying 64.7 percent brand-name recognition.
In 1995, Kraft purchased St. Petersburg's Samoilova confectionary factory, which produces candy, cookies and waffles. The company invested $10 million in the plant in the first three years.
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