Russian candy giant Krasny Oktyabr has sweetened its sugar-laden pot by taking a 51 percent controlling stake in the state-owned Moscow candy factory Kolomensky, company officials said Monday.
The $166 million purchase, approved by stockholders Saturday, raises the confectionery giant's market share to 7 percent from 5 percent, or 105,000 kilograms of the 1.5 million kilograms produced annually in Russia, the company's president, Anatoly Daursky said.
News of the merger shot share prices in Krasny Oktyabr, or Red October, up from $7.20 on Tuesday to $12 by Friday, said Anna Zaderman, an analyst with the Skate financial information agency.
Krasny Oktyabr's largest shareholders are the Moscow Property Fund, with 16.8 percent of voting shares, and Chase Manhattan Bank, with 10 percent, Zaderman said. Property fund officials declined to comment on the deal, but a Chase Manhattan spokesman said the bank considered the move "a step in the right direction."
The move will boost the company's production from 60,000 tons of candy annually to 70,000 tons, Daursky said.
By comparison, however, British confectioner Cadbury's single factory in Novgorod, which began production in September, already boasts an annual output of 40,000 tons, said Peter Knauer, the company's commercial director.
Pavel Cherepanov, Krasny Oktyabr's general director, was optimistic that exports to foreign countries would level the competition. The company already exports 3 percent of its produce to Germany, the United States and Mongolia, Cherepanov said, and Kolomensky's holdings should triple exports within the next three years.
The stake will also further solidify Krasny Oktyabr's position within the Commonwealth of Independent States, as Kolomensky has 20 plants throughout the region. Other plans include simplifying packaging, which has consisted of elaborate, multi-colored artwork. "Snickers and Mars bars, which control the market, come in plain brown wrappers," said Daursky. "Our young people are getting used to this, and we should follow suit."
Taking heed of such no-frills market trends -- glibly referred to by Russian confectioners as "snickerization" -- may be key to the survival of Krasny Oktyabr, as well as other Russian chocolate producers.
Russian candy makers are facing a full-scale assault by foreign producers -- and not only in the form of imports.
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