March 27, 2012

Danone to invest US$700 million in Russia

French food group, Danone plans for a US$700-million investment in Russia over the next five to seven years, with aims for increased capacity and taking advantage of expected growth in a core emerging market.

"We are seeing a lot of opportunities for further development as dairy products consumption is significantly lower in Russia than in western Europe," Filip Kegels, president of Danone's Russian business, told reporters.

The maker of Actimel and Activia yoghurts stepped up Russian investment in 2010 by acquiring a majority stake in Unimilk, and merging its Russian operations with the domestic player.

Over the next five to seven years, it will upgrade existing facilities, add new capacity and develop an educational programme for local farmers.

"We have consumption of some 15 kilogrammes a year per inhabitant, and what we can probably reach one day is twice this figure if we just look at the consumption we have in the west of Europe," said Bernard Hours, Danone's co-chief operating officer.

Russia now accounts for 11% of Danone's sales and is among the group's biggest markets, on a par with France.

Last year, Danone raised prices in Russia after a severe drought upped the cost of raw milk, sparking a slight decline in Russian sales volume, although revenue in monetary terms grew 4% to around RUB75 billion roubles (US$2.56 billion).

Hours told Reuters the price situation was stable and the company was expecting a "good, normal 2012" at its Russian operations.