December 18 2007, 09:57

Nestle constructs new plant for sauce production in Ukraine

Swiss company Nestle started the construction of the second plant for sauce production in Ukraine, RBC Daily informs. The initial investments to the project will amount to around EUR 25 mln. The first stage will be launched in spring 2009. The market players think that new plant will replace old production facilities - Nestle will probably get rid of them. If the company manages both production facilities, it will be able to significantly increase the exports to Russia, they add.

Nestle company owns 481 enterprises in 87 countries. The company started operating in Ukraine in 1994. Now Nestle owns two enterprises in Ukraine - "Svitoch" confectionary (Lviv) and "Volynholding" (Lutsk). In addition to trans-national brands, Nestle owns the trademarks "Torchin" and "Svitoch" in Ukraine. According to the data of ACNielsen, in 2006 "Torchin" occupied 22% in mayonnaise segment, 72% of ketchup segment, 48% of mustard segment, and 56% of other sauces segment of Ukrainian market. The sales of Nestle in Ukraine amounted to $ 385 mln. in 2006.

At the present moment the sauces under "Torchin" trademark are produced on the capacities of "Volynholding"; the production volume constitutes 100,000 tons per year. According to Hennadiy Radchenko, the PR manager of Nestle Ukraine, at the present moment the plant is working at the fullest capacity. Moreover, the old production facility is inconveniently located from the point of view of logistics, so it is impossible to build up the capacities there. The new capacity will be constructed on the area of 20,000 ha in 3 km distance from the existing enterprise. The first stage of the plant is designed for 25,000 tons of products per year.

To the opinion of some market players, Nestle may sell the old plant or create the developer project on its basis (the premises of the plant is located in the center of Torchin settlement). Mr. Radchenko admits the existence of this opportunity; however, he says, the company has no detailed plans yet.

"When Nestle just purchased this production facility, it was a small provincial plant. It is possible that the company is now going to construct a modern production complex, and to sell the existing capacity", Alexey Antipov thinks, the Chairman of the Director Council of "Baltimor-Holding" company. Maxim Protasov, the Chairman of Director Council, "PomidorProm" also admits the possibility that Nestle is going to transfer the production from old to new plant. "However, if Nestle keeps both production facilities, the company will be able to more actively export its produce to Russia. Twenty-five thousands of tons per year constitute one quarter of Russian ketchup market", he pointed out.

The representative of Nestle confirmed that the company is going to increase the share of imports to Russia in future (now 15% of the produced red sauces on the basis of tomato paste under "Torchin" trademark are supplied to the country). "Still, Ukrainian market is a priority for us", he emphasized.

According to estimations of Mr. Antipov, "Torchin" trademark occupies less than one percent of Russian market. "They will face difficulties entering Russia, the same as our producers find it complicated to work in Ukraine", Leonid Baryshev thinks, the General Director of "Essen Production AG" company. To the expert's opinion, if Nestle keeps the old plant operating after the new plant is launched, the most logical step would be to extend the assortment line and to launch the production of premium brand. "Most probably, Nestle would like to buy the local sauce brand in Russia", Mr. Baryshev is sure.