July 16 2008, 09:34

Ukrainian "Erlan" to construct the plant for BIOLA juice production in Rostov

Ukrainian company "Erlan" will construct the plant for BIOLA juices production in Rostovskaya region; the facility of 170 mln. liters per year capacity will cost €200 mln. This will be the first production asset of the company in Russia. The regional authorities may provide company with the reduced property tax payments and the reduced regional profit tax for the five years period. The experts point out that Russian juice market has been already divided between four largest players. The growth of this market has slowed down this year; but, the experts believe that "Erlan" project may be successful.

Andrey Matuzko, the Marketing Director of CJSC "Erlan" told "Kommersant" about the company's plans regarding Rostovskaya region. "In Rostovskaya region we plan to construct the plant for BIOLA juice bottling with the capacity of 60,000 bottles per hour or approximately 170 mln. liters per year. The plant will have two lines of aseptic juice bottling into 0.5 L and 1 L bottles installed (there are no conservative agents, vacuum chambers are used). German company KHS will supply the equipment; the same company was the supplier for our Ukrainian plant too".

The investments to the project will amount to around €200 mln. This will be the first production asset of the company in Russia. The project and budget documentation is under preparation now; the land plot allocation for the plant construction is to be solved. The plant products will be sold in Southern Federal Okrug, primarily in Rostovskaya and Volgogradskaya regions and Krasnodarskiy and Stavropolskiy krays. According to Andrey Matuzko, the final decision about the plant construction on the South was made after Sochi has been announced to be the capital of Winter Olympic Games 2014.

"The South of the country is a priority region for us; up to 50% of BIOLA juice, sold in Russian Federation, is here. The rest volumes are sold in Central part of Russia and Povolzhye - Moscow, Samara, Saratov, Voronezh, and Kaliningrad", Vladislav Karpus, the Director of Foreign Economics Direction, "Erlan" company said.

The source in the Administration of Rostovskaya region shares information that the plant is likely to be located in the Southern-Eastern (Azov) industrial zone, on the territory of the municipal settlement of Azov. "A definite land plot of 15 ha in Azov industrial area was offered to BIOLA producer", Nikolay Balbutskiy, the Deputy Mayor of Azov said. According to Valeriy Vakula, the Deputy Minister of Economics of the region, as soon as the land plot allocation is finally finished (the company may get it by means of the auction), the regional administration will sign an investment agreement with Ukrainian company. "Taking into account the volume of investments, the region may provide "Erlan" company with the reduced property tax and the reduced regional part of the profit tax for the five years period", he told.

CJSC "Erlan" (Dnepropetrovsk, Ukraine) manages three plants in Ukraine which produce juice, mineral water and cold tea. The volume of the juice production is approximately 20 mln. liters per month. The company occupies almost one quarter of the juice market of Ukraine (around 700 mln. liters). It sold 25.1 mln. liters of juices in Russia in 2007; 15.7 mln. liters of juices have been sold during the first half of 2008.

"Ukrainian company has already achieved great successes in Russia, especially on the South. The plant let them consolidate their position in the region. First of all, the plant construction should help reducing the logistic expenses, which are huge because of the prices for the diesel fuel. The project may pay back in 5-7 years", Dmitriy Shubin, the General Director of LLC "Interagri-systems" (Krasnodarskiy kray) believes.

"The rates of the increase of the juice market (in volume terms - "Kommersant") will decrease down to 8%, according to our estimations (12% in 2007). This fact is predetermined by the market saturation and the reallocation of the family budgets because of the price increase for food products", Snezhana Ravlyuk, the Leading Analyst of "Biznes Analitika" says. "The market is divided between four key players, the competition is very severe", Andrey Mankov, the Analyst of "UniCredit Aton" adds.

"Despite of the high level of the competition and the consolidation of Russian juice market, as well as the presence of the local strong players in Southern Federal Okrug (for example, "Interagri-systems", "Sady Pridonya" (Volgogradskaya region), "Erlan" is still able to significantly increase its positions on the market of Southern Federal Okrug due to the adequate price policy and the considerable investments to the distribution, marketing and advertisement. Also, the company possesses quite well established distribution channels in Russia; BIOLA trademark is quite well recognized on the South", Maxim Klyagin, the Analyst of "Finam Management" thinks.