Danone Plans $700m Russian Investment

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

27 Mar 2012 - French food group Danone plans to invest around $700 million in Russia over the next five to seven years, aiming to increase capacity and achieve further growth in a receptive market.

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.

Russia now accounts for 11 percent of Danone's sales and is among the group's biggest markets, similar in size to the company's domestic business.

The company introduced a new Russian market dairy range, Prostokvashino, encompassing milk, kefir, sour cream and granular curd products. The company said in their year-end results that Prostokvashino was positioned to become a “core brand” for Danone.

Worldwide for 2011, despite a rise in sales, the company reported a fall in full-year profit. This was attributed chiefly to continued integration costs related to Russia’s Unimilk and a rise in the cost of debt.

Since January 1, 2012, Danone and Unimilk have been operating jointly in Russia.

In February Danone said: “2011 saw Unimilk continue to concentrate successfully on its priorities: integrating the Danone-Unimilk joint venture, increasing profitability, and segmenting its brand portfolio.”

Costs associated with integration effected Danone’s year end results for 2011: “Unimilk’s fourth-quarter volumes remained stable compared with previous quarters, and average price per kilo continued to increase as the year progressed, in line with expectations. The impact of sharp price increases in the second half of 2010 has diminished gradually and explaining the -4.3% decline in sales value this quarter compared with 2010.”

In the company’s 2011 statement they stated that the costs associated with Unimilk integration were now largely complete and that the future would see them “benefit from the synergies resulting from the company’s integration.”