Russian ice cream maker goes west

Related tags Ice cream Poland Western europe Germany

Russian ice cream producer AlterVest has bought up two major
production facilities, one in Germany and one in Poland, in an
effort to spread its business reach and to reduce the costs
associated with exporting its products.

The company says it spent approximately $2.5 and $4 million for each facility, one located in Frankfurt, Germany, the other in Kalisz, Poland - both of which were recently declared bankrupt. Currently Poland is the biggest market in the central European region, while Germany is the largest market in the western European region, so both purchases represent significant potential in markets where ice cream consumption is already significantly higher than in the domestic market.

AlterVest came to the fore in the Russian market back in the early '90s, as a distributor for a number of large Moscow-based ice cream manufacturers. In 1999 the company bought its own factory in Naro-Fominsk and then acquired another facility in Tambov. Since this period, the company's total ice cream production has grown from 3,500 tons to 10,500 tons, putting it in the top ten ice cream producers in the country.

Despite a great deal of consolidation by larger companies in recent years, the Russian ice cream industry still remains a highly fragmented sector, with many players operating on a purely local basis. However, because there are so many players, competition remains intense in this highly important market segment. Analysts estimate that current production capacity for ice cream is three times greater than the actual consumption.

In recent years, overall ice cream sales have stagnated and with the Russian economy not forecast to undergo any significant growth in the near future, many ice cream manufacturers in Russia are looking to maintain sales growth by focusing on niche products. But AlterVest's move is unusual, as few Russian-based ice cream manufacturers have been able to secure the financial resources to make significant inroads into other foreign markets.

Although ice cream consumption has grown enormously in the past ten years, Russians still only consume around 2.4kgs of ice cream per person each year. Compared to the European average of around 15kgs, this figure would suggest that there is still plenty of room for further growth, however this will largely remain dependent on the country being able to maintain economic stability.

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