EBRD ups investment in Danone Russia

Related tags Danone Investment

The European Bank for Reconstruction and Development is to increase
its capital charter investement in Danone Industria in a move that
is expected to help finance expansion plans, allowing the company
to more than double its annual production in Russia to 310,000
tonnes by 2007.

The additional investment, which the EBRD​ says will be as much as €17.5 million will enable the EBRD to maintain its stake in the company at the existing level. The EBRD initially invested $21 million in the company in 2001, which enabled the company to get its dairy operations in Russia off the ground.

The transaction is part of a $100 million regional facility under which the EBRD has so far committed $74 million for equity investments in five Danone projects in Russia, Bulgaria, Romania and Poland. An EBRD spokesman told CEE-Foodindustry.com that this investment programme was ongoing and that more investment was expected in Danone's operations in the region in the future.

"This investment is part of an on-going programme between the EBRD and the Danone group,"​ the spokesman said. "The terms of this capital arrangement are highly technical, but the basic line is that it will help Danone to increase its production in Russia."

Danone Industria, the Russian dairy sector subsidiary of France's Danone group, started production in Russia in 1995. It operates two dairy plants with a combined capacity of 120,000 tonnes a year. The new project will allow Danone to expand the area from which it collects milk to 10 new regions west and south of Moscow, as well as introduce new products onto the Russian market.Danone Industria is Russia's second largest producer of yoghurt, behind leading player, Wimm-Bill-Dann, which currently produces 10 times the volume of dairy produce compared to its nearest rival. However, in recent months Wimm-Bill-Dann's expansion ambitions have been hit by rising production costs - a direct result of its rigorous expansion policy. This has given Danone the opportunity to increase its share of the market, with the division witnessing a 240 per cent jump in its turnover during the 2003 financial year.

Last year Danone registered a 15.5 per cent share of the national yoghurt market, with a 7 per cent share in cottage cheese and a 5.5 per cent share in the dairy-based dessert segment. This gives Danone approximately a 30 per cent share of the national dairy market.

In Eastern Europe Danone's​ total turnover stands at €0.9 billion. As well as Russia it has operations in Bulgaria, Hungary, Poland, Romania, Czech Republic and Turkey, where it is the number one player in fresh dairy produce and biscuits.

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