International food company Groupe Danone has acquired a small Ukrainian dairy plant in a bid to reduce dairy product imports into the country from its facilities in neighboring Russia while diversifying its product lines and increasing its market share.
The Paris-based Groupe Danone announced Sept. 7 that it had bought local market player Rodych Dairy Plant, based in the southern Ukrainian city of Kherson.
Neither Rodych nor Danone have disclosed how much the French dairy products giant paid for the Ukrainian plant, but the deal has been reported in Ukrainian media to be worth around $10 million.
With around $16.5 billion in total sales in 2005, Groupe Danone says it is the world leader in fresh dairy products.
Groupe Danone posted sales of $1.5 billion during the same period in Eastern Europe: Russia, Poland, the Czech Republic, Hungary, Romania and Bulgaria.
According to Groupe Danone, the Rodych Dairy Plant “enjoys a strong market position, with its Rodych and Vesely Pastushok brands, and posted sales of 10 million euros ($12.6 million) in 2005.”
“As a result of the acquisition, Danone will benefit from significant additional local distribution capabilities, as well as access to a strong milk sourcing network and production platform,” Danone said in its Sept. 7 statement.
Yuriy Voloshyn, the director of the Rodych plant, confirmed that Rodych was owned by private individuals, but would not disclose their names.
“This acquisition will enable Danone to strengthen its existing Ukrainian portfolio by adding traditional products, such as kefir and sour cream, thereby providing Ukrainian consumers with an enhanced range, produced mainly in their own domestic market,” Danone said.
With its current capacities, Rodych can produce up to 120 tons of dairy products a day, according to Voloshyn.
According to Ukraine’s State Statistics Committee, the country as a whole produces an average of around a million tons of dairy products a month, or about 33,000 tons a day.
Some industry specialists say that the move by Danone to buy a plant in Ukraine is a sign that the underdeveloped Ukrainian dairy products industry will begin to see greater commercial diversification on the market, and that consumption of homemade counterparts will be squeezed out, as disposable incomes and demand for plant-produced products continue to grow in the country.
According to Danone, per capita fresh dairy consumption in Ukraine averages 4 kilograms per annum, compared with 22 kilograms in Western Europe, leaving significant room for development. It said that average annual growth of the Ukrainian dairy products market has exceeded 15 percent in the last three years.
Danone has been importing its Activia, Actimel, Rastichka and Dannisimo dairy products into Ukraine since 1999 from its two Russian factories, which the French company built itself. However, it now says it will save money and increase its share of the Ukrainian dairy products market by making its products in Ukraine and phasing out its Russian imports coming into the country.