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Fazer buys into Moscow's bake-off trend

23-May-2005

Finnish bakery group Fazer has bought its way in to Moscow to take advantage of the growing demand among restaurants for bake-off bread products and frozen dough, reports Chris Mercer.

Fazer said it had bought a 97 per cent stake in Moscow's Zvezdny bakery. Zvezdny is one of the biggest bake-off pizza and frozen dough producers in the area and had sales of RUR830m in 2004 (€23m).

The firm said Moscow's retail sector was growing between 10 and 15 per cent per year and was still one of the most attractive market areas in Russia, despite the arrival of more international chains intensifying competition.

Fazer now hopes to take advantage of a shift in Moscow's foodservice sector to frozen and par-baked bakery products as restaurants increasingly see these as a way of merging quality and efficiency.

Many upmarket restaurants are loathe to buy bread from large-scale bakeries as this is seen as having a negative impact on their image, with specialists claiming that the quality of the bread is the thing that a restaurant's customers note.

But buying fresh bread from smaller bakeries also has its setbacks, not so much in terms of quality but rather volume and price - smaller bakers may not be able to supply sufficient quantities of bread at an attractive price, even for the most exclusive restaurants.

As a result, some restaurants have turned to baking their own bread, yet this is a costly business.

"Operating your own bakery makes sense for a restaurant only if the bread produced is also sold to other restaurants and grocery stores. For such a bakery to be profitable, you have to produce at least a ton of bread a day," said Renat Agzamov, brand manager of the confectionery chain Le Gato.

Frozen and par-baked products that can be 'baked off' on the premises so they are 'fresh' when served are therefore becoming more popular. Frozen bread is now bought by 20-40 per cent of Moscow restaurants.

"Frozen buns sell very well," said Svetlana Pronchenko, brand manger of Zvezdny. "Customers are particularly happy with our prices, which are much lower than those for equivalent imported products."

Frozen buns sell for RUR4-8 a piece, frozen baguettes from RUR20-40 each, loaves from RUR40-160 and croissants from RUR7-15.

Other foreign companies have noticed opportunities too. Swedish baker Cerealia Unibake is planning to build a factory in Moscow to supply frozen and long shelf life products to restaurants and fastfood outlets.

Swiss speciality baker Schulstad and Irish bakery firm IAWS, through its Delifrance brand, are already on the market alongside a range of domestic players, including Zvezdny but also Valentine, which supplies frozen burger buns to McDonald's.

Even so, Fazer president Berndt Brunow said he was confident of growing in Moscow, whilst also using the city as a base from which to expand in other regions across Russia and improve Fazer's position in the Baltic region.

The firm said co-operation between Zvezdny and Fazer's Hlebny Dom subsidiary in St, Petersburg would also provide efficiency savings. Through Hlebny Dom, Fazer is already the market leader in the Greater St. Petersburg area with a 27 per cent market share.

Every year Zvezdny produces around 1,800 tons of par-baked pizzas, 5,100 tons of frozen dough, 12,900 tons of bread and 6,100 tons of pastries.

Brunow added that other Fazer divisions were also interested in Russia's potential: "Offering the pick & mix confectionery concept, Candyking has a pilot project in St. Petersburg and Fazer Amica, our contract catering division, is currently investigating the opportunities in the Russian market."

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