Danone has announced plans to increase the production capacity of two of its Russia-based dairies. The move has been influenced by the company's increased Russian profits caused by the growth of the Russian sector which is expanding at an estimated 30 per cent per year.
Danone plans to install additional equipment at the company's Chekhov and Togliati plants. At the Chekhov plant the investment will increase its current dairy output by 10 per cent which will mean the dairy has the capacity of producing 18,000 metric tonnes of dairy products a year. The company expects production capacity at its Togliati dairy to increase 15 per cent from 60,000 tones.
In 2003 the dairy company's Russian sales rose 23 per cent and this took the company's market share in Russia up to 6.6 per cent in terms of volume and 15.2 per cent in revenue. Danone has stated that it hopes to increase its market share to 20 per cent by 2008.
European investment in the Russian dairy market seems to be driving the expansion of the sector. In 2002 the European bank for reconstruction and development (ERBD) joined forces with Danone to invest €6 million into the Russian dairy industry. The investment is part of an ongoing plan that is aimed at increasing production and improving quality of dairy produce in the country.
Next month the Russian government will decide if it will increase the duties paid on cheese imports to counteract the European cheese on the Russian market.
Some analysts believe this may hold little benefit for the Russian producer European companies are choosing to set up factories in Russia and eventually stop imports.
Danone for example expects that by 2005 it will be able to completely replace imports of dairy products with local production. The level of Danone's dairy imports have fallen in recent years as a result of an increase in its local production in Russia.