The holding is developing the premium segment of the confectionery market

As Kommersant has learned, the SladCo confectionery holding, one of the largest in Russia, is entering the premium segment of the confectionery market. In order to receive about $10 million in additional revenue per year from the implementation of the new project, SladCo will have to spend a similar amount on repositioning the main brand, experts believe.

According to SladCo Marketing Director Yulia Orlovskaya, her company “has big plans for the premium segment of the confectionery market, both in chocolate products and in the segment of floury confectionery products (wafers, cookies, etc.—Kommersant).” According to her, SladCo has already begun to develop the premium segment, launching candies on the market under the Nut Style trademark, which distributors receive at the rate of 450 rubles. for 1 kg. “In terms of the price index, this product is on a par with the A. Korkunov brand,” says Ms. Orlovskaya. “Although the Nut Style was launched on the market under the umbrella brand SladKo, which until now was presented only in the mass segment, for for three months it accounted for 40% of all sales of our packaged chocolates."

Yulia Orlovskaya reported that premium products will be produced under another umbrella brand, which she categorically refused to talk about. Along with its launch, SladCo plans to reposition its main brand - the restyling of the main brands has now been completed. All products will be produced on new equipment, investments in which, according to Ms. Orlovskaya, amounted to about $6 million. The holding expects that by the end of 2007, premium class products will occupy 10% of SladCo's total production volume.

The SladCo confectionery holding includes two confectionery factories: SladCo (formerly Confi, Yekaterinburg) and Volzhanka (Ulyanovsk). The Norwegian concern Orkla, through its Danish subsidiary United Confectionary BV, owns 96.24% of the shares of the SladCo factory and 95.62% of the Volzhanki factory. In 2005, the holding's turnover amounted to $155 million. In total sales of SladCo, about 65% are chocolate products, 25% are flour confectionery products, 10% are caramels, etc. According to analysts, the holding's share in the Russian confectionery market is about 5 % — “SladCo” closes the top five.

Experts explain SladCo's interest in the premium segment of the market due to its high growth. “The premium segment is the fastest growing segment of the confectionery market, especially in Moscow,” says Alexey Razhba, commercial director of ICS (the largest distributor of confectionery products in the Moscow region). According to him, if sales of expensive sweets and chocolate bars today are growing by 13-15% per year, then in other segments the growth does not exceed 1.5-5%. “So, in the capital region, the share of expensive packaged sweets (about 1 thousand rubles per 1 kg.—Kommersant) reaches 35%, this segment is demonstrating simply fantastic growth: sales of the Italian Ferrero Roche in 2006 increased by 90%, 'Korkunov' - by almost 40%, the concern 'Shtork' (TM 'Mercy' - Kommersant) - by 35%."

It is also important for the company to gain a foothold in the Moscow confectionery market, which accounts for 32% of all-Russian sales. The entire Russian chocolate confectionery market is estimated at $3.5 billion. According to the Business Analytics company, in 2005, SladCo's share of the Moscow chocolate market was 0.4%. According to Igor Makurin, CEO of RVR Communications, the implementation of the new project will provide SladCo with at least $10 million in additional revenue per year.

Experts are not sure that SladCo will be able to gain a foothold in the premium segment. “Now they are going to enter a segment where there is a completely different consumer, and the shortcomings that they have in the positioning of the main brand - it is extremely unclear, can interfere with the implementation of a new project,” says Andrey Stas, managing partner of Stas marketing partners. According to his estimates, SladCo’s costs for launching a premium brand could amount to up to $10 million. “It is quite difficult to change the consumer’s established perception of the company’s products as exclusively mass-produced,” says Andrey Korkunov, a minority shareholder of the Odintsovo confectionery factory. “There are many strong players in this segment, and "SladKo will have to prove to the consumer that its products are somehow different from theirs."

What plays into SladCo’s hands is that over the past two years, not a single bright Russian new product has appeared in the premium segment, notes Alexey Razhba. “And our consumer is ready to experiment; he actively tries new products, giving preference to domestic products,” he says.

Svetlana Kommersant-Mentyukova

"SladCo" craves the sweetest