Foreigners seem thirsty for Russian juice producers
News that PepsiCo is in talks to buy Russia's top juice maker Lebedyansky is more evidence that Russia's food sector is attracting foreign investors.
Russia's juice market is one of the fastest-growing worldwide. Last year sales volume rose by 14% – slower than the start of the decade but still impressive by global standards. Some analysts say the sector still has potential for high profits and regional growth and expect the market to increase over 11% next year.
As much as 70% of Russia's juice market is currently divided among four players. Lebedyanskiy has 1/3 of the market with 30% by volume. It is followed by Multon, recently bought by Coca-Cola, with 23%. Nidan, owned by London-based private equity group Lion Capita has 12% – the same as Russian group Wimm-Bill-Dann.
Once purely domestic, Russia's juice sector is starting to look like the beer market, now almost all in international hands. The two remaining potential candidates for acquisition are Lebedyansky and WBD's juice division.
“In my view the likeliest candidate for acquisition right now is more Lebedyansky rather than WBD – mainly because it's the one that has the largest market share to date. I think that Lebedyansky is high-profitable high-margin business, it's a good, world-run company, and I could see why someone would like to take it over to get the exposure to the Russian market,” says Viktoria Grankina, Troika Dialog Senior Analyst.
For some of these multinationals, while their main markets may be stagnating, the Russian market that is growing double-digit growth is an attractive proposition going forward. I think they can invest in developing brands and probably continue to increase market share by squeezing out the smaller local producers.
Senior Analyst, Troika Dialog
PepsiCo, like its main rival Coca Cola, is focusing on emerging markets to help offset weakness elsewhere. Coca Cola has already made two acquisitions in Russia, buying Multon two years ago at an attractive price. So for Pepsi a successful acquisition is crucial to compete in this sector.
It comes at a time when brand identity is starting to mean more for people, say researchers into the juice sector: “Brand in juice market is very important for Russian consumers – about 70% of our consumers said that brand is important or very important for them,” says Aleksandr Blinov, CEO of Romir marketing agency.
And consumers are ready to pay for a name as well as for quality – something that foreign investors may add to the product.