Kraft beats Russian recession with Bolshevik cookies
Kraft Foods Inc., the world's second-largest foodmaker, is beating the recession in Russia as it tailors baked goods to suit local tastes and customers snack on cookies named for Communist heroes.
"Russia is still one of best-performing markets for Kraft," Maurizio Calenti, Kraft's president for central and eastern Europe, Africa and the Middle East, said in an interview in Sobinka, where Kraft opened a Bolshevik cookie factory this week. "This year we are still growing here."
Kraft's sales reached more than 24 billion rubles ($815 million) last year in Russia, where it has about 20 percent of the biscuit market. Kraft inherited Bolshevik, Russia's biggest cookie baker, two years ago with the purchase of Groupe Danone SA's cookie and cracker unit. The acquisition made Kraft the world leader in biscuits.
The combination of Kraft and the Danone unit has exceeded growth targets, helped by Oreo cookie sales, which grew 30 percent outside the U.S. last year, said Sanjay Khosla, president of Kraft International.
The acquisition "gave us scale, it strengthened our expertise in biscuits worldwide, it brought in talent and helped our distribution in developing markets," Khosla, 57, said in a telephone interview.
Kraft now aims to create a "global powerhouse" in snacks and confectionery with its $16 billion offer for Cadbury Plc. The Northfield-based company has three weeks to make a formal offer for Cadbury, which rebuffed its initial approach.
The Kraft executives refused to comment on the Cadbury bid.
Kraft is celebrating its 15th anniversary in Russia this year. It distributes to 70,000 outlets in 500 cities in the country, Khosla said.
Bolshevik, which makes butter cookies, wafers and crackers, was founded in central Moscow in 1855 by a French company to produce cookies and cakes. Its name was changed to the Bolshevik Biscuit Factory in 1924 to honor workers who took part in the revolutionary movement, according to the unit's Web site.
"When you have an established brand with a strong heritage, it doesn't make sense to rebrand," Claire Regan, a Kraft spokeswoman, said in an e-mail about the Bolshevik name.
The cookies' brand recognition and price are fueling Kraft's sales growth in Russia, said Tatyana Bobrovskaya, an analyst at BCS Financial Group in Moscow.
Russians "don't refuse such products as sweets and biscuits" in the times of economic turmoil, she said. "People haven't been cutting back on these products' purchases. Also, some consumers have switched from higher-priced goods to mid- priced biscuits, and Kraft has benefited from that."
The new factory will make cookies under brands including Prichuda or "Whim"; Chocobarokko, "Baroque Chocolate"; and Utrenneye, "Morning." It is one of four Kraft food- manufacturing plants in Russia. The factory may one day replace the main plant in Moscow, Calenti said.
In China, Kraft created Oreo wafers that are smaller and less sweet than the traditional version of the sandwich cookie. Kraft is considering selling Oreos in Russia, Calenti said.
Such product adaptations, along with the addition of Danone's China operations and an emphasis on local decision making, have helped turn around Kraft's once unprofitable Chinese biscuit unit, Khosla said.
Kraft's global snack sales grew 40 percent to $15.9 billion last year, the company reported. The biscuit category worldwide totals $61 billion in annual sales and is growing an average of 5 percent a year, Khosla said.
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