Eastern European Markets
June 28th, 2007

Fazer expands its bakery operations in Russia

Fazer initiates strategic co-operation with the Tver bakery OAO Volzhky pekar by purchasing the majority of the bakery’s share capital. Volzhky pekar is the leading producer of fresh bread and coffee bread in the Tver region. Its turnover is 32 M¤ and it employs ca 1 800 people. The common goal is to double the bakery’s turnover in five years. Co-operation with Volzhky pekar in line with the Group’s strategy considerably strengthens Fazer’s position as one of the leading bakery companies in Russia.

On an annual basis, the OAO Volzhky pekar bakery bakes 45 000 tonnes of bread, 5 000 tonnes of bagles and 5 000 tonnes of different flour confectionery products. It employs ca 1 800 people and the annual development of its turnover has been around 20 per cent being 32 M¤ in 2006. The bakery has continuously delevoped its operations and invested in new production equipment and expanded its assortment. Volzhky pekar is situated in the town of Tver 160 km North-West of Moscow and 500 km South-East of St Petersburg in the Tver region with 2,5 million consumers. Volzhky pekar is the most significant bakery in the area.

Russia is one of Fazer’s main growth areas

Fazer is one of Russia’s leading bakery companies. During the past three years, Fazer’s bakery operations in Russia have grown at an average rate of 39 per cent annually, and today they constitute 14 per cent of the Group’s turnover. Fazer has during the past ten years invested ca 130 M¤ in its operations in Russia and the Group’s four bakeries in Russia employ 3 500 people. In April, Fazer Group renewed its organisational structure and the bakery operations in Russia formed a new separate division - Fazer Russia. The Group’s CFO Harri-Pekka Kaukonen was nominated Managing Director of Fazer Russia.

”According to our strategy, Russia is one of our main growth areas, and our target is to continue growing both through acquisitions and organic growth. Co-operation with Volzhky pekar, which was agreed on today, is a big step forward in fulfilling our strategy. Volzhky pekar is the most significant and respected company in the field in the Tver region, and both its location and assortment wonderfully complete our current operations in Russia,” says Group President Berndt Brunow. ”I am very glad that the management and main shareholders of Volzhky pekar saw this opportunity to start developing the bakery together with Fazer. With the current growth of retail chains and globalisation, bakeries must unite forces in order to stay successful.”

Target to double turnover in five years

Some of the challenges of the growth of Fazer’s bakery operations in Russia are acquiring additional production capacity and smooth distribution in Moscow. The Moscow area is one of the most interesting markets in Russia with its 13 million consumers and an estimated annual growth of 10-15 per cent in retail trade.

A large investment programme is going on at Fazer’s Zvezdny bakery in Moscow which will bring the production volumes up by 50 per cent to 75 000 tonnes per year, especially increasing the production of fresh bread and pizzas. In St Petersburg, Fazer’s Hlebny Dom bakery is the leading bakery in the area. It produces yearly 120 000 tonnes of bread and coffee bread, of which 20 per cent is delivered to Moscow. Volzhky pekar will see during the next five years significant investments into new production lines, improving the current production and developing new products.

”Our goal is to double Volzhky pekar’s turnover in five years. Along with the co-operation, we will gain such strategic and operative synergy advantages which will benefit all our bakeries. The bakery’s location is perfect for deliveries to Moscow, and the assortments of our bakeries complete each other,” says Group President Berndt Brunow.

About Fazer Group
Fazer Group originates from a family business founded in 1891. Today the Group offers meals, bakery products and confectionery and operates in a total of nine countries. Its operations are based on passion for customer, quality excellence and team spirit. The Group operates in four divisions, which are all committed to offering taste sensations: Fazer Amica, Fazer Bakeries, Candyking and Fazer Russia. Fazer Amica is a leading contract catering company in the Nordic and the Baltic countries, offering customers delicious food and tailor-made service solutions. The company operates in the Nordic countries, Estonia, Latvia and Russia. Fazer Bakeries offers fresh and tasty bakery products and operates in Finland, Sweden, Estonia, Latvia and Lithuania. Candyking is a pioneer and a market leader in the pick & mix confectionery business in the Nordic countries, the United Kingdom and the Baltic states. Fazer Russia, operative since 1 April 2007, is responsible for Fazer’s bakery operations in Russia and is one of the leading bakery companies in Russia. Fazer’s most important associated company is Cloetta Fazer AB, which is the leading confectionery company in the Nordic countries. Fazer Group‘s turnover for 2006 was around one milliard euros. The Group employs ca. 15,000 people.

Further information
Fazer Russia, Managing Director Harri-Pekka Kaukonen, tel + 358 40 523 7372
Fazer Group, SVP, Communications Ulrika Romantschuk, tel. + 358 40 566 4246

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