Food industry workers join forces to become more effective
The advent of the Single Economic Space and Russia’s accession to the WTO is inspiring the development of food processing plants. They need to improve their competitiveness and enhance their investment attractiveness by joining forces as holdings, with similar companies banding together.
By Andrey Romanovsky
“On the basis of large food companies, we’re creating holding companies,” explains the Chairman of Belgospishcheprom, Ivan Danchenko. “As within the Customs Union, we’ll have to compete with major, powerful food companies from the Russian Federation.”
The unification is being conducted on a territorial basis. For example, several companies are gathered around Gomel Fat Factory. Stolbtsy Horticultural Plant will join with Grodno Sugar Refinery, and Malorita Canning Vegetable Drying Plant with Zhabinka Sugar Plant. Sugar mills may band together with some confectionary plants, consolidating not only production capacity but efficiency, while accumulating financial resources for modernisation.
The Government aims to reduce production costs for companies by allowing them to save on taxes. Moreover, major food companies will be able to promote their products abroad more successfully. The formation of large food holding companies is set to revolutionise the industry, with Sergey Levin, known for promoting Syabar beer and Sochny juices, as well as Sontsa washing powder, suggesting particular food clusters. The largest confectionary factory in Belarus, Slodych, is set to be at the heart of one such holding.
According to reports, some Belarusian enterprises have attracted Ukrainian investors, including the owners of the brand Roshen. In recent years, supplies of Ukrainian sweet products to Belarus have increased significantly. Experts note that this success could be balanced by Roshen if it was able to raise production capacity and access to raw materials in Belarus.
In contrast, Russian producers are yet to show great interest in reorganising the Belarusian food industry although some short term reactivation may occur. Some effort is required to promote Belarusian goods to the Russian market; for example, issues over the right to use old Soviet confectionery brand names, such as Alenka and Mishka na Severe (Bear of the North), are ongoing.
However, the Belarusian Government, realising the need to reorganise the sweet industry, is ready to begin major privatisation, selling shares which are currently state-owned. In addition, diversification should attract investors. As with Belgospishcheprom, confectionery companies are being encouraged to become more self-reliant, reducing tariff and non-tariff fees and promoting Belarusian sweets abroad, to defend the interests of national companies.
Improving the competitiveness of the Belarusian confectionery industry should help raise export revenues several fold; these currently stand at over $2.5bn annually for agricultural products.