On the Street -- Unilever Completes Russian Purchase

July 4/Business Monitor International Ltd. (BMI) -- The Anglo-Dutch consumer goods giant Unilever has completed the acquisition of Russian food condiments company Baltimor, a prominent producer of ketchup, mayonnaise and tomato paste products with an annual turnover of close to $100 million. BMI sees plenty of promise in the deal, highlighted by the fact that Baltimor's ketchup range accounts for over 50% of industry sales in the country. BMI expects the consumption of food condiments to rise sharply in line with our forecast that through to 2013, food consumption in Russia will increase by 62.8% and reach 10.8 trillion rubles ($466 billion).

The acquisition falls in line with Unilever's wider strategy to pursue growth in emerging markets. The global downturn has provided the impetus for it to make use of its financial muscle to pursue acquisitions and take advantage of deflated asset prices. In view of the sharp slowdown in Western Europe in particular, the fact that emerging markets account for almost 50% of the company's turnover has been a decisive factor in the relative strength of its performance in 2009. In Q109, Unilever reported organic turnover growth of 4.8% despite marked underperformance in Western Europe.

Baltimor's market potential is highlighted by the fact that Russians consume almost four pounds of ketchup annually. Although U.S.-based ketchup giant H.J. Heinz is present and has pulled up its market share to around 20% (mainly the result of its acquisition of the domestic ketchup maker Petrosoyuz in 2005), BMI does not expect it to challenge Baltimor's market leadership. In addition to Russia being a particularly tough market for Western brands to penetrate, any concerns about the strength of Baltimor's balance sheet (liquidity constraints have been a major issue for a number of food companies in 2009) and its ability to continue expanding its promising business will probably be laid to rest now that it has fallen under Unilever's wing. Going forward, Baltimor will also benefit from Unilever's R&D expertise and knowledge of the food business.

Unilever's move into ketchup is the latest addition to its promising food and drink portfolio in Russia, which unsurprisingly rates among its most important growth markets. Already boasting a strong position in Russia's promising mayonnaise sector through its Calve brand, the acquisition of Baltimor provides Unilever a leading position in Russia's two main food condiment segments. It also has assets in Russia's highly promising ice cream segment. After acquiring the ice cream maker Inmarko in 2008, Unilever recently laid out plans to invest $140 million in the construction of the country's largest ice cream manufacturing facility.  

From the July 6, 2009, Prepared Foods E-dition