Mars gave a sauce signal
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Large foreign food companies are reviewing their portfolio of assets in Russia. Thus, the American Mars is looking for buyers for a sauces plant in the Moscow region, which could not provide the desired sales and profits. The asset may be of interest to other players, but it is unlikely that the deal will be completed quickly, experts say.
Mars is looking for buyers for a sauce factory in Lukhovitsy, Moscow Region, sources told Kommersant among food manufacturers, including those who received an offer to acquire an asset. Kommersant has a copy of the presentation for investors. The complex includes a production line with a capacity of 20 thousand tons of sauces per year, there is a railway line on the border of the territory. Brands are not included in the deal, Kommersant’s sources say. The asset is estimated by the seller at 370 million rubles.
American Mars is a major manufacturer of confectionery, food and pet food. Brand portfolio includes Mars, Snickers, Milky Way, Bounty, Twix, Skittles, M&M’s, Orbit, Pedigree, Whiskas. In Russia, he manages ten factories. In 2021, the revenue of Mars LLC increased by 11.4%, to 155.48 billion rubles, net profit decreased by 5.8%, to 17.2 billion rubles.
The enterprise in Lukhovitsy initially produced soups in aseptic packaging under the Gurmania brand, but in 2010 it was decided to withdraw the product from the market, and the plant switched to the production of Dolmio and Ben’s Original (formerly Uncle Ben’s) sauces. According to one of Kommersant’s sources, the sale of the asset may be due to the fact that this business for Mars in Russia has ceased to be profitable. After the outbreak of military operations of the Russian Federation in Ukraine, Mars announced the cessation of new investments in the Russian market, stopping imports and exports, noting that local factories continue to work. Mars told Kommersant that they decided to close the plant in Lukhovitsy in 2020 as part of a strategy to improve business efficiency, and this does not affect the company’s operations.
Artem Motorny, managing partner of Walnut Capital, notes that Dolmio and Ben’s Original did not provide significant sales volume, the direction did not bring significant profit to Mars, and it is unreasonable to create new brands in the segment with the corresponding level of costs. Under such conditions, the desire to sell production assets is obvious, he states. At the end of 2021, Unilever announced the sale of the Russian sauce business, including the factory in Tula, the Baltimore brand and the rights to the Calve brand in Russia and the CIS, to Denis Shtengelov’s KDV group. Analysts linked the deal (see “Kommersant” dated October 18, 2021), including the lack of vertically integrated production at Unilever.
According to Kommersant’s interlocutors, interest in the Mars plant will largely depend on the equipment, which must be compatible with the buyer’s. The price mentioned may also be too high, one of Kommersant’s interlocutors adds. The founder of Uncle Vanya Group of Companies, Tigran Telunts, says that the asset is not of interest to his group, since the company is developing its own sites.
Investment banker Ilya Shumov says that there are many foreign players for sale on the market for small businesses that find it much easier to sell assets in Russia than large companies. According to him, for Mars, the sale of the plant in Lukhovitsy essentially refers to the sale of “non-core assets.” When embedding in a large holding, the site will be able to bring additional profit, and regional companies can also act as buyers, Mr. Shumov adds. But, he notes, a quick sale should not be expected. Earlier it became known (see Kommersant dated July 29, 2022) about the plans of the American Kraft Heinz to sell the Russian baby food business, which also could not meet the company’s expectations.
Sales of table sauces, which include Dolmio and Ben’s Original, grew by 21.7% in value terms in January-November 2022, the highest among similar categories, according to NielsenIQ. In real terms, the turnover decreased by 2.7%. For comparison: physical sales of mayonnaise decreased by 2.6%, while monetary sales grew by 19.4%. Demand for adjika and horseradish in physical terms fell by 15% and grew by 9.3% in money terms, according to NielsenIQ.
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