CONFECTIONERY INDUSTRY

November 9, 2017 | Author: Lynn Ross | Category: N/A
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1 CONFECTIONERY INDUSTRY 20162 CONFECTIONERY INDUSTRY About 70% of the volumes of confectionery in Belarus is manufactur...

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CONFECTIONERY INDUSTRY

2016

CONFECTIONERY INDUSTRY About 70% of the volumes of  confectionery in Belarus is  manufactured by Concern  “Belgospischeprom” 

Belarusian confectionery industry is represented by 20 enterprises: 8 companies forming part of the State Food Concern “Belgospischeprom”, enterprises and sections of communal, private and foreign owners property. About 70% of the total production output of confectionery is manufactured by the enterprises of the Concern “Belgospischeprom” .

The State Food Concern  “Belgospischeprom” regulates  activities of companies in the  industry

The majority of confectionery companies are privately owned, but their activities are regulated by the State Food Concern “Belgospischeprom”. The Concern determines plan indicators (i.e. production growth rate, export supply), and controls their execution.

Largest manufacturers The key players in the Belarusian confectionery market are OJSC “Kommunarka” and “Kommunarka” and “Spartak” are  JV JSC “Spartak”. After the government, following the Presidential Decree №107, restored the control over “Kommunarka” and “Spartak”, these enterprises became state‐controlled state‐owned (57% of OJSC “Kommunarka” shares and 60 % of JV JSC “Spartak” shares).

Increased competition in the  confectionery market

The creation of CEC and Russia’s accession to the WTO led to the increased competition in the Belarusian confectionery market.

Minor recession of confectionery  The production volume of confectionery in 2015 amounted to 257 thousand tons (in production in 2015 2014 – to 262 thousand tons). In 2008‐2012, average annual growth rate amounted to 17.39%, while in 2013‐2015 annual average rate of drawdown decreased to ‐0.11%.

Import of confectionery traditionally exceeds export in Belarus. Import of

Import of confectionery decreases   confectionery dropped by 4% (compared to 2014) and totaled 52.6 thousand tons in concurrently with export growth 2015. Contrarily, export of confectionery increased from 18 thousand tons to 19 thousand tons in 2015. Export share of the production reached 7.4%.

For the first time in years, the pace of sugar confectionery sales decreased and

Per capita consumption of  amounted to 97.4% in 2015 (127.4 thousand tons of sugar confectionery were sold confectionery amounted to 30.6 kg through the market outlets). After a considerable drop in 2011, import ratio in the consumption structure increased again. Annual average growth rate of consumption for the period 2005‐2011 amounted to 3.9% , increasing from 13.6 kg per capita in 2005 to 17.1 kg per capita in 2011. However, after changing the range of flour confectionary products, average per capita consumption of confectionery reached 29.2 kg in 2012, and exceeded 30 kg in 2013. Comparing to 2014, per capita consumption of confectionery in households went down in 2015 and amounted to 30.6 kg.

Retooling and modernization  processes at confectionery  industry enterprises continue

Organizations of the State Food Concern “Belgospischeprom” intended to accomplish re‐tooling and modernization of processes of main production units in 2011‐2015 (as part of the Program for the Development of Belarusian Confectionery Industry Organizations). The plan requires the installation of 29 modern complete lines. Retooling have not been completed in 2015 and will be going on in 2016‐2017.

OJSC «Investment Company UNITER»©

1

CONFECTIONERY INDUSTRY Production

Confectionery production in Belarus

Confectionery market includes: • •

Sugar confectionery marmalade, etc.)

market

(chocolate,

candy,

caramels,

zephyr,

The production volume of confectionery is estimated to reach 257 thousand tons in 2015 (262 thousand tons in 2014). The average annual growth rate of production amounted to 17.39% in 2008‐2012. Wherein, the production volume had been constantly decreasing till 2007, while the positive trend was only noted in 2008‐2011. The annual average rate of drawdown decreased to ‐0.11% in 2013‐2015. The confectionery production is seasonal, with the largest volume of production taking place in October‐March. According to the classification of National Statistical Committee of the Republic of Belarus (applied before 2012), the shares of sugar and flour confectionery in the production structure are almost the same. In 2011, the production volume of flour confectionery amounted to 82.4 thousand tons, of sugar confectionery – to 71.7 thousand tons (53% and 47% of the production volume respectively). The production structure has changed from 2005 to 2011: sugar confectionery prevailed in the production of confectionary products in 2005 (58% share of the overall level). After the increase in household income, consumer preferences changed: candies and chocolates sales increased, while demand for caramel and other lower price segment products declined. Therefore, the production volume of flour confectionery gradually expanded (from 54.6 thousand tons in 2005 to 82.4 thousand tons in 2011), which led to its predominance in the production structure.

Structure of confectionery production in the Republic of  Belarus Sugary sweets 4,7%

Sugarplum 1,2%

Soft sweets 15,8%

Layer cakes and fancy  cakes 7,3%

Chocolate 5,7%

Wafers 11,2%

Caramels 7,7%

100,0 50,0

8,2%

1,5% 4,9% 4,9%

0,2% 1,4% ‐1,9%

0,0 2008 2009 2010 2011 2012 2013 2014 2015 Confectionery products, thou tons Growth rate

Source: Belstat, * The production growth is explained by the changes in the range of  flour  confectionery products in 2012

300,0

Confectionery production in Belarus by  types, thousand tons

250,0 200,0 194,4

150,0 100,0 58,9 67,2

69,1

73,8

200,5 204,5201,6

82,4

50,0

68,5 70,7 70,9 73,1 71,7 63,5 57,9 57,5 55,4 0,0 2007 2008 2009 2010 2011 2012 2013 2014 2015 Sugar confectioneries

According to a new classification of Belstat, 55.4 thousand tons of sugar confectionery was produced in 2015. The production volume is 3.7% lower than in 2014 (57.5 thousand tons).

Halva 2,2%

Gingerbread and  spice cakes 8,8%

150,0

67,4% 154,1 137,9 140,0 146,9

Flour confectioneries

Marshmallows10,2%

Cookies 17,9%

200,0

80% 70% 60% 50% 40% 30% 20% 10% 0% ‐10%

Source: Belstat, * The production growth is explained by the changes in the range of  flour  confectionery products in 2012

Toffee 1,2%

Source: Belstat

257,9 258,4 262,0 257,0

250,0

Flour confectionery market (cookies, wafers, gingerbread, cakes, eastern sweets, etc.)

Cakes and rolled  cakes 1,7%

300,0

Ship biscuits and  biscuits 0,3%

All kinds of confectionery products are produced in the Republic of Belarus: caramel, halve, sugarplum, zephyr, spice cakes, cookies, cakes, wafers, marshmallows, chocolate products, etc. The largest shares in the production are distributed in the following way: cookies (17.9%), soft candies (15.8%), wafers (11.2%), marshmallows (10.2%), spice cakes and gingerbread (8.8%).

Flour sweets 4,1%

OJSC «Investment Company UNITER»©

2

CONFECTIONERY INDUSTRY Foreign trade

Export and import of confectionery products, thousand tons

Import of confectionery traditionally exceeds export in Belarus (2.5 times on average before 2011). Import of confectionery dramatically decreased and amounted to 25.1 thousand tons in 2011 (declined to 30.7% compared to 2010), resulting from devaluation of national currency and Import Substitution Program (ISP). Import volume reestablished in 2012 and amounted to 36.9 thousand tons (+45.5%). After it decreased to 52.6 thousand tons in 2015 (dropped by 4% comparing with the previous year). Export of confectionery, in contrast, increased from 18 thousand tons to 19 thousand tons in 2015. Overall, export volume had been gradually increasing from 2011 till 2014. During that period, the import growth rate was constant (till 2015). The export/import proportion varies in terms of the confectionary products type. There is almost no difference between volume of export and import of sugar confectionery products. However, this trend has changed since 2013. In 2015, import exceeded export almost 2.5 times. Import of flour confectionery normally exceeds exports more than 5 times. After a dramatic drop in 2011, the import of flour confectionery products began to recover in 2012‐2015. Despite decline in 2012‐2014, export of sugar confectionery products increased to 10.6 thousand tons in 2015. On the contrary, import declined to 24.4 thousand tons. Import of flour confectionery products have been increasing throughout last 5 years, amounted to 28.2 thousand tons (+5.2%) in 2015, with export amounted to 8.4 thousand tons in 2015 (+7.6%). There was a slight increase in export of confectionery products starting from 2009 to 2013, but the share of sales in the foreign markets in 2009‐2011 remained constant at 10%. Export share considerably declined from 10% to 6.9‐ 7.4% in 2012‐2015. The main suppliers of confectionery to Belarus are Ukraine and Russian Federation (16.9% and 72% respectively). Belarusian manufacturers supply confectionery products to 25 CIS and non‐CIS countries: Turkmenistan, Azerbaijan, Mongolia, Germany, Latvia, Russian Federation, the USA, Israel, Kazakhstan, etc.

60

50,0

50 33,1

40

31,1

10 13,2

13,2

0

14,4

13,2

9,5%

13,3

9,8%

10,0%

10%

14,4

15,4

7,0%

7,3%

18,1

18,8

6,9% 18,0

7,4% 19,0

8%

Export and import of sugar confectionery products, thousand tons 27,2 28,0

30

24,4

25

20,6

17,6 14,3 14,5 13,112,5 11,9 15 10,2 10,6 10,0 10,3 10,6 10,2 10 20

5 0 2008 2009 2010 2011 2012 2013 2014 2015 Export

Source: Belstat

Import

Export and import of flour confectionery products, thousand tons 30

26,8

28,2

22,8

25 18,8

18,6

16,6

16,3 12,0

3,2

3,8

2,9

5,3

5,6

7,8

6,9

8,4

0 2008 2009 2010 2011 2012 2013 2014 2015 Export Import Source: Belstat

Export and import by the types of  confectionery products in 2015

6% 4%

18,8

18,1

15,4

2008 2009 2010 2011 2012 2013 2014 2015 Export Import Source: Belstat

5 9,6%

19,0

20

10 12%

18,0

25,1

15

20 18 16 14 12 10 8 6 4 2 0

52,6

36,9

36,2

30

20

The share of exports in production

54,8

Import

24,40

28,23

2% 2008

Source: Uniter

2009 2010 Export, thou tons

2011

0% 2012 2013 2014 2015 Export share in the production, %

Export

10,58 0%

20%

8,44 40%

Sugar confectioneries Source:  Comtrade

60%

80%

100%

Flour confectioneries

OJSC «Investment Company UNITER»©

3

CONFECTIONERY INDUSTRY Geographic structure of confectionery  export, 2015

Foreign trade Russia is the primary consumer of the Belarusian confectionery: Russia was accounted for 85.2% of the total export volume in 2015. The major exporters of confectionery products are the “Belgospishcheprom” Concern’s companies.

Kazakhstan 1,2%

Export of confectionery products to Russia is carried out by the exclusive representative of confectionary companies in Belarus ‐ Belkonditer LLC (the Company established in 2006 and represents the interests of Spartak, Kommunarka, Slodych, Krasniy Mozyryanin, Vitba, Brestkhlebprom).

Azerbaijan 1,7%

Russia 85,2% Others 8,9%

There are new opportunities to increase the export of Belarusian confectioners: i.e. supply of products using refrigeration. CUE “Minskhlebprom” has already closely collaborated with Russian partners on export supplies of frozen cakes.

Turkmenistan 1,4% The Baltics 1,5%

Source: Belstat

Geographic structure of confectionery  import, 2015

Consumption According to estimates, the consumption of confectionery products in Belarus amounted to 290.6 thousand tons in 2015 (2.7% lower than in 2014). Import share dropped to 18.1% in 2015. The growth of confectionery products consumption has been observed in Belarus since 2005, with the only exception of 2011. The annual average growth rate of consumption for the period 2005‐2011 amounted to 3.9% ‐ from 13.6 kg per capita in 2005 to 17.1 kg per capita in 2011. However, because of the implementation of a new flour confectionery line, average per capita consumption in Belarus reached 29.2 kg in 2012, and exceeded 30 kg in 2013. Comparing to 2014, consumption of confectionery in households went down and amounted to 30.6 kg per person in 2015 . The dynamics of the confectionary consumption in the Republic of Belarus for the last years allows to drawn out the following trends: •

an increased level of consumption of more expensive confectionery groups, while the consumption of chocolate confectionery, mixed and glazed cookies and classical sweets slows down;



a growing share of packaged products and the increase in sales of “branded” products;



an increasing dependence of sales level on the volume of marketing and advertising support.

The distinctive characteristics of the consumer market of confectionary products in Belarus are strong concentration of production, development of new types of products, government regulation, and market saturation.

Germany 3,7%

Ukraine 16,9%

Poland 2,0%

Russia 72,0%

Others 5,4%

Source: Belstat

Consumption of confectionery in the  Republic of Belarus 35

21,0%

30 25

19,7%

25%

21,5% 15,5%

17,3% 18,3% 18,1% 13,3%

15%

20 15

10%

10 5 0

20%

16,5

16,6

17,8

17,1

29,2

30,6

31,5

30,6

5% 0%

2008 2009 2010 2011 2012 2013 2014 2015 Average per capita consumption, kg per capita Import share in the consumption, % Source: Uniter

OJSC «Investment Company UNITER»©

4

CONFECTIONERY INDUSTRY The key players

Structure of confectionery market in the  Republic of Belarus

Belarusian confectionery industry is represented by 20 enterprises: 8 companies forming part of the State Food Concern “Belgospischeprom”, enterprises and sections of communal, private and foreign owners property. The main manufacturers of confectionery industry in Belarus are JV JSC “Spartak”, OJSC “Kommunarka”, OJSC “Krasny pischevik”, OJSC «Confectionery factory "Slodych“, JV JSC “Ivkon”, OJSC «Krasny Moziryanin», OJSC “Konfa”, JLLC «The First Chocolate Company». These 8 companies are subject to the State Food Concern “Belgospishcheprom”. They comprise about 70% of the total production output of confectionery in Belarus. Additionally to specialized enterprises, bakery industry manufacturers produce flour confectionery.

CUE  “Minskhlebprom” 7%

67% of the total production volume accounted for the enterprises of the Concern “Belgospischeprom”, 12% ‐ for Bread products Department, 7% ‐ for CUE “Minskhlebprom”, and 3% ‐ for Belcoopsoyuz. Remaining production volume accrued to smaller manufacturers.

Bread products  Department 12%

The following shares of the enterprises are state‐owned: OJSC “Kommunarka” – 57%, JV JSC “Spartak” – 60%, OJSC «Confectionery factory "Slodych“ – 70.2%, OJSC «Krasny Moziryanin» ‐ 86.6%, OJSC “Krasny pischevik” – 18%, and OJSC “Konfa” – 25%.

Characteristics of the main manufacturers of Belarusian confectionery  industry Enterprise

Brand

Chocolate bars and gift seta, caramels, sugar  candies, wafers

OJSC “Kommunarka”

Candies, chocolate products(gift sets and bars),  caramels, sugar candies

OJSC “Krasny pischevik”

Zephyr, marmalade, halva, sugarplum, candies,  toffee

JV JSC “Ivkon” OJSC «Krasny Moziryanin» OJSC “Konfa”

Belcoopsoyuz 3%

Concern  “Belgospisc heprom”  67%

Source: Belgospischeprom

Location of the main manufacturers of  confectionery industry in the Republic of Belarus

Products range

JV JSC “Spartak”

OJSC «Confectionery  factory "Slodych"

Other manufacturers 11%

Cookies, crackers Caramels, gift sets, glazed wafers, eastern  sweets Zephyr, fruit jelly, toffee, candies, marmalade Gingerbread (with filling), cookies, wafers,  zephyr, sugarplum

OJSC «Investment Company UNITER»©

5

CONFECTIONERY INDUSTRY The key players The largest player of the Belarusian confectionery industry is JV JSC “Spartak”. Its revenue amounted to 72.9 mln US dollars. OJSC “Kommunarka” follows with the total revenue of 72.3 mln US dollars.

Revenue of the largest OJSC for 2015, mln US  dollars 72,9

80

72,3

70 60

JV JSC “Spartak” (5.45 mln US dollars) and OJSC “Kommunarka” (1.32 mln US dollars) were the leading companies in terms of net profit in 2015. Confectionery factory "Slodych“ was ranked the third.

50 33,2

40 30

20,4

20

7,8

10

7,2

1,9

0 OJSC «Confectionery factory "Slodych"

JV JSC  “Spartak”

OJSC “Krasny  OJSC  JV JSC “Ivkon” OJSC «Krasny pischevik” “Kommunarka” Moziryanin»

OJSC “Konfa”

Net profit margin for 2015, % OJSC “Konfa”

‐44,1%

OJSC «Krasny Moziryanin»

0,2%

Source: FinMin

Net profit of the largest OJSC for 2015, mln US dollars

JV JSC “Ivkon”

6,0 5,0 4,0 3,0 2,0 1,0 0,0 ‐1,0 ‐2,0

5,45

1,33

1,8%

OJSC “Krasny pischevik”

1,9%

JV JSC “Spartak”

7,5%

OJSC «Confectionery factory "Slodych"

6,5%

1,32

0,63

‐0,83

0,02

‐1,13

‐50%

‐14,4%

OJSC “Kommunarka”

‐40%

‐30%

‐20%

‐10%

0%

10%

20%

Source: FinMin, Uniter OJSC «Confectionery factory "Slodych"

JV JSC  “Spartak”

OJSC “Krasny  OJSC  JV JSC “Ivkon” OJSC «Krasny OJSC “Konfa” pischevik” “Kommunarka” Moziryanin»

Source: FinMin

The amount of revenue per employee among enterprises of the confectionery industry has not significantly changed. This indicator fluctuates from 7.7 thousand US dollars to 44.6 thousand US dollars (peaking by the industry leader OJSC “Kommunarka”). Revenue per employee in 2015, thousand US  dollars 7,7

OJSC “Konfa”

19,1

OJSC «Krasny Moziryanin»

28,5

JV JSC “Ivkon”

44,6

OJSC “Kommunarka”

It should be noted, that the companies leading in terms of revenue and net profit, namely JV JSC “Spartak” and OJSC “Kommunarka”, took the second and the fourth place correspondingly. Net profit margin of OJSC “Kommunarka” during 2015 stood at 1.8%. Thus, it could be noted that JV JSC “Spartak” and OJSC “Kommunarka” are the undisputed leaders in terms of almost all reported indicators – both in relative and absolute values.

31,3

OJSC “Krasny pischevik”

38,1

JV JSC “Spartak”

36,7

OJSC «Confectionery factory "Slodych"

Source: FinMin

JV JSC “Ivkon” is a leader in terms of net profit margin in 2015 (totaled 14.4%). Profitability of the enterprise is 7.5%. JV JSC “Spartak” was ranked the second with the large underrun at 7.5%.

0

10

20

30

40

50

OJSC «Investment Company UNITER»©

6

CONFECTIONERY INDUSTRY Legal environment 1) The majority of the confectionery companies are privately owned, but their activities are regulated by “Belgospischeprom” (the State Concern). “Belgospischeprom” is entrusted to implement the state policy in terms of the confectionary industry. The Concern determines plan indicators (i.e. production growth rate, export supply), and controls their execution. 2) Program for the Development of Belarusian Confectionery Industry Organizations (2011‐2015) was implemented in order to expand production capacity using modern energy‐efficient equipment and advanced technologies, to increase production volume of confectionery products in the Belarusian market, and to develop an export potential of confectionery industry. 3) The government, taking advantage of Presidential Decree No. 107, restored the control over the leading confectionery plants – “Kommunarka”, “Spartak”, and “Krasny pischevik”. The Decree retroactively gives local authorities a priority right to purchase shares from individuals who swapped their securities into cheques “Imuschestvo” or purchased them at discount. 4) The creation of CEC and Russia’s accession to the WTO is expected to increase the competition in the Belarusian confectionery market. As a result, the government intends to establish protectionist measures in the market. 5) In August 2011, the Ministry of Justice of the Russian Federation has registered the Association of the Confectionery Industry in the Customs Union (“ASKOND‐CU”). The association concentrates on the protection of the manufacturers interests and reform of technical regulation within the Customs Union. The founding members of “Askond‐TS” were Russian Confectionery Industry Association “Askond”, “Belgospischeprom”, Association of food and pharmaceutical industries manufacturers of Kazakhstan, and Association of Confectioners of Kazakhstan.

The rate of the number of domestic chocolate was  established for Belarusian shops

According to the Decree of the Ministry of Trade of the Republic of Belarus (effective from August 12, 2014), at least 36 types of domestically produced chocolate must be introduced in every Belarusian shop. The document requires the retail facilities, that sell imported goods relevant to the local ones, the obligatory presence of domestic products. The exception may only be those goods which classified as critical import. The rate of the number of Belarusian chocolate for gastronomes with shopping capacity of more than 200 sq. m. is 40 product items, for big supermarkets with shopping capacity of 1‐2.5 thousand sq. m. – 80 product items, for hypermarkets with shopping capacity of 8 sq. m. – 120 product items. At least 5 items of Belarusian chocolate must be proposed in the stalls, and at least 36 – in small specialized product shops. Ukraine introduced special import duties on  Belarusian goods Ukraine introduced special import duties on Belarusian goods on January 20, 2016. Special duty in the amount of 39.2% will be applied for sugar and flour confectionery products, chocolates and chocolate products.

OJSC «Investment Company UNITER»©

7

CONFECTIONERY INDUSTRY Legal environment Non‐tariff trade regulation between Belarus and Ukraine After investigation of Belarusian producers` applications for temporary blocking actions to the access to the Ukrainian commodity market, Ukraine has introduced protective duties for the Belarusian confectionery industry since 2016. For example, there were applications for license requirements of every consignment of Ukrainian food products last year, Ukrainian confectionery products was blocked by the Belarusian customers the year before last, sales limitation of Ukrainian products in the Belarusian retail outlets was observed two years ago. All Ukrainian suppliers must undergo an additional sanitary examination since August of 2015. Based on an examination suppliers must receive a corresponding decision for a specified term. Despite the fact that all Ukrainian producers are certificated by corresponding government agencies of Belarus, Belarus adopted a regulation for a additional sanitary procedure in august. As the result Ukrainian producers were being deprived of the access to the Belarusian market within a month and a half. Special duty will be applied on the entry into force of the decision and till the cancellation of discriminating and unfriendly actions against Ukraine by Belarus.

Shops were obliged to sell 36 types of Belarusian chocolate According to the Decree of the Ministry of Trade of the Republic of Belarus No 20 (May 8, 2014), the retail facilities that sell imported goods corresponding to the local ones are obliged to ensure the availability of appropriate domestic products. For example, the rate of the number of Belarusian chocolate for gastronomes with shopping capacity of more than 200 sq. m. is 40 product items, for big supermarkets with shopping capacity of 1‐2.5 thousand sq. m. – 80 product items, for hypermarkets with shopping capacity of 8 sq. m. – 120 product items, in small specialized product shops – at least 36. Moreover, more than 3 home‐produced milk items must be sold in the gastronomes, and more than 10 milk items – in the supermarkets and department stores. The hypermarkets must propose at least 30 domestically produced milk items to consumers, the specialized and highly specialized product shops – 6 milk items.

Customs duties on confectionery products  were declined  A set of EEC`s decisions on adjustments in CCT of the Customs Union went into operation. Rates of duties of CCT of the Customs Union will be adjusted according with arrangements that were reached through the negotiations for Russia`s accession to the WTO. Protocol of Russia`s accession to the WTO went into operation on the 22th of August of 2012. Gradual reduction of customs duties has been finished by 2015. All together reduction of import duties touched on 88 product groups (4822 commodity codes). In this case reduction of duties on the majority of the list amounts to less than 3%. Most critical adjustments (from 3% to 4.9%) accrued to certain textiles and carpets, and also selective number of equipment (5%). Reduction of duties concerns most of food products: meat of some animal species and meat products (groups 0204, 0206, 0208, and 0210), live, fresh and refrigerated fish (0310 and 0302), frozen fish and fish fillet (0303, 0304), milk products (0402), fresh and canned vegetables and fruits from commodity item 07, a range of confectionery products and alcoholic drinks, confectionery products, and juice material. Total adjustments affected 602 commodity items.

OJSC «Investment Company UNITER»©

8

CONFECTIONERY INDUSTRY Investment activity Food industry is one of the first in which privatization process started in 1993. During a discounted voucher privatization, a large number of employees participated. As a result, 97% shares of “Kommunarka” were purchased by them. In order to prevent undesirable redistribution of property through the secondary market, the government imposed a restriction on the flow of shares in 1998. To a certain extent, the moratorium on shares flow was provoked by the situation in “Kommunarka”, when unauthorized group of persons attempted to accumulate shares of the company in 1997. At the same time, the institution of “golden share” was introduced. This mechanism was being implemented in the joint‐stock companies through state agents who were entitled to put a veto for a variety of important issues, such as significant economic decisions. In 2000, “golden share” was introduced at “Kommunarka”, because the government had fears that the enterprise would come under the control of the Russian holding company “Babaevski”. However, the President ultimately signed the Decree No 140 of 04.03.2008. According to this document, the institution of “golden share” has been abolished. The moratorium on flow of shares has been entirely lifted since January 1, 2011. As a result, the investment activity has increased: investors started to buy shares, including shares of the confectionery industry enterprises . Yet after the issue of the Presidential Decree No 107, the priority right to buy shares of strategically important enterprises was granted for local authorities. Moreover, the document has the authority under the relations which have arisen since the beginning of 2011. Enterprises of the confectionery industry: OJSC “Kommunarka”, OJSC «Confectionery factory “Slodych”, JV JSC “Spartak” and OJSC “Krasny pischevik” – were included in the list of joint‐stock companies which are substantial for the operation of strategic sectors of the economy. These enterprises are not affected by the abolition of restrictions on the citizens’ sale of shares, acquired during the preferential privatization. Taking advantage of this Decree, the government brought back the control over the leading confectionery factories.

Investment projects In 2016‐2020, the companies of the confectionery industry is expected to attract further investments because of the industry inclusion in the list of prioritized ones for the investment. The Concern “Belgospischeprom” intends to accomplish further re‐tooling and modernization of the main production units. The confectionery companies of the Concern has already implemented a range of investment projects under Organizations of Belarusian Confectionery Industry Development Programme. The modernization process at OJSC “Kommunarka” is almost completed (about 95% is ready). New technological lines have been installed; a new chocolate section has been made, and a confectionery shop has been modernized. Moreover, necessary renewal of communications has been accomplished, the activity of which works out for a significant period of time. “Krasny pischevik” took out credit resources (46.6 bln roubles) in 2015 for modernization of production. The credit resources were took out 3 times larger than in 2014. An active investment activity let decline depreciation (from 66.4% in 2012 to 50.3% in 2015).

A new line for the production of gingerbread with fillings has been launched at OJSC «Confectionery factory “Slodych”.

JV JSC “Spartak” set in operation wafers section. The project was implemented according to an investment contract between JV JSC “Spartak” and Gomel Oblast Executive Committee. Its total cost, including purchase of equipment and recovery operation, amounted to 10 mln euro. Production volume will be expanded to 25 tons wafers products per a day (at 15‐20%) by means of absolute manufacturing automation. Thus product costs will be declined at 7%. Payback period of a new project is three and half year.

JV JSC “Ivkon” put into operation a new line for production of candies (import substitutes) that have been already exported to 30 countries.

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CONFECTIONERY INDUSTRY Statistical Appendix Key economic indicators Indicator Nominal GDP Nominal GDP * Real GDP Growth Industrial production Agricultural production CPI CPI  IPPI IPPI Export of goods and services (USD) Import of goods and services (USD) Current account Current account*  FDI (net)  Foreign reserves Budget balance Internal Public Debt Total External Debt* Monetary base

Unit of measurement BYR tr USD bln % yoy % yoy % yoy % yoy % yoy e/y % yoy av. % yoy e/y % yoy % yoy USD mln % of GDP USD mln USD mln e/y % of GDP % of GDP e/y % of GDP e/y % г/г к/п

2006 79,27 37,0 10,0 11,4 5,9 7,0 6,6 8,3 9,0 22,3 33,2 ‐1448 ‐3,9 351 1383 1,4 6,5 18,5 20

2007 97,17 45,3 8,6 8,7 4,1 8,4 12,1 16,3 22,2 24,2 28,0 ‐3040 ‐6,7 1790 4182 0,4 6,3 27,6 38

2008 129,79 60,8 10,2 11,5 8,9 14,8 13,3 14,8 15,4 34,2 37,0 ‐4988 ‐8,2 2150 3061 1,4 6,6 24,9 12

2009 137,44 49,2 0,2 ‐2,0 1,0 13,0 10,1 15,0 11,3 ‐32,9 ‐27,0 ‐6178 ‐12,6 1782 5653 ‐0,7 5,7 44,8 ‐12

2010 164,48 55,2 7,7 12,0 2,5 7,7 9,9 13,5 18,9 20,3 22,8 ‐8278 ‐15,0 1352 5031 ‐2,6 5,6 51,6 50

2011 274,28 47,3 5,3 9,1 6,6 52,3 108,7 69,2 149,6 54,2 29,3 ‐5775 ‐12,2 3928 7916 2,4 11,8 71,9 84

2012 527,39 63,1 1,5 5,7 6,1 67,5 21,8 90,5 21,0 11,4 2,5 ‐1688 ‐2,7 1308 8095 0,5 9,3 53,5 62

2013 636,78 71,5 0,9 ‐4,8 ‐4,0 18,5 16,5 14,0 10,7 ‐15,5 ‐6,7 ‐‐ ‐‐ ‐‐ 6651 0,2 10,7 ‐‐ 13,4

Exchange rate (NBB, official)** 

BYR/USD av.

2145

2146

2136

2793

2978

4623

8336

8876

Exchange rate (NBB, official)** 

BYR/USD e/y

2140

2150

2200

2863

3000

8350

8570

9510

Exchange rate (NBB, official)**

BYR/EUR av.

2692

2937

3135

3885

3950

6432

10713

11782

Exchange rate (NBB, official)**

BYR/EUR e/y

2817

3167

3077

4106

3973

10800

11340

13080

* In 2011, indicator  was calculated on the basis of the market exchange rates (estimated average market rate – 5984 BYR/USD), in the other years –on the average exchange rate basis. ** In April‐October 2011, the multiplicity of the exchange rates was observed. Source: IPM Research Center

Production of confectionery in Belarus, thousand tons Confectioneries, overall Growth rate Sugar confectionery Flour confectionery Source: Belstat

2006

2007

2008

2009

2010

2011

2012 

2013

2014*

2015

129,1

127,4

137,9

140,0

146,9

154,1

257,9

258,4

262,0

257,0

‐1,07% 74,2 54,9

‐1,32% 68,5 58,9

8,24% 70,7 67,2

1,52% 70,9 69,1

4,93% 73,1 73,8

4,90% 71,7 82,4

67,36% 63,5 194,4

0,19% 57,9 200,5

1,39% 57,5 204,5

‐1,91% 55,4 201,6

Structure of confectionery market in Belarus (by production volume) Share Concern “Belgospischeprom”

67,2%

Bread products Departament

11,7%

CUE “Minskhlebprom”

7,1%

Belcoopsoyuz

3,2%

Other manufacturers

10,8%

Source: Belgospischeprom

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CONFECTIONERY INDUSTRY Statistical Appendix Production structure of Belarusian confectionery  industry Production  volume, tons

Category Marshmallows

10,2%

Toffee

1,2%

Halva

2,2%

Sugarplum

1,2%

Soft sweets

15,8%

Chocolate

5,7%

Caramel

7,7%

Ship biscuit and  biscuit

0,3%

Flour sweets

4,1%

Wafers

11,2%

Cakes and rolled cakes

1,7%

Layer cakes and fancy cakes

7,3%

Spice cakes and gingerbreads

8,8%

Cookies

17,9%

Sugary sweets

4,7%

Export and import of confectionery, thousand tons 2008

2009

2010

2011

2012

2013

2014

2015

Export

13,17

13,25

14,38

15,43

18,13

18,76

17,96

19,02

Import

33,09

31,14

36,23

25,10

36,53

50,04

54,82

52,63

Export and import of sugar confectionery, thousand tons 2008

2009

2010

2011

2012

2013

2014

2015

Export

9,99

10,33

10,62

10,17

12,50

11,88

10,20

10,58

Import

14,28

14,52

17,58

13,14

20,61

27,22

28,02

24,40

Export and import of flour confectionery, thousand tons 2008

2009

2010

2011

2012

2013

2014

2015

Export

3,18

2,92

3,77

5,26

5,64

6,88

7,75

8,44

Import

18,82

16,63

18,65

11,95

16,30

22,82

26,80

28,23

Source: Comtrade

Import share of consumption volume of confectionery 

Source: Belstat

2007

2008

2009

2010

2011

2012

2013

2014

2015

23,7%

21,0%

19,7%

21,5%

15,5%

13,3%

17,3%

18,3%

18,1%

Export and import regional pattern in 2015 Export

Import

Export share of production volume of confectionery 

Russia

85,2%

Russia

72,0%

Kazakhstan

1,2%

Ukraine

16,9%

Azerbaijan

1,7%

Germany

3,7%

Turkmenistan

1,4%

Poland

2,0%

The Baltics

1,5%

Others

5,4%

Others

8,9%

Source:  Comtrade

2007

2008

2009

2010

2011

2012

2013

2014

2015

12,3%

9,6%

9,5%

9,8%

10,0%

7,0%

7,3%

6,9%

7,4%

Source: Belstat, Comtrade

Consumption of confectionery 2008 2009

2010

2011 2012 2013 2014 2015

Consumption, thousand 157,8 157,9 168,7 162,4 276,7 289,7 298,9 290,6 tons Specific consumption, kg  16,5 16,6 17,8 17,1 29,2 30,6 31,5 30,6 per capita

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Disclaimer The information in this publication is based on carefully selected sources believed to be reliable but we do not make any representation as to its accuracy or completeness. Any opinions herein reflect our judgement at the date hereof and are subject to change without notice. Any investments discussed or recommended in this report may be unsuitable for investors depending on their specific investment objectives and financial position. Any reports provided herein are provided for general information purposes only and cannot substitute the obtaining of independent financial advice. Private investors should obtain the advice of their banker/broker about any investments concerned prior to making them. Nothing in this publication is intended to create contractual obligations on any of the entities composing UNITER.

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