Fazer Bakery – Country-Wide Bakery Expansion

The company is one of the leading baking companies in the Nordic regions.

Fazer Russia will invest €100m ($158m) in the bakery to produce a range of value-added frozen bread, fresh bread and coffee bread.

Fazer Russia operates under the Hlebny Dom brand name for its bakery business.

The Fazer Group, a family business founded in 1891 in Finland, operates in eight countries with four divisions, one of which is Fazer Russia (the others being Fazer Amica, Fazer Bakeries and Candy King). The company is one of the leading baking companies in Estonia, Lithuania, Russia, Latvia, Sweden and Finland.

The company has positioned itself as one of the leading bakers in Russia and is going through a period of expansion to provide additional capacity. Since 2005 Fazer has seen unprecedented growth in the Russian market with the business growing at a rate of 40% a year. In 2007 Fazer Russia turned over €170m. In 2008, it registered €222.5m.

Fazer Russia operates under the Hlebny Dom brand name for its bakery business. Hlebny Dom is one of the leading players in the market in St Petersburg with an annual output of 130,000t of bread and other bakery products of which 20% goes to Moscow. The Fazer Bakery business in Russia is composed of several bakery businesses, including BKK Neva, which was acquired in January 2009.

Zvezdny bakery

Fazer’s Moscow-based OAO Experimentalny Konditersko-Bulochny Kombinat (Zvezdny) bakery is one of the country’s largest manufacturers of pre-baked pizzas, frozen dough, fresh bread, pastries and coffee bread (75,000t per year) in the Tver region.

Fazer purchased the Zvezdny bakery in Moscow in 2005. On a yearly basis, Zvezdny manufactures some 1,800t of bake-off pizzas and 5,100t of frozen dough, as well as 12,900t of bread, 6,100t of pastries and 1,240t of rusk.

Expansion

In March 2008, Fazer announced the building of a bakery on a greenfield site in the east of Leningrad Oblast. The company will invest €100m ($158m) in the bakery to produce a range of value-added frozen bread, fresh bread and coffee bread for the domestic and surrounding international markets (the company has invested €130m in its Russian operation in the last ten years).

Finance

The European Bank for Reconstruction and Development (EBRD) has raised a loan of RUR3.5bn (€95m) for expansion of the Fazer bakery business in Russia. Around 60% of the loan is expected to be distributed to several international banks. The EBRD will keep around RUR1.4bn (€38m) on its books and syndicate RUR2.1bn (equivalent to €57m) under an EBRD A/B loan structure.

The maturity of the EBRD-funded portion of the loan (A loan) is eight years. The portion of the loan funded by commercial participating banks (B loan) includes both an eight-year maturity and a five-year one. Part of the loan will finance the Leningrad Oblast bakery.