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| Lotte Confectionery's Kaluga plant in Russia. Courtesy of Lotte Confectionery |
By Kim Hyun-bin
Korean food companies that operate plants in Russia have been keeping a close eye on Moscow's war on Ukraine and the ensuing U.S.-led international sanctions as they fear the prolonged military conflict could adversely affect their business there, according to company officials and industry analysts Thursday.
For now, their plants have been operating normally, the companies said, but they fear they may stop producing foodstuff and other products in Russia if the international community takes more measures against Moscow.
Orion, Paldo, and Lotte Confectionery, which run manufacturing facilities in Russia, have been taking precautionary measures by increasing inventories of raw ingredients.
Orion said it has secured three months' worth of raw materials to produce its signature Choco Pie in advance. The small cake-like snack has established itself as a national favorite in Russia.
"As of now, there is no problem with the plant operation as well as the scheduled completion of our new factory (in Tver)," an Orion official said. "However, due to the worries of an extended crisis, we have currently built up three months' worth of raw materials and plan to add more to our stockpile."
Sales at the company's Russian subsidiary rose to 117 billion won last year from 77.2 billion won in 2019 and 89 billion won in 2020.
Orion is thinking about bringing in key materials through its Chinese subsidiary, if the Russia crisis worsens.
Lotte Confectionery, which recently invested about 34 billion won in a Russian subsidiary to expand its own Choco Pie production line, is also seeking ways to secure local funds to increase stockpiles of raw and subsidiary materials.
"Currently, we are operating our plants, but keeping a close eye on possible additional sanctions that could be imposed," a Lotte Confectionery official said.
Lotte Confectionery also announced a plan to introduce "Mon Cher" chocolate cakes in the first half of this year, aiming to grow more than 20 percent in Russia. But due to difficulties in securing raw materials and an expected rise in flour prices, the launch plan could be postponed.
Despite their efforts, the crisis and ensuing sanctions will make it difficult for the two companies to proceed with their planned Russian market expansion.
Initially, Orion planned to increase the supply of Choco Pie to more than 1 billion pieces per year at its new plant in Russia, and use the plant as a stepping stone to target the Central Asian and European markets.
Paldo, the largest instant noodle maker in Russia, is also closely monitoring the situation. For now, instant noodles and other food products do not fall under any international sanctions category put in place against Russia.
