| A customer shops for Orion's Choco Pie at a supermarket in Russia in this file photo. Courtesy of Orion |
By Park Jae-hyuk
Orion emphasized once again that its new factory in a Russian administrative division of Tver will start operations during the first half of this year as planned, despite the international community's growing calls on global enterprises to leave the country.
The confectionery giant, which runs two production facilities in Russia, expects the Tver factory to help its expansion into Central Asia and Europe.
Based on that belief, the company reiterated that it will remain in the lucrative Russian market, while indicating its intention to raise the prices of its top-selling Choco Pie and several other snacks in the world's largest country.
"In accordance with the country's skyrocketing inflation, we plan to increase our product prices there," Orion Holdings Executive Vice Chairman Huh In-cheol told shareholders during their general meeting, Thursday.
"Our subsidiaries in Korea, China and Russia will collaborate organically to come up with countermeasures against difficulties in the supply of ingredients."
Last year, Orion's Russian subsidiary posted a 31.5-percent year-on-year growth in sales. Its operating profit also rose 8.3 percent from a year earlier.
Analysts expect the food firm to continue seeing solid earnings in Russia this year.
"Although the circumstances surrounding its Russian subsidiary are instable, the company seems to have made efforts toward its stable operation there," NH Investment & Securities analyst Cho Mi-jin said in report, Friday.
Hi Investment & Securities analyst Lee Kyung-shin said that Orion can anticipate much higher earnings in Russia, once the geopolitical tensions ease.
"Despite the geopolitical tensions between Russia and Ukraine, the export from its Russian subsidiary to Ukraine accounted for only 2 percent of the subsidiary's exports, so there will be a limited impact on the company," the analyst said. "The company is also expected to minimize costs by diversifying sources to import ingredients."
However, a growing number of multinational firms doing business in Russia are facing a boycott from consumers worldwide, while some of them came under threat of cyberattacks from international hacker groups, such as Anonymous.
Starting Saturday, the Korean government will also ban the exports of 57 types of non-strategic items and technologies to Russia and Belarus, in order to join the international community's economic sanctions against them in the wake of Russia's invasion of Ukraine.