By Brad Dorfman
CHICAGO (Reuters) - The Russian market is not an easy one for H.J. Heinz Co. (HNZ.N: Quote, Profile, Research, Stock Buzz).
Margins there are, and will continue to be, below the company average. The market is fragmented and Heinz has got to spend a lot of money in a battle for market share.
But according to Heinz Chairman and Chief Executive Officer William Johnson, the size of the market makes it one the company will not leave.
"It's the second largest ketchup market in the world and one of the fastest growing with the third highest per capita consumption in the world," Johnson said at the Reuters Food Summit in Chicago on Tuesday.
Johnson said the company did not want to repeat the mistake it made in the 1980s, when it chose not to sell ketchup in Japan, which for some time was the No. 2 ketchup market in the world.
"We fundamentally missed that market," Johnson said. "We have a 5 (percent) share in Japan give or take and we are not going to make that same mistake in Russia."
The size of the Russian market is attracting other U.S. food companies. Campbell Soup Co. (CPB.N: Quote, Profile, Research, Stock Buzz) said in February it plans to test market its soup in Russia during fiscal year 2008, which begins at the end of July.
"It will be a long-term share battle," Johnson said of Heinz's plans in the Russian market. "It will be a long-term opportunity and someday we'll look back and be very pleased that we participated in the Russian market." Continued...
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