OREANDA-NEWS. Nutritek continues to expand at a solid pace, boosting its market share from 13.3% in 2005 and to 15.3% in 2006. In 2007, the company intends to increase its presence to 18%, and then to 27% over the next four years.

According to a research by Antanta Capital, Nutritek is the only company in Russia and the CIS that manufactures high margin and potentially lucrative breast-milk substitutes. The company’s share of this market segment is around 14%.

Nutritek has begun moving into South East Asia, focusing particularly on the Chinese market. The company’s core feedstock base is New Zealand, where Nutritek owns a dairy enterprise. September 2007 saw the commissioning of a powered milk production line at the New Zealand plant. A second line is due for start-up in 2008, when the plant is also expected to begin operating at design capacity.  

Next year is also expected the commissioning of the company’s two baby food plants in China, which will manufacture breast-milk substitutes. The main driver for the Chinese market is a decision taken by the country’s government to upsize consumption of dairy products among the population. By 2011, Nutritek is looking to capture up to 3% of the local market, whose current capacity is $6 bn.

In September 2207 Standard & Poor’s assigned the company a B rating with a positive outlook, noting Nutritek’s strong potential in light of the rapid growth of the baby food market. In 2002-2006 the market expanded at an average annual rate of 28% in monetary terms.

The company intends to scale up the share of baby food in its product mix. Given that gross margin for baby food is on average 150% higher than margins for the dairy segment, this should translate into an overall improvement in the company’s indicators.

Still, the risks attached to investing in Nutritek derive, in the view of Antanta Capital analyst Andrey Verkholantsev, first and foremost, from its heavy dependence on market prices for raw materials, given that the company’s in-house feedstock base is relatively limited. Fluctuations in global milk prices, which occurred this year, for example, could take a toll on profit margins.

Nutritek is Russia’s biggest producer of baby food and commands 15.3% of the domestic market.