Case
Teaching Notes
Supplementary Resources
Abstract
The case describes the steps Atria undertook in Russia with a focus at post-acquisition integration of Russian activities in the overall Atria strategy.
This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.
2024 Sage Publications, Inc. All Rights Reserved
Resources
Exhibit 1. Atria’s Internationalisation Timetable
Year | Countries Entered |
1997 | Sweden |
2003 | Lithuania |
2004 | Estonia |
2005 | Russia |
Source: Company records.
Exhibit 2. North and North-West economic zones of Russia
Exhibit 3. Some characteristics of the meat-processing industry in Finland and Russia
Finland | Russia |
High level of consolidation (CR3 about 80%) | Low level of consolidation (CR3 about 20%) |
Small number of meat processing companies (5) | Large number of meat processing companies (about 60) |
Low share of imported meat raw materials (about 5%) | High share of imported meat (about 50%) |
High level of consolidation of grocery retail (CR3 about 85%) | Growth in centralised retail trade – rapid development of Russian and foreign retail chains |
Growth in purchasing power of families | |
High level of meat consumption (70 kg per capita annually)* | Low level of meat consumption compared to developed countries (50 kg per capita annually) |
*In Sweden – 80 kg.
Source: Author’s interviews with market analysts
Exhibit 4. Brief overview of Pit-Product Group
The company was established as a sausage plant in April 1996 in St. Petersburg. In 1998, it started manufacturing conventional and original delicatessens and exclusive products at a new facility. At the same time, a vacuum system for product packaging was introduced. In 1999, Pit-Product introduced modern, ecologically friendly, smoking technology. In 2001, another factory was established with its own slaughterhouse in the village of Sinyavino some 40 kilometres outside St. Petersburg (in the Leningrad Region). In 2002 and 2003, two new workshops started to produce raw smoked products. The company acquired a pig-breeding farm in the Village of Irinovka, Leningrad Region and reconstructed it from the ground up. A bit later, Pit-Product began to use new FLOW-PACK equipment for sausage packaging, a new SHIWA production line to cut sausage products, and two new Sorgo climarooms. All of these innovations allowed the company to increase production volumes and the diversity of its portfolio of dry smoked sausages.
Pit-Product’ products are available in all large retail chains in St. Petersburg as well as in most unchained outlets. As early as in 1999, the company had established a successful partnership with the Pyatyorochka economy class outlets. In summer 2003, the first Pit-Product’s branded outlet opened in St. Petersburg. In 2003, expansion to other parts of Russia continued: the products of Pit-Product began to be delivered to the Republic of Karelia, Tver, Murmansk, Novgorod and Arkhangelsk Regions as well as to the Far East of Russia (see Exhibit 5). In 2004, the company formed strategic alliances with the Lenta chain of hypermarkets, the Dixy discounter and the Ramstore supermarkets.
Pit-Product’s assortment includes 200 different sausages and meat products (of which frankfurters and grilled sausages cover 51% of sales, raw sausages 26%, partly smoked sausages 12%, smoked sausages 5%, and cured sausages and sliced products 6%). The company has grown at a rate of 30–50% in recent years. In 2004, production volume totaled 15.5 thousand ton, and 19 thousand ton are planned to be manufactured in 2005. By the completion of the acquisition deal, Pit-Product was one of St. Petersburg’s largest meat processors. Its share in the St. Petersburg meat product markets in 2004 was approximately 13%; in 2005 its market share for frankfurters and boiled sausages was close to 20%.
Source: Company web-site: http://www.pitproduct.ru/company/history.thtml
Exhibit 5. Top Ten Russian Food Retailers
Ranking (%) | Retailer | Revenues, $ million | Year-on-year growth |
1 | Pyaterochka | 1,425 | 50 |
2 | Metro | 1,059 | 61 |
3 | Tander | 894 | 45 |
4 | Perekrestok | 771 | 72 |
5 | Auchan | 640 | 61 |
6 | Seventh Continent | 600 | 46 |
7 | Ramstore | 550 | 22 |
8 | Dixy | 490 | 60 |
9 | Lenta | 476 | 55 |
10 | Kopeyka | 415 | 70 |
Source: Standard & Poor’s, July 29, 2005.
Exhibit 6. Integration plan: critical tasks for each functional team
Source: company records.
Exhibit 7. Integration plan for the Production, Productivity, Investments functional team
Source: Company records.
Exhibit 8. Pit-Product Old Organisation Structure
Source: Company records.
Exhibit 9. The new organisation structure of Pit-Product
Source: Company records.
Appendix 1. Atria Group – Financial Snapshot, €million
(half-year) | 2005 | 2006 | 2007 | 2008 | 2009 |
Net sales | 976.9 | 1103.3 | 1272.2 | 1356.9 | 648.1 |
EBIT | 41.5 | 94.5 | 38.4 | 6.8 | |
Profit before tax | 37.8 | 34.6 | 80.6 | 16.7 | −1.1 |
Earnings per share | 1.24 | 1.15 | 2.56 | 0.42 | −0.06 |
Return on equity | 10.0% | 8.8% | 17.2% | 2.5% | |
Return on investment | 10.3% | 8.7% | 15.2% | 5.3% | |
Equity ratio | 43.0% | 42.8% | 47.6% | 38.4 | |
Gross investments | 107.3 | 89.0 | 284.1 | 152.6 | |
R&D expenditures | 6.7 | 7.4 | 8.4 | 9.9 | |
Dividend per share | €0.42 | €0.46 | €0.70 | €0.20 | |
Dividend yield | 3.3% | 3.1% | 4.0% | 1.7% |
Source: Company records.
Appendix 2. Atria’s Business Areas: key indicators
(half-year) | 2006 | 2007 | 2008 | 2009 |
Atria Finland | ||||
Net sales, €million | 686.1 | 749.6 | 797.9 | 383.6 |
Operative EBIT, €million | 32.2 | 39.7 | 34.4 | 17.8 |
Average personnel | 2325 | 2394 | 2378 | |
Atria Scandinavia | ||||
Net sales, €million | 336.4 | 457.8 | 455.2 | 202.0 |
Operative EBIT, €million | 7.4 | 20.5 | 15.4 | 1.9 |
Average personnel | 1206 | 1768 | 1691 | |
Atria Russia | ||||
Net sales, €million | 74.1 | 65.6 | 93.8 | 54.4 |
Operative EBIT, €million | −2.7 | 4.3 | −3.4 | −8.9 |
Average personnel | 1528 | 1278 | 1525 | |
Atria Baltic | ||||
Net sales, €million | 30.5 | 26.7 | 32.3 | 19.3 |
Operative EBIT, €million | −3.4 | −3.1 | −3.8 | −2.5 |
Average personnel | 681 | 507 | 541 |
Source: Company records.
Appendix 3. Atria’s EBIT by Region, €million
2010e | 2006 | 2007 | 2008 | 2009e | |
Atria Finland 41 | 33 | 40 | 34 | 41 | |
Atria Scandinavia 22 | 7 | 21 | 14 | 12 | |
Atria Russia | −3 | 4 | −3 | −11 | 1 |
Atria Baltic 2 | −4.9 | −4.4 | −3.8 | −4.5 | — |
Source: Pohjola Bank report
This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.
2024 Sage Publications, Inc. All Rights Reserved