Russian juice and dairy firm Wimm-Bill-Dann has reported a 25% fall in first-quarter net income amid increased spending on promotional pricing and marketing.
The company posted net income of US$5.3m for the three months to 31 March 2004, compared to $7.1m in the same period of the previous year.
Wimm-Bill-Dann’s sales increased 24.3% year-on-year to $278.3m from $223.9m in the first quarter of 2003.
“The first quarter showed that our regional expansion strategy has already started to contribute to increasing sales, giving us a solid foundation for sustainable organic growth in the next two to three years,” said CEO Sergei Plastinin.
“At the same time, in order to gain a significant share of regional markets for our new premium segment yoghurts and dairy desserts, we are currently selling these products at introductory prices, making them more attractive both to the supply chain and to the final consumer in the regions,” he continued.
“We are also promoting our new products through extensive marketing and advertising in the regions, aimed at raising consumer awareness and generating loyalty. Further, following an extensive modernisation programme both in dairy and juice, our depreciation is relatively high as is the current cost of raw milk. All of these factors are putting strong pressures on our operating margins. This is why our profitability dynamics will be lagging behind those of sales in 2004,” Plastinin added.