Restrictions on the promotion of Western products in the Russian Federation in the face of geopolitical tensions are forcing the Russian divisions of global companies to optimize their brand portfolio. Thus, the local structure of a large coffee concern, the Dutch JDE Peet’s, may refuse to use the flagship Jacobs brand. The brand is important to the category, competitors warn.
The Russian division of the major coffee supplier JDE Peet’s may refuse to use the Jacobs brand. This was told by a Kommersant source in one of the retail chains. The company’s coffee could be sold under the Monarch or Milicano brands, he said. Kommersant’s interlocutor on another network says that changing the local brand is being discussed, but there is no final decision yet. Another Kommersant source in the retail market also heard about a possible brand change.
JDE Peet’s was created in 2015 from the merger of the coffee business of Mondelez International and DE Master Blenders 1753 BV Brand portfolio includes Jacobs, L’OR, Senseo, Tassimo, etc. In 2022, JDE Peet’s sales grew by 16.4%, to €8.2 billion
The Russian plant “Jacobs Dow Egberts Rus” is located in the Leningrad region. According to the investment portal of the region, the capacity of the enterprise is more than 35 thousand tons of products per year. It produces instant coffee, coffee blends, roasted ground and grain coffee Jacobs Monarch, Jacobs Monarch Millicano, Carte Noire. In 2021, the revenue of Jacobs Dow Egberts Rus increased by 13%, to 35.11 billion rubles, net profit was 5.96 billion rubles.
Since the beginning of the military operations of the Russian Federation in Ukraine, JDE has sought to ensure that business in Russia develops independently, according to its reporting. Thus, JDE did not authorize investments in the expansion of production and stopped investments in advertising and promotion of global brands.
According to a Kommersant source, the abandonment of the Jacobs brand should give the Russian plant more opportunities to promote products.
JDE told Kommersant that they intend to continue to provide customers and consumers in Russia through a local representative office. Further strengthening of localization, including the portfolio of brands, will best meet demand, says a company representative.
The representative of MilFoods (Poetti brand) Pavel Mayorov notes that the coffee category is distinguished by high competition, so it is important to stand out from competitors with the help of brand-specific attributes. With growing influence in the private label (PL) coffee category and consumers looking to save money, brand loyalty is one way to retain customers, he says.
The Russian structure of another major coffee supplier – Tchibo GmbH “Chibo CIS” – after passing under the control of local top management, may also refuse to use the Tchibo brand, Kommersant’s sources said. Among the options is the transition to the Gold brand. Now Cibo CIS uses the gold-coffee domain. Tchibo CIS did not discuss a possible brand change, noting only that they produce and sell coffee under the Tchibo brand.
According to the Check Index service and online cash desk operator OFD Platform, in January-February 2023, the number of coffee purchases decreased by 18% year-on-year, but the average check increased by 35%, to 449 rubles.
Alexey Popovichev, Executive Director of Rusbrand, believes that the abandonment of the umbrella brand is unlikely to reduce the recognition of JDE products, but it will allow the company to continue developing local business, reducing the associated risks for the head office. The Russian food and beverage market already has examples of global companies abandoning flagship brands. So, PepsiCo instead of Pepsi, Mirinda, 7Up produces Evervess and Russian Gift drinks, and Multon Partners (formerly Coca-Cola HBC) produces Dobry and Rich drinks.