Venture Investments & Yield Management (VIYM) Investment Fund Andrei Yakunin, son of the former president of Russian Railways, Vladimir Yakunin, has agreed to sell his share in the business of French Kiss, a manufacturer and seller of chocolates. This follows from the reporting of the Luxembourg VIY Growth Fund for the fiscal year ended June 30, 2019.
In November 2019, the fund received an offer from the majority shareholder French Kiss for a repurchase for 150 million rubles. 32.5% owned by the fund, the transaction is planned to be completed in 2020, according to VIY Growth Fund.
VIYM is considering various options for selling a stake in the French Kiss network, said RBC Andrei Degtyarev, CEO of Ales Capital, an investment advisor to VIYM. According to him, one of the possible options is to sell the stake to the majority shareholder of French Kiss, Hussein Yamanyilmazu.
VIYM's exit from business is associated with the end of the investment period, says Degtyarev. The VIY Growth Fund reports that the results of the French Kiss were weaker than expected: the development of the company was affected by sanctions and unstable demand for premium products associated with a decrease in real incomes of the population and the devaluation of the ruble.
According to the data from the SPARK database, revenue in accordance with Russian Accounting Standards of the main Russian legal entity French Kiss, LLC Frenchchiss, amounted to 4.9 billion rubles in 2018, net profit - 3.6 million rubles. There are no data for 2019 yet. Open sources have reports from the leading Cypriot FK French Kiss Ltd for 2017: then its net loss amounted to $ 506 thousand.
Hussein Yamanylmaz confirmed to RBC that it is the majority shareholder of French Kiss. In a written response to a request from RBC, he clarified that a final decision on the purchase of a stake from VIYM has not yet been made.
What is famous for French Kiss
French Kiss, a manufacturer and distributor of premium handmade chocolate, was founded in 2003 by Hussein Yamanylmaz, a Turkish native. In the mid-1990s, he was engaged in the supply of fruits and confectionery products to retail chains.
The first French Kiss boutiques appeared in Moscow in 2004. RBC’s French Kiss presentation for 2019 indicates that the network in large cities has 24 own boutiques and nine franchise employees. According to Yamanylmaz himself, the total number of French Kiss stores is now 33, of which 23 are own.
Since March 2015, French Kiss has been manufacturing products in its own factory in southwestern Moscow. There are more than 300 items in the French Kiss assortment: chocolates, dragees, cakes, cakes, as well as tea. The company's website indicates that among its customers are Sberbank, Gazprom, LUKOIL, and the State Duma.
VIYM Fund invested in French Kiss in 2014. The chain of chocolate boutiques was chosen, in particular, due to steady growth. The then VIYM CEO Dmitry Shitsle estimated that the company is growing at about 40% per year. By 2017, French Kiss, according to VIYM data, planned to take first place among manufacturers and distributors of premium handmade chocolate in Russia both in terms of sales and production, and in the number of boutiques.
The amount of the transaction was not disclosed, it was only reported that the funds will go to finance the French Kiss investment program until 2017. The VIY Growth Fund report states that one of the VIYM structures for the purchase of 32.5% of French Kiss received borrowed funds in the amount of 676 million rubles, which is 4.5 times more than now Yamanylmaz is ready to pay for the VIYM package. The claimed 676 million rubles. - This is all investments, including loans, explained in Ales Capital.
In 2014, the entire Frech Kiss business was valued at $ 17 million, now VIYM's share is sold at least half the price, an interviewee familiar with the terms of the first transaction told RBC.
What happens to the chocolate market
Russians prefer to buy chocolate at discounts: according to research company Nielsen, chocolate bars are the leader in sales by promotions among all food categories, 79% of all chocolate bars and 69% of chocolate bars and chocolate by weight are sold in promotional chains. For the year ended September 2019, only chocolate bar sales in Russia grew by 4.7% in real terms, analysts at Nielsen said. Sales of bulk chocolates, candy bars and assorted ones fell.
Purchases of chocolate always reflect the situation in the country: with the growth of the economy, consumption of chocolate, including expensive, per capita is growing, says the chairman of the board of directors of the Confael confectionery company Irina Eldarkhanova. According to her, in 2019, Konfael had a small - about 5% - drop in sales.
The company chain, which French Kiss accounts for about 80% of sales, is the most difficult sales channel for development, says Eldarkhanova. She explains: shopping malls have high rental rates, while purchasing power and the average purchase receipt are reduced.