1. ON JUNE 22, 1995, CO MAY ATTENDED THE SIGNING CEREMONY AND RECEPTION MARKING ANOTHER U.S. FIRM'S ENTRANCE INTO THIS DEVELOPING REGIONAL MARKET. U.S. FIRM KRAFT FOODS INTERNATIONAL, THROUGH ITS EUROPEAN SUBSIDIARY KRAFT JACOBS SUCHARD (KRAFT) SIGNED FORMAL DOCUMENTATION DETAILING ITS NEW VENTURE WITH THE ST PETERSBURG-BASED PETROCONF JOINT STOCK COMPANY (FORMERLY THE SAMOILOVA CONFECTIONERY FACTORY. PETROCONF, FOUNDED IN 1862, IS ONE OF THE OLDEST FACTORIES IN THE CONFECTIONERY INDUSTRY IN ST PETERSBURG AND THE NORTHWEST REGION OF RUSSIA. THE FIRST STAGE OF THE AGREEMENT, WHICH WAS COMPLETED ON JUNE 26, 1995, WAS KRAFT'S PURCHASE OF 80 PERCENT OF THE OUTSTANDING SHARES FROM PETROCONF'S MANAGEMENT AND EMPLOYEES. THE DEAL MARKS THE FIRST FOOD INVESTMENT IN RUSSIA FOR PHILIP MORRIS/KRAFT.
2. THE DEAL IS ESTIMATED AT USD 11 MILLION TO BE IMPLEMENTED OVER THREE YEARS. FOLLOWING AN IMMEDIATE CASH INVESTMENT OF USD 1 MILLION, KRAFT WILL INVEST AN ADDITIONAL USD 3 MILLION IN EQUIPMENT THIS YEAR, PLUS ANOTHER USD 7 MILLION IN INVESTMENT OVER THE NEXT THREE YEARS. THIS INVESTMENT PACKAGE WILL EVENTUALLY PROVIDE KRAFT WITH CLOSE TO A 99 PERCENT INTEREST IN PETROCONF.
3. THE INITIAL FOCUS OF THE VENTURE WILL BE A CONTINUATION OF THE MANUFACTURING OF CONFECTIONERY PRODUCTS, WAFERS AND CANDIES UNDER THE PETROCONF LABEL, A WELL-ESTABLISHED NAME IN RUSSIA. KRAFT MANAGEMENT WILL BE BROUGHT INTO THE VENTURE AND EXTENSIVE TRAINING PROGRAMS WILL BE ESTABLISHED FOR PETROCONF EMPLOYEES. ONCE KRAFT IS SATISFIED WITH PACKAGING AND QUALITY IMPROVEMENTS AND ITS EQUIPMENT HAS BEEN INSTALLED, KRAFT WILL BEGIN LAUNCHING ITS OWN BRANDS IN THE MARKETPLACE. KRAFT WILL ALSO DEVELOP TRADEMARKS FOR THE PRODUCTS AND REORGANIZE THE PURCHASING PRACTICES OF THE FIRM, AND THEN IT WILL COMMENCE A STRONG MARKETING CAMPAIGN TO RAISE BRAND AWARENESS AMONG LOCAL CONSUMERS. THE CANDY AND CONFECTIONERY MARKETS IN RUSSIA REMAIN ONE OF THE STRONGEST AMONG THE APPROXIMATELY 150 MILLION CONSUMERS IN RUSSIA.