The Rise of Roshen

If you grew up in the United States, you are probably very familiar with Hershey chocolate. Holding a 44% market share of all chocolate in the US, Hershey is the go-to brand for most Americans for anything chocolate related [1]. However, this is very different in Ukraine and much of Eastern Europe, where Hershey’s is practically unheard of and much of the confectionary market is dominated by a brand that most of us haven’t even heard of: Roshen. Currently Roshen is a household name in Ukraine, being the go-to brand for chocolate, candy, and even cakes, with an estimated annual revenue of one billion dollars, making up about 1 percent of Ukraine’s GDP [2]. In addition to its cultural relevance, the company has also had significant political presence in Ukraine, with its founder, Petro Poroshenko, currently serving as the Ukrainian president.

To understand how Roshen managed to acquire so much influence and become the confectionary powerhouse it is today, we must explore its history and how it was established. A unique attribute to the Roshen corporation is that unlike most other chocolate companies, it wasn’t built from the ground up, but rather established as a unification of various chocolate factories, each with its own unique history. The largest and most significant factories of the Roshen company are the Kyiv Confectionary Factory located near Ukraine’s capital, and the Vinnitsa Confectionary Factory [3].

The Kyiv factory was originally opened in 1886 by Valentin Yefimov and was named after Karl Marx by soviet authorities in 1923 to celebrate his 105th anniversary. Around the same time the production volume exceeded 700 tons per year, and the factory relocated to a sugar factory, which allowed it to reach a production of 32,800 tons per year by 1940. Notably, around 1950, the then called Karl Marx Confectionary Factory began producing Kyiv Cake, made of airy layers of meringue with cashew, chocolate glaze, and buttercream filling. The cake has since remained as one of the symbols of Kyiv city, and continues to be popular in many post-soviet states [4]. Throughout the existence of the Soviet Union the factory was government-controlled, and it continued to be state-owned shortly after its collapse in 1991.

The Vinnitsa branch of Roshen also has a unique history and specialization. The factory was first formed when the Vinnitsa city counsel decided to establish a confectionary factory on the site of a former brewery. The range of sweets was originally limited, with only sugar-coated caramel, gingerbread, candy dots and biscuits available, however the assortment gradually expanded. Unfortunately, the factory was destroyed during World War II, and had to be rebuilt, with new buildings being added in the 1960’s. By 1980 the factory was considered among the five most powerful enterprises in the USSR [5].

Following the collapse of the Soviet Union, the Kyiv and Vinnitsa factories, along with various others, were sold to the Ukrprominvest group, headed by Petro Poroshenko. These factories were soon combined by Poroshenko to form the Roshen group in 1996, earning him the nickname “Chocolate King” [6].

For the unification of the original four factories, the Ukrprominvest group began by taking control of all factory activities, from production and sourcing of raw ingredients, to sales and distribution. The group established a unified quality standard that would be used in all four factories and consistent requirements for the finished products were put in place. Unfortunately, the products from the four factories were still not associated with one manufacturer, so the company would have to find a way to establish itself as an identifiable national Ukrainian brand.

In the year 2000, the Roshen group decided to establish Roshen as a brand to make consumers associate products from their factories with one producer. Interestingly, the Bureau of Marketing Technologies questioned the foreign sounding brand name, as Roshen was not a Ukrainian sounding word, and the group justified the choice by identifying plans for creating an international confectionary brand to later expand to foreign markets. Eventually the brand was approved, and the company began active advertising for the Roshen brand in 2002 [7]. During the time of the changes in name and style, the company also updated most of the equipment at their four factories, establishing a more modern manufacturing process that would allow them to meet increasing demands and standards [8].

The company later attempted to establish corporate legends about the name “Roshen”, spreading stories about a god of sweets with the same name in some ancient mythologies, or a count who was particularly fond of sweets, but none of these stories stuck with consumers. It is believed that the name is derived from the name of the owner of the corporation, Petro Poroshenko, by taking the middle two syllables of his last name. However, Poroshenko was not just responsible for the name of the company, with much of the brand’s success having been due to his management skills and resources.

Petro Poroshenko was born in the Soviet Union in 1965 to a mother who was a teacher at a technical school and a father who was an engineer and later managed multiple factories under Soviet rule. Poroshenko graduated Kiev State University in 1989 with a degree in economics after having founded a legal advisory firm mediating contract negotiations in foreign trade. Upon graduation he undertook negotiations himself, starting to supply cocoa beans to the Soviet chocolate industry in 1991, while also serving as the deputy director of the Republic Union of Small Businesses [9]. Prior to Poroshenko’s foreign trade negotiations, good chocolate was hard to come by in Soviet states, so once he established a trade route for chocolate companies the demand for chocolate increased greatly [10]. Through his experience with the cocoa trade, Poroshenko also became acquainted with the confectionary market, and later headed the acquisition and unification of a Ukrainian national brand, seeing a huge potential for a sweets company following the end of the Soviet Union.

After establishing the Roshen group and acquiring various other holdings, Poroshenko went start a political career in the ranks of the Social Democratic Party of Ukraine. He later left and formed his own party called the Solidarity Party of Ukraine, which had a center-left political agenda, and soon joined the emerging Party for the Regional Renaissance Solidarity of Labour, or Party of Regions. At this time Poroshenko developed his political base in the Vinnitsia region, the location of the largest Roshen factory, and eventually left the Party of Regions for his previous party.

At the end of 2001 Poroshenko was chief of staff for Viktor Yushchenko and the main sponsor of his campaign. During this time, tax inspectors launched an attack on his businesses as a result of the campaign, however UkrProminvest and its holding Roshen managed to survive until Yuschenko came to power. During Yuschenko’s presidency, Poroshenko was one of his closest associates, counteracting the influence of nationalist right-wing politicians in his inner circle.

Following his role during the Yuschenko presidency, Poroshenko served various other roles, notably as the Secretary of the National Security and Defense Counsel, and as the foreign minister in the Yanukovich government [9].

In 2014 Ukraine experienced the Euromaidan Revolution, in which a series of violent events culminated in the ousting of pro-Russian Ukrainian president Viktor Yanukovich and the overthrow of the Ukrainian government. Yanukovich had previously promised to enter an association agreement with the European Union, which would have provided Ukraine with loans in return for liberalizing reforms, however he ultimately decided not to sign it. This sparked a wave of protests which soon became violent, resulting in the deaths of almost 130 people, causing Yanukovich to be relieved of his duty in a 380-to-0 vote [11].

The center of Kyiv before and during the Ukrainian revolution [19]

During the years leading up to the revolution, Roshen managed to gain significant popularity and support through various social initiatives, boosting Poroshenko’s political backing as well. This included a Roshen founded initiative for the repair and construction of playgrounds, reconstruction of a historic theater, and later the development of the Cherkasy Zoo. Roshen also provided consistent support towards the protection of Ukraine’s sovereignty by dedicating resources for caring for wounded Ukrainian fighters, along with supporting orphans from the violent area. Additionally, Roshen provided around 100 million dollars’ worth of assistance to armed forces involved in the post-revolutionary conflict, helping buy cars, body armor and other military equipment to support the cause [10].

However, Roshen has also had its fair share of political controversies over the years. In May of 2012, Roshen changed the Ukrainian-language inscriptions on candy wrappers into Russian, triggering heated discussion and even protests as a result of Ukraine’s attempts at establishing independence from Russia [13]. The president of the corporation explained that the action was done out of necessity for the company’s survival in foreign markets, however Poroshenko convinced the managers that “Ukrainian goods in the Ukrainian market should be Ukrainian”, further establishing his political stance on Ukrainian sovereignty [14].

Following the Ukrainian revolution and formation of an interim government led by Arseniy Yatsenyuk, Petro Poroshenko won an unscheduled presidential election in a landslide [15]. During his bid for presidency, Poroshenko had announced that he plans to sell the Roshen company if he is elected in response to concerns over his potential diversion of attention and concern towards his enterprise. Poroshenko later appeared to make efforts to sell the business but claimed that he could no longer sell the company since the assets were frozen by a court investigating one of the company’s factories.

Leading up to the Ukrainian revolution, Russia banned Roshen’s chocolate for alleged quality and safety violations, including a claim that the candy contained benzopyrene, a potentially carcinogenic additive. Roshen rejected the allegations, claiming that neither Russia nor Ukraine have regulations against the additive, which is found in many burnt food products such as dark-roasted coffee. Russia also stated that the chocolate had inadequate fat content as well as problems with taste and smell. Poroshenko claims the ban on Roshen candy is due to his support of Ukraine’s alignment with the EU, which Russia strongly opposes. Russian authorities later took further actions against Roshen, closing a Roshen factory in the Russian city of Lipetsk after a court found the company guilty of trademark violations, leading to Poroshenko’s inability to sell after his nomination [16]. Following the sanctions, Roshen took a significant hit in sales as a result of its loss of presence in the Russian market and its Russian-based factory [18].

Following Poroshenko’s presidency, the president ran to stay in office and ended up losing to comedian Volodymyr Zelensky, with concerns over Poroshenko’s refusal to sell Roshen playing a significant role in the election. While Poroshenko’s political ambitions may have reached a peak, Roshen continues to thrive, with aspirations to expand into more of the eastern European market, where it is considered a premium brand. In the process of perusing their goals for international expansion in Europe, Roshen recently acquired Hungarian firm Bonbonetti, and is planning to continue growing its current 4.2% market share of the Eastern European confectionary market [17].

The Eastern European chocolate scene is particularly interesting because by many standards it lacks behind the western market, with experts pointing out that lower quality bulk cocoa beans are often used, giving a flatter, less nuanced taste. Some experts also claim that the beans are often over-roasted to hide deficiencies, and that such methods have been used for most of the industry’s lifespan in the region, causing many to become accustomed to it and expect the flavor in chocolate that they taste [18].

Overall, Roshen and its founder have had an interesting and exciting history over the past two decades, having grown to dominate the chocolate industry in the region, and playing a role in the political and social climate of its country. Roshen continues to hold the title of the Hershey’s of Ukraine, creating attractions for kids and a friendly environment associated with its sweets. We will likely see much more of Roshen in coming years, with developments in their chocolate as well as the chocolate of the whole of Eastern Europe as the industry matures, and welcomes innovations in taste, texture and ingredients.

Roshen’s flagship store in the center of Kyiv [18]

Citations:

  1. [Scholarly] ECONOMICS OF CHOCOLATE. OXFORD UNIV Press, 2019.
  2. [Multimedia] “2017 Global Top 100: Part 4 | Candy Industry.” Candy Industry RSS, www.candyindustry.com/2017-Global-Top-100-Part-4.
  3. [Multimedia] “Factories and Plants.” Factories and Plants, roshen.com/en/en/about-roshen/factories-and-plants.
  4. [Multimedia] History of the Famous Kyiv Cake – Destinations.com.ua. destinations.com.ua/fine-dining/history-of-the-famous-kyiv-cake
  5. [Scholarly] Kaflevska, Svitlana, and Oleksandra Lysiuk. “The Current State Of Development Of Agricultural Enterprises Of Vinnytsya Region.” Economic System Development Trends: the Experience of Countries of Eastern Europe and Prospects of Ukraine, 2018, doi:10.30525/978-9934-571-28-2_17.
  6. [Scholarly] Tadeusz A. Olszański; Agata Wierzbowska-Miazga (28 May 2014). “Poroshenko, President of Ukraine”. OSW, Poland. Archived from the original on 8 March 2016. Retrieved 10 March 2016.
  7. [Multimedia] Brandpedia – история брендов и шедевры рекламы. “История Бренда ROSHEN (Рошен).” Brandpedia, http://www.brandpedia.ru/brand-972.html.https://www.next-brands.com/roshen/
  8. [Scholarly] Diuk, Nadia. “The Maidan and Beyond: Finding Ukraine.” Journal of Democracy, vol. 25 no. 3, 2014, pp. 83-89. Project MUSEdoi:10.1353/jod.2014.0041
  9. [Multimedia] Freeman, Colin. “Petro Poroshenko, the Billionaire Chocolate Baron Hoping to Become Ukraine’s next President.” The Telegraph, Telegraph Media Group, 29 Mar. 2014, www.telegraph.co.uk/news/worldnews/europe/ukraine/10731848/Petro-Poroshenko-the-billionaire-chocolate-baron-hoping-to-become-Ukraines-next-president.html.
  10. [Multimedia] “Ukraine MPs vote to oust president”. 22 February 2014. Retrieved 24 March 2019.
  11. [Multimedia] Poroshenko bought and transferred 100 sniper complexes to the 3rd Regiment of Special Operations Forces . http://www.ukrmilitary.com . Quoted from 2017-10-29 .
  12. [Multimedia] Gazeta.ua. “Українці Відмовляються Купувати Солодощі ‘Рошен’ з Російськомовними Написами.” Gazeta.ua, 29 Jan. 2014, gazeta.ua/articles/life/_ukrayinci-vidmovlyayutsya-kupuvati-solodoschi-roshen-z-rosijskomovnimi-napisami/467974.
  13. [Multimedia] “Порошенко Повернув На Свої Цукерки Українську Мову.” Pravda.com.ua, 25 Nov. 2012, http://www.pravda.com.ua/news/2012/11/25/6978131/.
  14. [Multimedia] Damien McElroy (23 February 2014). “Ukraine revolution: live – Ukraine’s president has disappeared as world awakes to the aftermath of a revolution”The Daily Telegraph.
  15. [Multimedia] Flintoff, Corey. “Why Chocolate Is A Bargaining Chip In The Ukraine-Russia Conflict.” NPR, NPR, 8 Apr. 2014, www.npr.org/sections/thesalt/2014/04/08/300265710/why-chocolate-is-a-bargaining-chip-in-the-ukraine-russia-conflict.
  16. [Multimedia] Nieburg, Oliver. “Roshen Acquires Hungarian Firm Bonbonetti.” Confectionerynews.com, William Reed Business Media Ltd., 13 Nov. 2012, www.confectionerynews.com/Article/2012/11/13/Roshen-acquires-Bonbonetti.
  17. [Scholarly] Lubos, Smutka, et al. “Agrarian Import Ban and Its Impact on the Russian and European Union Agrarian Trade Performance.” Agricultural Economics (Zemědělská Ekonomika), vol. 62, no. No. 11, 2016, pp. 493–506., doi:10.17221/294/2015-agricecon.
  18. [Multimedia] “In the Center of Kiev Set Fire to the Store Roshen.” 24, 24-my.info/in-the-center-of-kiev-set-fire-to-the-store-roshen-5/.
  19. [Multimedia] MsTriaI. “Ukrainian Revolution Turning Incredibly Sour.” Medium, Medium, 11 Sept. 2017, medium.com/@chillinois/ukrainian-revolution-turning-incredibly-sour-6cc15275efba.

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