[Exclusive] "KRW 10 Billion? Not Sales, But Royalties" ... Russian Choco Pie Demand Outpaces Factory Supply

KRW 11.4 Billion in Royalties Sent to Korean Headquarters Last Year
53% Increase in Just One Year... First Time Exceeding KRW 10 Billion
Choco Pie's Annual Sales Surpass KRW 200 Billion

The surging popularity of Choco Pie in Russia is bringing smiles to Orion. Last year, Orion’s Russian subsidiary significantly increased the amount of cash remitted to its Korean headquarters and holding company in the form of technology and trademark royalties, driven by strong sales growth. Orion’s Russian subsidiary is also making steady investments in the construction of a new factory, with plans to rapidly expand supply in line with rising demand.

According to the food industry on May 11, Orion International Euro, Orion’s Russian subsidiary, paid 588.66 million rubles (approximately KRW 11.4 billion) in technology and trademark royalties to Orion’s Korean headquarters and its holding company, Orion Holdings, last year. This represents a 53% increase from the previous year and marks the first time the Russian subsidiary has paid over KRW 10 billion in royalties to Korea. The scale of technology and trademark royalties, which stood at around 200 million rubles in 2022, jumped to over 300 million rubles in 2023 and 2024, and nearly reached 600 million rubles last year. It appears that more than 20% of the total selling and administrative expenses incurred by the Russian subsidiary for product sales last year were allocated to royalties.

Typically, technology and trademark royalties are paid as a fixed percentage of sales. According to Orion’s annual business report, the Russian subsidiary’s sales exceeded KRW 300 billion last year. In 2023, Orion International Euro recorded sales of KRW 339.4 billion and net profit of KRW 44.4 billion, reflecting year-on-year increases of 47.2% and 27.2%, respectively. The Russian subsidiary’s annual sales, which remained at KRW 89 billion in 2020, surpassed KRW 200 billion in 2022, and soared past KRW 300 billion last year—a fourfold increase in just four years.

This rapid sales growth appears to be driven by the local popularity of Choco Pie. Last year, Choco Pie’s local sales surpassed KRW 200 billion for the first time. First exported to Vladivostok, Russia, in 1993, Choco Pie exceeded KRW 100 billion in sales in 2022, just before its 30th anniversary in the Russian market, and reached KRW 200 billion in sales in just three years. Orion’s Russian subsidiary currently operates two factories, one in Tver and another in Novosibirsk. The operating rate of the Russian subsidiary’s factories exceeded 120% last year, with the Choco Pie production line itself running at 140% capacity.

In addition, Orion’s Russian subsidiary is expanding its product portfolio, including Choco Pie, to broaden its business scope. Last year, the Russian subsidiary invested KRW 16 billion in facility upgrades, establishing dedicated production lines for “Bungo (Champung-eo-bbang)” and “Fresh Pie (Fresh Berry)” in the pie category. The company expanded its “Choco Boy (Choco Song-i)” product line to five varieties, including original, mango, and blackcurrant, and launched the “Jelly Boy (Almaeng-i)” series locally. Sales of Choco Boy grew by 27% year-on-year last year, while Jelly Boy achieved a 58% increase in sales over the same period. As a result, the number of products sold by the Russian subsidiary grew from 17 in 2020 to 41 by last year.

With a dramatic increase in product sales, Orion’s Russian subsidiary has begun expanding its production capacity to meet surging demand. The company is currently constructing a second factory building in Tver, scheduled for completion in September 2027, as part of a total investment of KRW 240 billion. The expansion will add new production lines not only for pies but also for biscuits, snacks, and jellies. Once the new lines are operational, annual production capacity is expected to reach KRW 750 billion. Upon completion of the Tver factory, the number of local employees is anticipated to exceed 1,000. The number of employees at the Russian subsidiary increased by 80%, from 428 in 2022 to 772 last year.

An Orion representative stated, “With our products enjoying tremendous popularity, production cannot keep up with demand, which is why we are actively reinvesting locally. We will continue to strengthen our foundation for sustainable growth by upgrading our production capacity and refining product and channel strategies.”

This content was produced with the assistance of AI translation services.