Sweet and savoury snacks in Russia
Economic recovery and growing consumer expenditure on food are underpinning demand for sweet and savoury snacks in Russia. According to Euromonitor International’s Countries & Consumers database, Russian GDP grew by 4% in real terms in 2010, reversing the 8% decline registered the previous year.
Retail sales of sweet and savoury snacks totalled US$3.3 billion in 2010, up 7% on 2009 in US$ fixed 2010 exchange rate terms. Value growth was underpinned by increasing unit prices, which rose by 5% on average, and the strong performance of fruit snacks and nuts, which increased in value terms by nearly 17% each. Volume sales of sweet and savoury snacks grew by 2%.
Fruit snacks was the best performing category in 2010, with 10% volume growth driven by strong consumer demand. In 2010, manufacturers and retailers improved their offer of packaged fruit snacks and nuts by launching a variety of products in different packaging formats and price segments. This was done to recover consumer interest lost in 2009 to cheaper unpackaged dried fruit and nuts, which are widely available in bulk through major retail channels.
Both fruit snacks and nuts benefited from a wider product range and improved economic conditions in 2010. Many affluent consumers and weight watchers have been opting for fruit snacks and nuts as a healthier alternative to traditional confectionery and bakery items that accompany tea.
Other sweet and savoury snacks, including fish and seafood snacks, croutons and sunflower seeds, saw a slowdown in 2010 in terms of volume and value growth due to relative saturation. However, it remained the largest category in sweet and savoury snacks, accounting for 52% of retail volume and 46% of retail value sales in 2010.
Seafood snacks such as marinated and dried octopus, calamari, shrimp and eel, which traditionally accompany beer, lost out to cheaper savoury croutons and chips and crisps in 2010.
Sweet and savoury snacks experienced further consolidation in 2010. Over the last few years there have been several important acquisitions by KDV Group OOO, for example Bridgetown Foods ZAO in 2008 and Sibirsky Bereg ZAO in 2009. Thanks to these two acquisitions, bakery and confectionery player KDV Group assumed leadership of sweet and savoury snacks in 2009 with an overall 25% value share.
In September 2010, KDV Group acquired Zolotoy Terem ZAO, the owner of the Barentsev brand of fish snacks. The leader in fish snacks, Barentsev held a 3% value share of overall snacks in Russia in 2009 and since April 2010 has been distributed by the snacks division of PepsiCo in Russia, Frito Lay Distribution OOO, following an agreement with Zolotoy Terem. Market insiders expected PepsiCo to subsequently buy Zolotoy Terem (with a 3% value share in snacks in 2009), but KDV Group moved in first and reportedly quickly signed an acquisition agreement.
The second largest player in sweet and savoury snacks, Frito Lay Distribution, commanded a 15% value share in 2009 thanks to its leadership in chips/crisps (51% share). The company’s success can be attributed to a combination of factors, including an efficient and widespread distribution network and ownership of manufacturing facilities in Russia, which help to minimise production costs and subsequently enable the company to offer competitive retail prices.
The company’s Lay’s crisps often cost 5% less than Kraft’s Estrella crisps, which are imported from Ukraine and Latvia. Frito Lay successfully caters for local tastes, offering products such as KhrusTeam savoury croutons and crisps in popular flavours, such as Lay’s Krasnaya Ikra (red caviar flavoured crisps), launched in spring 2009, and Lay’s Mushroom, launched in 2008.
The adverse economic conditions of 2009 benefited private label snacks which are some 10-20% cheaper than their branded equivalents. Private label’s highest share in 2009 was in the fruit snacks category, while the eponymous brand of supermarket chain Perekriostok became the most prominent in nuts, with a 4% value share.
The forecast period performance of sweet and savoury snacks is anticipated to be less dynamic than that of the review period. Sales growth will slow to a retail volume CAGR of 2% over 2010-2015 and a constant value CAGR decline of 1%.
Volume sales are set to benefit from sustained expansion of the snacking culture, particularly in rapidly developing urban areas. A gradual change in local drinking habits from spirits to beer and wine may benefit demand for savoury snacks.
Fruit snacks will continue to benefit from the growing demand for healthier products, with the category forecast to achieve the strongest growth in volume terms over 2010-2015, with a CAGR of 11%.
As the obesity rate in Russia is rising and health concerns are increasingly raised by consumer groups and the media, manufacturers may seek to start introducing a variety of healthier snacks with a lower fat and salt content. These currently have low penetration.
Segmentation will be another means to develop product offer. Snacks which appeal to children are already available, such as Bombaster from KDV Group and Kukuruznik from Russky Produkt OAO. The next step will be the introduction of snacks for other consumer groups, such as teenagers, weight watchers and families.
Gradual saturation in sweet and savoury snacks will restrain more dynamic value sales growth. Imported products will continue to lose share to local, low-cost snacks offering a good price/quality proposition. Value growth will also be constrained by expanding private label products, which are expected to gain stronger consumer acceptance.