Actuality February 18, 2008

On the Russian market of ready-to-eat food is already observed stagnation for several years. However, it does not mean the lack of internal dynamics. Leadership in this segment passed from "global" noodle and puree to "national" porridges and ready-to-eat soups.

Growth indices of ready-to-eat food market were either minimum or quite negative for the last years. The reason of such stagnation of rather prospective market is a saturation of medium and low price segments and absolute underdevelopment of premium segment.

The golden era of ready-to-eat food market falls to the end of the 1990th. Exactly then, after the crisis of 1998th, the population was interested in inexpensive and "fast" food. Large corporations quickly responded to the demands of the consumers. Russia was taken over by cheap cake noodle and instant soups. Because of outstripping demand growth the low price segment of ready-to-eat food, especially noodle, grew like a weed. This segment attained its maturity very quickly, having risen from an entrance to the market to its saturation in record short terms. Up to 2003-2004 the market grew by 50, and even by 70% a year.

First in 2004 the analysts began to talk that the market can show the negative dynamics. A year later the market players joined them: the large producer of ready-to-eat products DHV-S published the data of own research, suggesting that the market stopped at the mark $1,1 bln and does not almost grow.

However, such data concerns the separate segments of market, in particular the noodle and instant bouillon. Another reason of deceleration became the banal weariness of consumers with the endless monotony of supply. Besides, in this period began to develop and market actively such commodities, as drinking yoghurts, curds and other dairy products, suitable for a snack in the workplace. And the fashion for the healthy lifestyle took possession of the hearts of the Russian consumers.

For the players of the "fast" market should have become obvious that further expansion of business requires diversification and release of new products to the market. The profits of the Russian population that grew considerably during the crisis, allowed people to opt for more expensive but also more quality and natural products. However, producers did not hurry to respond to such demand of consumers, therefore, the culture of consumption of the ready-to-eat dinners and suppers that began to arise, disappeared and did not take root deeply in the conscious of the Russians.

The ready-to-eat noodle and instant soups have the deeply rooted image of cheap, unhealthy, poor meal. Such products were popularly named "bomzh-packages". According to Olga Belovaya, the head of department for the specialized researches of "Nielsen Russia" company, the reputation of the unhealthy product influenced the dynamics of the retail sales in the category on the whole.

According to the data of "Nielsen Russia" company, the general volume of retail sales of ready-to-eat products (the category includes soups, bouillons, ready-to-eat food, noodle) decreased by 4% in natural units in 2007, and sales of ready-to-eat noodle – by 6%. Today the category of noodle is supported by a noodle with natural ingredients on the whole that reminds the Russians the favorite homemade food. The market slump also influences the development of the Russian fast-food industry – even today this restaurant segment grows by 30-50% a year and its competitiveness will only grow.

Today’s popularity of the ready-to-eat breakfasts is unsurprising in this context – inst and quick-cooking porridges and muesli. This segment appeared already in 1994, when such brands as Bruggen, Hahne, Kellog’s and Nestle were imported to Russia. The market existed due to the import up to 1998, when the Russian producers of "breakfast on the run" appeared on it. However, the expected post-crisis increase on the ready-to-eat breakfasts’ market did not come: quite the opposite, stagnation came.

Its formation has begun from the upper price segment that could not result in rapid growth in post-crisis Russia. Therefore, the market of the ready-to-eat breakfasts grew by modest 10-15% a year, while other categories of ready-to-eat products gave up to 70% annual increase.

Moreover, the structure of the offer on the ready-to-eat breakfasts’ market did not correspond to the demand. The main product range included rather strange to the Russian consumers products at that moment: flakes and muesli. The consumption of muesli reaches in the European countries up to 40-50 tons a year, while in Russia it reaches only 2-3 tons. Moreover, "foreignness" of these products, consumption growth were restrained by expensiveness: in particular, before crisis muesli were bought no more than by 20% inhabitants of two capitals, thus, the overwhelming majority – from time to time. After the crisis, with profits decrease, the Russians almost gave up the ready-to-eat breakfasts, preferring the traditional cooking at home.

The real increase on the market started in 2003, when the Russian producers of breakfasts began to work actively. Flakes and muesli on shelves gave place to the favorite by the Russians porridges: buckwheat, oat, rice. Porridges began to be offered with different fillers. At the same time the western companies increased their presence in the segment of porridges – Raisio, Myllin Paras and Nordic. Growth of porridges segment influenced the other segments of ready-to-eat breakfasts’ market, foremost muesli, the sales of which increased quicker than before the crisis. The producers of the ready-to-eat porridges had (and have) one ace of trumps: they do not have to fight against bad reputation, as noodle, bouillons and puree. The market growth marked by the change of supply structure that takes into account the tastes of the Russians has only begun. Its potential is far not exhausted. However, for the segment of the ready-to-eat breakfasts is right the trend, general for the whole ready-to-eat products market: the intensive way of development is impossible further. Today the main source of growth is expansion of the range line, commodity orientation to the target groups of consumers, competent promotion of commodity, supporting the modern image of natural and quality products.

The today’s consumer becomes more and more particular about the own feed. And in the ready-to-eat products he is already interested not in cheapness, but quality, meeting the idea of healthy food, and also the variety of tastes, convenience and ergonomics of the package. People want to spend on cooking as less time as possible, but receive healthy feed maximally. Such tendency is marked by market players. According to Elena Tarakanovskaya, group-brand-manager of MAGGI of Nestle Russia Ltd., people trouble about what to eat; more and more Russians declare about the importance of healthy food and healthy lifestyle.

Today, the meal at home, and moreover, its cooking, becomes a rather fashionable enthusiasm, but not the permanent duty. More frequent both parents work in families, more time is spent on the endless traffic jams and driving from suburbs to the large cities.

The tempo of life of the Russians has changed, especially inhabitants of two capitals. Muscovites, for example, grudge the time even for cooking of the morning fried eggs, preferring to add some boiling water to porridges. Several years ago the fried eggs in the morning were eaten by about the half of the capital inhabitants, and last year there was less than the quarter. "Fast" porridges actively oust the basic competitor – porridges cooked. The segment of food products, that did not reach the 10-percent level few years ago, today occupies almost one third of consumer preferences

Today to take a nuncheon, and even to dine full, not leaving the computer, want not only middle managers, but also department heads. And "middle managers" considerably added both their profits and demands as for food. But exactly this category of population the Russian producers and suppliers of ready-to-eat products persistently stay away from. Toady the cost of these products is in a range from RUR 15 ($0,63) for noodle, up to RUR 150 ($6,25) for lasagna for several portions. Deplorably slowly develops the Russian industry of the ready-to-eat food – full dinners in fractional packages.

According to Sergey Filchenkov, the analyst if Finam Investment Company, the average price segment of ready-to-eat food is already formed – on its part falls about 70% ($2 bln) of turnover. And at the high price segment, quite the opposite, falls relatively small stake. Today this segment, according to Sergey, is presented mainly in gastronomic boutiques and cookeries of expensive trade centers. The restaurant business tries to develop it gradually; for example, due to the sale of dishes of fine dining that are enough to warm to eat. Sergey relates the lack of this segment development to the relatively low purchasing power of population and its psychological unreadiness to pay for ready-to-cook foods.

Elena Tarakanovskaya is rather optimistic. According to her, the high price segment of the market is in the active stage of formation today. "The need for fast hunger satisfaction in different circumstances also was and will be actual for consumers with any profit", Elena says. "And the offers of "fast" products for people who can take a nuncheon in a cafe (restaurant), but do not have time for this is still far from saturation". She marks that on the market already begin to appear culinary products that can be referred to the premium segment. The premium products exactly are able to compete with the growing industry of fast-food restaurants and to influence favorably the industry image on the whole.

However, from all wide category of ready-to-eat products only producers of the ready-to-eat breakfasts and ready-to-eat soups actively undertook the development of the premium segment today. First, as opposed to, for example, the producers of puree and especially noodle, it is not necessary to fight with the image of unhealthy, sustaining food. Quite the opposite – ahead is the immortal "oatmeal", child’s reminiscences about wheat cream with apples and rice porridge with dried apricot. Producers of the ready-to-eat breakfasts are in the winning position: they form the industry for themselves, raise new consumers. In this segment of "fast" food already appear the premium products; producers offer the special porridges for women, keeping their figure, products for sportsmen, vitaminized breakfasts.

The segment of the ready-to-eat soups does not suffer also from harmful survivals of times past. Here are already present such giants as Nestle, Unilever, Campbell and Mars, offering "Maggi", "Knorr", Campbell and Gurmaniya respectively. The last occupies up to 90% of the liquid soups market now, other 10% share soups of the large producers and the great number of small regional factories. At the moment, the market of liquid soups does not exceed a few ten millions dollars a year, but it possesses the enormous potential. According to some estimations, this segment grows by 50% a year. Besides, soups are the most popular dish in the ration of the Russians, 27% from all consumable dishes in 2006.

Producers of noodle and puree are in the most difficult situation. The Russians, who overate the cheap noodle in the 1990th, are not ready to trust the new quality standards. And the producers of "fast" pasta begin to extend the range of products, in order to attract new consumers. They produce the lenten noodle, child’s noodle with toys in packages, noodle, containing pieces of natural meat, hen or fish.

At the current moment it is possible to assert with the confidence only one: the high price segment of ready-to-eat products is actually absent in Russia. But without development of this segment is impossible the civilized market development. The ready-to-eat food is products with the maximally high added cost. The production of such products will create new workplaces. The new products, the new quality standards will demand development of the new technologies. Development of segment will affect the development of agriculture also.

But for mastering the premium segment the producers of "fast" food should solve several vital tasks at once. Firstly, there should be careful, multi-stage control of products’ quality, so that the stabilized image of the industry was not ruined. Further, industry needs highly skilled workers. High-professional food technologists and engineers, qualified restaurant "chiefs" that come to work to the factory should participate in development of premium products. However, many professionals of food industry are rare visitors on the open labor market, and there is the real headhunt. Not only a labor market, but agriculture also should correspond to the needs of the production. 95% of all ready-to-eat mashed potatoes are produced in Russia. Thus, 95% of potato flakes, used for its production today, is the imported raw material. Quality of products of the Russian agriculture companies does not suit the producers of "fast" food.

On the one hand – the producers, interested in expansion of business, on the other – absence or deficit for resources for such expansion. The solution of this classic task is generally well known – an increase of investments, liquidation of bottle necks. Actually, the companies-producers are engaged in it now. However, it will be hard to realize it in the conditions of stagnated market.

The market of ready-to-eat food dynamically develops in the West. If Russia only begins the intensive development, the experienced western consumer already can not be attracted with the simple convenience of "fast" food – they need a variety and quality of product. In the West are widely soled the ready-to-eat seconds for diabetics, vegetarians, for the adherents of different diets (albumen, low-caloric etc.), ready-to-eat organic dishes, cuisine of the nations, color kitchen (using the products of one color), ready-to-eat food for pregnant and nursing women and other. In 2007, according to the different estimations, the volume of the world ready-to-eat market totaled $120 bln, demonstrating within the last 8 years growth no less than by 30% a year. It is possible to select, at least, 1400 significant producers on this market. Ready-to-eat market in Great Britain, Germany, France, Italy and Spain attained €8,4 bln by 2007 altogether. According to the forecasts of the western analysts, by 2011 the market of these countries will attain the mark at €9,9 bln. Among the European countries the biggest stake is occupied by Great Britain, where in 2007 the sales of ready-to-eat products totaled about €3 bln.

Reaping the fruits of the 90^th