7 Nov 2016
Russian Cookies Set to Seek Their Fortune Among Mainland Consumers
Gone are the days of empty food shelves in Russian supermarkets, with many producers now keen to export more widely.
Back some 25 years ago, when Russia made its first faltering steps towards becoming a market economy, the food sector offered the clearest indication of just how much things needed to change, with supermarket and convenience store shelves frequently lacking even the barest of essentials.
At the time, a humble section of simple snacks and confectionery items – Mars Bars, Choco Pies, Wagon Wheels and Snickers – would have seemed like an undreamt of feast to many Russian consumers. Today, of course, things are very different.
In modern Russia – regardless of the ongoing EU and US sanctions – the domestic food-processing sector is in rude health, frequently rivaling the multinationals in terms of its range and quality. Far from worrying about how to stock the home shelves, many companies in the sector are increasingly looking to export, seeking opportunities beyond their usual markets of Eastern Europe and Central Asia.
At present, one country above all others is the target for Russia's more ambitious food producers – China. Two years ago, Miratorg, Russia's largest canned-meat producer, paved the way when it first began exporting to the mainland. Since then, a host of other food-and-drink companies have followed suit, including manufacturers of several milk-powder and condensed-milk products, and producers of Baikal vodka, Abrau-Durso sparkling wines, and even KVAS, a Russian malt drink whose makers are looking to rekindle the popularity it enjoyed in Heilongjiang, Jilin and Liaoning back in the 1950s' heyday of Russian-Chinese friendship.
The most recent company to begin targetting mainland consumers is Lubimy Kray, Russia's largest cookie producer. Exports of its Posidelkino oat cookie brand are currently said to be proving an inspiration to many in Russia's agricultural sector, with the majority of producers keen to find new markets in light of the continuing EU/US sanctions and the contraction of the domestic market.
Despite the high profile of its sales to China, exports currently account for only about 5% of Lubimy Kray's output. Through its two St Petersburg facilities, the family-owned business produces about 2,900 tons of confectionery a month, the vast majority of which is sold through 43,000 stores in 125 cities across Russia, the Commonwealth of Independent States and the Baltics. It also services a number of specialised Russian food stores in the US, Canada, Germany and Israel.
In terms of expansion, the company's management is targetting China, as it believes it can compete effectively with current imports from Europe and North America on both price and quality grounds. There are, however, a number of factors that could undermine its bid for mainland success.
Firstly, the majority of Russian-made confectionary and cookie products have only a six-month product-expiry period, compared to the year that is the norm for most multinationals. Secondly, although delivery from Russia to China is highly cost effective thanks to the ready availability of empty containers heading back to the mainland, the logistics process is untested and likely to prove lengthy. Thirdly, the packaging used by Russian companies needs to be radically redesigned and rethought in line with the particular sensibilities of Chinese consumers.
Leonid Orlov, Moscow Consultant