in cooperation with
CONSUMER MARKETS
In focus: Food and Beverage markets in Russia December 2011 kpmg.ru KPMG IN RUSSIA AND THE CIS
2 | In focus: Food and Beverage markets in Russia
In focus: Food and Beverage markets in Russia | 3
Foreword George Pataraya Partner
Daniel Strishewsky Director
Head of Consumer Markets KPMG in Russia and the CIS
Strategy Consumer Markets KPMG in Russia and the CIS
“The KPMG Consumer Markets team is pleased to present our Food and Beverage market insights. The aim of this document is to give companies our outlook regarding key developments in the food and beverage markets and to highlight the key challenges the market will face from 2012 to 2015.”
“KPMG Consumer Markets team prepared this document in cooperation with leading research institutes, Nielsen and Euromonitor. This analysis will provide you with important insights into the key food and beverage markets based on most recent industry data and opinion.”
Alexey Maltsev Associate Director
Alexander Khvostov Senior Associate
Strategy Consumer Markets KPMG in Russia and the CIS
Strategy Consumer Markets KPMG in Russia and the CIS
“Looking ahead at the Food and Beverage market we see consolidation, concentration and a reduction in growth rates across major segments. Even a couple years ago, FMCG markets were growing at double digit pace and companies grew organically following general consumer trends. Going forward organic growth may not allow shareholders to achieve their growth ambitions and M&A will rank higher on the agenda.”
“Among the markets analysed dairy, beverages and salty snacks will show the highest investment attractiveness as they still have the highest potential for further growth and significant space for further consolidation and product innovations.”
4 | In focus: Food and Beverage markets in Russia
Executive summary
5
Macroeconomic outlook
7
Selected Food and Beverage market insights
8
Dairy
9
Chocolate
12
Beverages
15
Coffee
18
Salty snacks
21
In focus: Food and Beverage markets in Russia | 5
Executive summary
Majo or con nsum merr marke ets in Russsia a exceptt fo or da airy lag g sub bsta antia allyy be ehiind d the e EU le eve el in te ermss of pe er-cap pitaa consu umpttion and thu us havve po otentiial forr fu urtthe er grrow wth
Per-capita consumption in Russia vs EU [%]
Key Russian Food and Beverage markets potential 120% 100%
F&B consumer spending growth in Russia
EU level
Dairy
80% Beverages
Chocolate
60% 40%
Coffee Salty snacks
20% 0% 5% 0%
6%
7%
8%
9%
10%
11%
2012-2015 CAGR of market in value terms [%] Source: Nielsen, KPMG analysis
Expected short and mid-term development of the key Russian Food and Beverage markets Short-term development
Long-term development
Forecast: 2012
Forecast: CAGR 2012–2015
Key trends
Volume growth, %
Price growth, %
Value terms growth,%
Volume growth, %
Price growth, %
Value terms growth,%
Dairy
6-8%
8-10%
16-18%
4-6%
5-7%
9-13%
Convenience Health and wellbeing
Chocolate
5-7%
3-5%
9-11%
3-5%
4-5%
7-11%
Convenience Seeking variety
Beverages
8-10%
3-5%
13-15%
8-10%
2-3%
9-12%
Search for authenticity Seeking experience
Coffee
3-5%
4-6%
8-10%
2-4%
4-5%
7-10%
Quality Convenience Savvy shopping
Salty snacks
6-8%
2-4%
9-11%
5-7%
4-5%
9-12%
On-the-go consumption Seeking new varieties/experience Health & wellbeing
Source: Nielsen, KPMG analysis
12%
6 | In focus: Food and Beverage markets in Russia
Dairy The dairy market is one of the largest in the Russian F&B sector in terms of volume. It is expected to continue demonstrating the fastest growth in value terms (approximately 9–13%1), which is mainly driven by dairy prices growing faster than general consumer inflation due to a deficiency in raw milk. Other market growth drivers are increase in consumption and a continued shift towards yogurts and deserts.
Chocolate The Russian chocolate market is expected to grow by approximately 7–11%1 in value terms. The key growth driver is expected to be overall increase in per capita consumption, which is fueled by new products and varieties (e.g. snackable packaging formats, new tastes and flavours). Further, value growth will be driven by an expected increase in cocoa beans prices which will translate into chocolate price growth.
Beverages The beverage market is one of the fastest developing markets in Russia. Total volume grew by approximately 12% in 2010 and YTD 20112 and are expected to level at an annual growth of 7% by 2015. Continued innovation in colas, lemonades, ice tea and kvass will further shape the market.
Coffee The coffee market is expected to demonstrate the slowest growth in terms of both volume (approximately 2–4%1) and value (approximately 7–10%1) as it is almost fully developed and has nearly reached saturation point in Russia.
Salty snacks The salty snacks market is expected to grow at a rate of 9–12%1 until 2015 and is driven by the highest lag in per-capita consumption (vs. the EU), however, some categories (e.g. fish) are likely to decline due to market saturation.
1 2
The market forecast relates to 2012-2015 period. YTD 2011 Jan-Sep; KPMG analysis.
In focus: Food and Beverage markets in Russia | 7
Macroeconomic outlook The e pacce of the e ecconom mic c re ecovverr y sh houlld de eterm mine con nsum mer exp pend ditturre grow wth in Russiia. Thiis is exxpe ectted d to o clo ose e the e gap between n devvelope ed marke etss an nd outtpa ace otthe er BRIC C cou untrriess.
Per capita consumer expenditure on food, beverages and tobacco [USD ‘000]
Expected CAGR 2011-2015
4 3.2
3.2
3.5
3.6
3.3
3
0.7%
2.8
2
1.4
1
1.6
1.9
10.7%
2.1
0.4
0.5
0.5
0.6
0.8
2009
2010
2011F
2012F
2015F
11.0%
• Continued growth of disposable income will establish a solid foundation for purchasing power growth over the next 5 years and will move Russia closer towards the level of developed countries. • The share of spending on food and beverages as a percentage of total expenditure should continue to decrease from 29% (2011) to 26% (2015). • The expected slow down in consumer price growth from 2012 to 2015 will help boost per-capita consumption across major food and beverage sectors; however consumer price inflation will be higher.
0 Average EU level Russia Average BRIC level (excl. Russia) Source: Economist Intelligence Unit.
Nominal disposable income per capita and real disposable income growth [% change vs. PY1]
Consumer prices and inflation rate [% change vs. PY1]
15 15%
15 %
13%
11%
12%
13% 12%
11%
10 10%
10 %
9%
9% 8%
9% 4%
4%
5%5
4%
3%
2%
% 5
7%
6%
7% 6%
4% 0%0 2009
2010
2011F
2012F
2015F
Real personal disposable income (% change p.a.) Nominal personal disposable income (% change p.a.) Source: Economist Intelligence Unit.
1
Previous year.
0 % 2009
2010
2011F
2012F
2015F
Consumer price inflation General inflation rate Source: Consumer prices: Economist Intelligence Unit, Inflation rate: Ministry of Economic Development of Russian Federation, KPMG analysis.
8 | In focus: Food and Beverage markets in Russia
Selected Food and Beverage market insights
In focus: Food and Beverage markets in Russia | 9
De espite e a hiigh h levell of matu uriity y and d per capitta con nsum mption n, the e daiiryy mark ket still has ro oom for fu utu ure de eve elo opm ment. Gro owth is s exxpec cted to co ome frrom m shiiftting g consu umer prreferrence es tow wardss yo ogurrtss and d desssertts which h will drive e overralll marrke et prroffittab billity.
Dairy Dairy market dynamics in volume terms [mln. t.] and growth rate
Dairy market dynamics in value terms [RUBbn] and growth rate
CAGR 2012-2015
6.0
5.2–5.6
5.0
4.4
4.6–4.7
500 380–420
400
4.1
4.0
CAGR 2012-2015
289–294
300
3.0
205
11%
2.0
249
7%
16–18%
200 6–8%
1.0
4–6%
0.0
22%
16%
100 0
2010
2011F
2012F
2015F
2010
2011F
Dairy market in volume terms Dairy market growth in volume terms Source:
9–13%
2012F
2015F
Dairy market in value terms Dairy market growth in value terms
Nielsen, KPMG analysis
• Russia is amongst the top list of dairy consuming nations and still has potential for further per capita consumption development.
Milk and yogurt consumption per capita in different countries, 2009 [kg] UK
“
“The trend of consumers switching to more sophisticated branded products is evident in the yogurts and desserts segment” – expert of Euromonitor International “Growth will be driven by new product launches in flavoured fromage frais and dairy-based desserts” – manager of major dairy company in Russia
”
104 8
Germany
66 16
Russia
70
Poland
43 9
112
82
3 73
52
China 11 1 12 Milk Yogurts Source:
Euromonitor International, Nielsen, KPMG analysis.
10 | In focus: Food and Beverage markets in Russia
• Growth in the yogurts and desserts segments is changing the landscape of the dairy market. By 2015 these segments should represent over 30% of the total dairy market.
Market structure by product in volume terms 3.4 m. tones
13% 22%
65%
2011F
Market structure by product in value terms
4.0 –4.2 m. tones
RUB260-280 bn.
28%
33%
Yogurts and desserts
20%
17%
Kefir
52%
51%
Milk (Sterilised + Pasteurised)
2011F
2015F
15% 19%
66%
2015F
Expected market growth in volume terms Expected CAGR (%)
RUB150 bn.
Expected market growth in value terms 2011F-2015F
Expected CAGR (%)
2011F-2015F
■ Milk (Sterilised + Pasteurised)
+5-6%
■ Milk (Sterilised + Pasteurised)
+14-16%
■ Kefir
+0-2%
■ Kefir
+10-12%
■ Yogurts and desserts
+7-9%
■ Yogurts and desserts
+19-21%
Convenience and Health & Well-Being trends are driving the innovation pipeline – drinkable and bio yogurts are expected to lead market growth. Trend
Description
Products
Implications
Convenience
Under current lifestyle pressures consumers are looking for products which save time and are easy to use
• Drinkable yogurts for on the move consumption
A shift from traditional dairy products towards the yogurt-dessert group, in particular drinkable yogurts
As consumers become more health conscious they are improving their diet, which leads to increased consumption of natural & organic products
• Cereal based drinkable/ spoonable yogurts
Health and Well-being
• Ready to eat yogurt-based breakfasts with cereals included
• Dairy products that aid digestion • Probiotics and enriched products
Source:
KPMG analysis.
“
“Russian consumers have become more demanding in terms of product flavours and added value. Responding to this trend, producers are expected to extend their product portfolios with more exotic flavours” – leading market research company in Russia
”
A shift towards the premium dairy products price category
In focus: Food and Beverage markets in Russia | 11
• Raw milk prices remain volatile and continue to drive inflation dynamics above the general consumer inflation trend
Expected dairy product price growth in Russia vs. consumer price inflation and general inflation [% change vs. PY] 13%
14
The dairy market is highly dependent on sourcing of domestic raw milk. Milk production in Russia is currently stagnating due further reduction in dairy cattle and the continued use of outdated technology. This has generated a 20% deficit in domestic raw milk. Imported raw milk (>20%) and dry milk (~70%) is mainly from Belarus.
12 10
9%
8
7%
6
9%
9%
8% 4%
6%
7% 6%
4
6% 4%
2 0 2010
2011F
2012F
2015F
Dairy product price growth Consumer price inflation General inflation rate Source: Consumer prices: Economist Intelligence Unit, Inflation rate: Ministry of Economic Development of Russian Federation, KPMG analysis.
12 | In focus: Food and Beverage markets in Russia
The de eve elopm ment of non n-c choccola ate e sn nackk alte ern nativves (b bis scuiits, waferss, can ndiies) is pre eve enttin ng ch hoccolaate e perr-capiita co onsum mptio on frrom m grow win ng to owarrds the EU levvel. Moderrate gro owth h is exxpe ectted d to co ome from fr m the chocolate barr and d taablet se egm ments s at th he exxpensse of the ch hocola ate bo oxe es se egm ment.
Chocolate market dynamics in volume terms [mln. t.] and growth rate
Chocolate
Chocolate market dynamics in value terms [RUBbn] and growth rate
CAGR 2012-2015
250
700
200–230
570–590
600 500
CAGR 2012-2015
460
485
200
510–520
150
400
5%
300
5–7%
3–5%
100
8%
200 100 0 2011F
2012F
2015F
2010
Chocolate market in volume terms Chocolate market growth in volume terms
7–11%
2011F
2012F
2015F
Chocolate market in value terms Chocolate market growth in value terms
Nielsen, KPMG analysis
• The market is expected to grow (in volume) by 5-7%1 which should result from further per-capita consumption growth. Long-term market increase will come from new product developments. Nevertheless, despite the high disparity versus developed markets in (terms of per-capita consumption) market growth might be limited by the development of non-chocolate snack alternatives.
Chocolate consumption per capita in different countries, 2011 [kg]
Switzerland
9.8
Germany
9.3
Russia
Source:
The market forecast relates to 2012-2015 period.
10.8
Norway
Poland
1
9–11%
0 2010
Source:
168–171
5%
50
1%
154
143
4.0 1.3
Euromonitor International, Nielsen, KPMG analysis.
In focus: Food and Beverage markets in Russia | 13
• Snacking segments (chocolate bars and tablets) are expected to remain the most popular product categories in Russia. Market structure by product in volume terms
Market structure by product in value terms
~485,000 tones
~570’000-590‘000 tones
RUB155 bn
RUB200–230 bn
15%
18%
17%
20%
Chocolate bars
23%
26%
29%
33%
Tablets
21%
21%
28%
26%
41%
36%
26%
21%
2011F
2015F
2011F
2015F
Expected market growth in volume terms Expected CAGR (%)
Pralines Other
Expected market growth in value terms 2011F-2015F
Expected CAGR (%)
2011F-2015F
■ Other
+0-1%
■ Other
+1-5%
■ Pralines
+4-5%
■ Pralines
+5-9%
■ Tablets
+7-8%
■ Tablets
+10-14%
■ Chocolate bars
+8-9%
■ Chocolate bars
+10-14%
Convenience and Seeking Variety trends are driving product innovations – pocket formats, premium chocolate products and traditional bars with new fillings are shifting market landscape. Trend
Description
Convenience
Under current lifestyle Ready to eat portioned chocolate pressures consumers are bars /candies/ nuts and dry fruits looking for products which covered with chocolate save time and are easy to use
Shift from traditional 100 gram chocolate confectionery packaging towards snackable formats: tablet pocket formats, 3 pieces in a pack, 30 grams bags
Seeking variety
Consumers are looking for new tastes and flavours
Increasing consumption of chocolate confectionery
Source:
Euromonitor International, Nielsen, KPMG analysis.
Products
• Seasonal chocolates • Traditional chocolate bars of different chocolate types (dark, milk, white) and with new fillings
Implications
14 | In focus: Food and Beverage markets in Russia
• Cocoa bean prices are expected to remain volatile in 2011–2012. This is expected to impact on consumer prices of Russian confectionary.
Expected chocolate product price growth in Russia vs. consumer price inflation and general inflation [% change vs. PY] 10 10%
In 2010/2011 increased demand for cocoa-beans from emerging chocolate markets such as Turkey, China and India pushed up global prices for cocoa-beans, resulting in increased global consumer prices for chocolate confectionery.
9%
8% 8 6% 6
7% 7%
4 4%
2% 2
9% 8% 6% 5%
6% 4%
4%
4%
3%
0% 0 2010
2011F
2012F
2015F
Chocolate product price growth Consumer price inflation General inflation rate
Source: Consumer prices: Economist Intelligence Unit, Inflation rate: Ministry of Economic Development of Russian Federation, KPMG analysis.
In focus: Food and Beverage markets in Russia | 15
Carrbon nated Softt Driinkss (C CSDs),, Kvass and d Ice Te Teaas willl driv ve th he be everrage e markket over th he com min ng yearrs th hro ough fla avor and d packkagiing g in nnovatio ons.
Beverages
Cold beverage market dynamics in volume terms [bn. l.] and growth rate
Cold beverage market dynamics in value terms [RUBbn] and growth rate
CAGR 2012-2015
8
7.0–7.2
7 6 5
4.8
4
13%
5.3
350
280–300
300
5.7–5.9
250 200
12% 8-10%
3
CAGR 2012-2015
8-10%
150
2
100
1
50
0
15%
13–15%
9-12%
2011F
2012F
2015F
12%
0 2010
2011F
2012F
2015F
2010
Cold beverage market in volume terms Cold beverage market growth in volume terms Source:
213–218
190
164
Cold beverage market in value terms Cold beverage market growth in value terms
Nielsen, KPMG analysis
• The total volume of the market is expected to increase by 12% in 2011 and approximately 8-10% till 2015.
Cold beverage consumption per capita in different countries, 2011 [litres]
Poland
This is partially driven by an increase in per-capita consumption in existing categories and organic growth of recently launched categories – kvass, juice drinks and ice tea.
“
UK The Netherlands
“2011 brought significant changes to the Russian beverage market – increase in disposable income, decrease in unemployment and stabilisation of the currency brought about the effect of ‘delayed demand’ and people ready to spend money on soft drinks again” – beverage market expert, Euromonitor International
”
33
36
25 17
Russia
24
Brazil
22
29 28
55 45
21 16
69
44 37
Mineral and pure water consumption Juice consumption Source:
Euromonitor International, Nielsen, KPMG analysis.
16 | In focus: Food and Beverage markets in Russia
• The market landscape is expected to change over the coming years as lemonade, kvass and mineral water categories are expected to outperform the juice segment.
Market structure by product in volume terms
Market structure by product in value terms
5.3 m. liters
7.0-7.2 m. liters
RUB 189.6 bn.
RUB 280-300 bn.
6% 9%
6% 11%
8% 7%
8% 9%
Ice Tea Kvass
44%
37% 49%
40%
Carbonated soft drinks
41%
34%
47%
43%
Juice
2011F
2015F
2011F
2015F
Expected market growth in volume terms Expected CAGR (%)
Expected market growth in value terms 2011F-2015F
■ Juice
+3-4%
Expected CAGR (%)
2011F-2015F
■ Juice
+8-9%
■ Carbonated soft drinks
+10-11%
■ Carbonated soft drinks
+12-14%
■ Kvass
+11-12%
■ Kvass
+17-19%
■ Ice Tea
+8-9%
■ Ice Tea
+9-10%
A return to traditional Russian recipes such as kvass and mors and “Seeking Variety” in existing categories is expected to support further growth in the beverage market. Trend
Description
Search of authenticity
Authenticity is a distinctive • Kvass and Mors Shift from CSD and juice trend in Russia: a strong sense towards Russian traditional • Soviet lemonades of national pride, a distrust of drinks the unknown, and a desire to • Juices being advertised with maintain traditions motivate emphasis on local origin consumers to return to Russian traditional drinks
Seeking for experience
This trend is initiated largely by the affluent and the young in big cities, where novelty and new experiences appeal.
Source:
KPMG analysis.
Products
• Juice-containing drinks • Flavoured water and lemonades
Implications
Category value growth
In focus: Food and Beverage markets in Russia | 17
• Consumer price growth in the beverage market in 2011 is expected to be in line with consumer inflation. The downward movement in pricing during 2010 was primarily the result of promotional activities by beverage producers, including frequent launch of juices and CSD promotional packs. In the future, we expect beverage prices to demonstrate moderate growth. Expected beverage price growth in Russia vs. consumer price and general inflation [% change vs. PY] 10 10%
9%
9% 8%
8%8
7% 7%
6%6 4%4
6%
6%
4%
4%
4%
3% 2%2 0 (0,4%) (-2) (2%) 2010
2011F
2012F
Beverage price growth Consumer price inflation General inflation rate
Source: Consumer prices: Economist Intelligence Unit, Inflation rate: Ministry of Economic Development of Russian Federation, KPMG analysis.
2015F
18 | In focus: Food and Beverage markets in Russia
Furrth her deve elopm ment of the co offe ee mark ket iss lim mitted d as it is unlike ely thaat Russiaanss, con nsiide ere ed a te ea drinkking natio on, wiill chan nge e th heiir con nsum mptiion n patte ern ns. Mod derate growtth in n co offe ee co onsu umptio on will most like ely com me fro om pre emiu um prrop posiitio ons. Coffee market dynamics in volume terms [‘000 tones] and growth rate
Coffee
Coffee market dynamics in value terms [RUBbn] and growth rate
CAGR 2012-2015
100
120 92–97
95 90 83
85 80 75
CAGR 2012-2015
80
85–87 3–5%
80
2–4%
5% 0%
90–110
100 66
60 40
77–79
9%
8–10%
2011
2012
7–10%
5%
20 0
70 2010
2011
2012
2010
2015
Coffee market in volume terms Coffee market growth in volume terms Source:
71
2015
Coffee market in value terms Coffee market growth in value terms
Nielsen, KPMG analysis
• Despite low per capita consumption in Russia compared to EU, the coffee market growth in Russia is limited by a strong tradition of tea consumption. Coffee per capita consumption [kg]
Coffee and tea consumption per capita [cups per day]
Finland
9.7
Sweden
5 4
Poland
3.1
3
USA
2.8
2
United kingdom Russia Source:
7.9
6
1.5 0.8
Euromonitor International, Nielsen, KPMG analysis.
Coffee penetration in Russia has reached almost 90% of the market; however, due to a strong tradition of tea drinking the overall proportion of coffee consumption is low. In 2010 Russia was ranked 31st in a league table of coffee drinking nations.
1 0
3.65
3.65
3.65
1.79
1.89
2.02
2009
2010
2011F-2012F
Coffee Tea
In 2012 coffee consumption frequency is expected to moderately increase while the tea consumption frequency is expected to remain at the same level. The increase in the number of cups of coffee consumed per day is expected to be driven by promotions, increased coffee machine availability and other innovations.
In focus: Food and Beverage markets in Russia | 19
“
“Fresh coffee beans are expected to register the best performance within the coffee market due to a shift in preference from the overdeveloped instant coffee category towards premium natural products” – Marketing manager of leading coffee manufacturer
”
• Consumer focus on Quality, Convenience and Savvy Shopping will be the main drivers of innovation and development; distribution and retail should drive mix changes towards premium product propositions. Market structure by product in value terms RUB 71 bn.
RUB 90–110 bn.
21%
24%
R&B, beans
35%
Freeze dried
31% 24%
Expected market growth in value terms Expected CAGR (%)
22%
Spray dried
23%
19%
Mixes
2011F
2015F
2011F-2015F
■ Mixes
+3-4%
■ Spray dried
+5-8%
■ Freeze dried
+11-13%
■ R&B, beans
+11-13%
Quality, Convenience and Savvy shopping trends are driving the innovation pipeline on Russian coffee market. Trend
Description
Products
Implications
Quality
Consumers are willing to pay more for better taste, bigger variety, more natural products and brand names that can guarantee quality
• Fresh coffee (R&G, beans)
Shift towards high quality premium products driving the category value growth up
Convenience
Under current lifestyle pressures consumers are looking for products which save time and are easy to use
• Ready to drink (3in1, cappuccino mix in bags and RTD coffee)
Slightly increased share of cheap coffee categories, driving down market value
Savvy shopping
Consumers are becoming more price conscious: they are comparing prices, seeking discounts, promotions and reward programs
• Economy packs (refills and doybags)
Margin pressure on coffee producers
Source:
Euromonitor International, Nielsen, KPMG analysis.
• Coffee machines with portioned coffee capsules
• Retail offers: discounts and trade offers • Promotions: gifts with purchase, bundling with other categories
20 | In focus: Food and Beverage markets in Russia
• Coffee price growth is expected to be slower than general inflation over the coming years due to excessive availability of coffee beans.
“
Expected coffee price growth in Russia VS consumer price inflation and general inflation [% change vs. PY] 10 10%
9%
9%
8%8
“In 2011 the total volume growth in coffee was insignificant compared to other non-alcoholic drinks. The main reason for the muted increase is the relative coffee market saturation in Russia. The effect of the crisis did not make people stop drinking coffee, unlike soft drinks...” – Euromonitor analyst
Coffee supply/demand balance in 2010-2012F [millions of standard 60-kg bags]
”
6%6 4%4
7% 5%
0 0% 2010
8.2 8.4
9.0 8.6
5%
4% 4%
2011F
2012F
2015F
Coffee price growth Consumer price inflation General inflation rate Source: Consumer prices: Economist Intelligence Unit, Inflation rate: Ministry of Economic Development of Russian Federation, KPMG analysis.
Coffee beans price dynamics [USD cents/kg] 607 507
500 8.0 8.2
6%
4%
600
7.4 8.0
6%
2%2
700
7.7 7.8
8%
7%
400
432 317
300 200
244 164
195
170
100 2008/09
2009/10
2010/11
2011/12F 2012/13F
World supply World demand Source: Food and Agriculture Organization (FAO), Economist Intelligence Unit, KPMG analysis.
A surplus of coffee beans is opening opportunities for category development – the global supply of coffee beans is expected to increase by 10% due to the recovery of Brazilian production, and increased coffee production in other major exporting countries.
0 2009
2010 Arabica
2011F
2012F
Robusta Source: Food and Agriculture Organization (FAO), Economist Intelligence Unit, KPMG analysis.
In focus: Food and Beverage markets in Russia | 21
Weste ern trrend ds sho ould d con ntin nue e to driive e marke et de emand. Nuts and d pottato o chiips are exxpected to fu urtherr in ncre ease e in n mark ket mix x at th he expe ense e of trad ditio onal Ru ussiian n saltty snaccks – cri risp p brreaads an nd fiish. Salty snacks market dynamics in volume terms [‘000 tones] and growth rate CAGR 2012-2015 180–200
200 160
135
120
147
Salty snacks Salty snacks market dynamics in value terms [RUBbn] and growth rate 100
156–159
80 54
60 6–8%
80
5–7%
15% 9–11%
40 20
0%
9–12%
1%
0
0 2010
2011F
2012F
2010
2015F
Salty snacks market in volume terms Salty snacks market growth in volume terms Source:
67–69
62 9%
40
CAGR 2012-2015 90–110
2011F
2012F
2015F
Salty snacks market in value terms Salty snacks market growth in value terms
Nielsen, KPMG analysis.
• Salty snacks consumption per-capita in Russia is still behind the level in the EU which shows opportunity for growth given expected macroeconomic upturn.
“
Core salty snacks (potato chips + extruded/rice chips) consumption per capita in different countries, 2011 [kg] UK
4.6
Netherlands
“The crisis coincided with saturation in some categories of salty snacks, such as dried sea-foods, croutons and sunflower seeds” – Marketing manager, leading Russian salty snacks producer
”
3.4
Spain
2.1
Greece
1.2
Poland Russia
Source:
1.6 0.5
Nielsen, KPMG analysis.
22 | In focus: Food and Beverage markets in Russia
• Western trends will continue to drive market demand – the potato chips and nuts segments will continue to dominate the salty snacks market at the expense of traditional Russian salty snacks such as crisp breads and fish. Market structure by product in volume terms 146,900 tones
Market structure by product in value terms
180,000-200,000 tones
25% 5% 10% 13%
RUB 62.4 bn.
RUB 90-110 bn.
16%
14% 4%
22%
4%
4% 6%
23%
14%
16% 16%
13%
47%
53%
2011F
2015F
Expected market growth in volume terms Expected CAGR (%)
50%
2011F
2015F
Fish Nuts
Potato chips
Expected market growth in value terms 2011F-2015F
■ Potato chips
44%
Crisp breads Extruded/ rice chips
Expected CAGR (%)
2011F-2015F
+8–11%
■ Potato chips
+13–19%
■ Nuts
+9–12%
■ Nuts
+16–22%
■ Fish
-7% – -4%
■ Fish
-1% – +4%
■ Extruded/ rice chips
+2–5%
■ Extruded/ rice chips
+10–15%
■ Crisp breads
+2–5%
■ Crisp breads
+7–12%
“
“Healthy snacks such as nuts are set to see the strongest current value growth in 2011. This is explained by the health and well-being trend and the categories’ recovery after sales suffered in 2009...” – Business Intelligence specialist of the snack company
”
Consumption on-the-go, “Seeking Variety” and “Health & Well-Being” will drive market dynamics and structure. New flavors and packaging innovations will drive per-capita consumption towards EU level. Trend
Description
Products
Implications
On-the-go consumption
Under current lifestyle pressures consumers are looking for products which save time and are easy to use
• Package downsizing (e.g. salty biscuits for on-the-go consumption)
Further market share gain of packed snacks versus unpacked (e.g. nuts, sunflower seeds)
Seeking variety/ experiences
This trend is driven largely by the affluent and the young in big cities, where novelty and new experiences appeal
• New chips and crisp bread flavours
Category value growth due to a primary shift towards premium products
As consumers become more health conscious they are increasing taking positive steps regarding diet, such as looking for natural & organic products
• Healthier snacks with lower fat and salt content
Health & Well-being
Source:
KPMG analysis.
• New packaging solutions
Increased share of nut consumption
In focus: Food and Beverage markets in Russia | 23
• Consumer prices are expected to be in line with the overall level of inflation as sourcing issues such as the potato deficit in 2010 are overcome.
2011F
2012F
2015F
Salty snacks price growth Consumer price inflation General inflation rate
Q3'11
2010
Q2'11
0
7.4
Q1'11
3%
1%
9.0
7.7
9.5 7.9
7.2
Q4'10
2
8.2
8.7
8.4
Q3'10
4%
8.7
Q2'10
6%
9.8
Q1'10
4
4%
Q4'09
6%
13.5
Q3'09
7%
6%
Q2'09
6
7%
Q1'09
8
17.1 17.5 15.6
Q4'08
8%
20 18 16 14 12 10 8 6 4 2 0
Q3'08
9%
9%
Q2'08
10
Potato producer price dynamics in Russia [RUB/kg]
Q1'08
Expected salty snacks price growth in Russia vs. consumer price and general inflation [% change vs. PY]
Source: Rosstat, KPMG analysis.
Source: Consumer prices: Economist Intelligence Unit, Inflation rate: Ministry of Economic Development of the Russian Federation, KPMG analysis.
The potato deficit in 2010, which caused significant cost price pressure on the Russian salty snacks market, has now been rectified and prices have already started to decrease. Thus, prices for salty snacks are forecasted to be in line with the overall level of inflation.
Contact us George Pataraya Head of Consumer Markets Partner T: + 7 (495) 937 4477 (ext. 14446) E: gpataraya@kpmg.ru Daniel Strishewsky Strategy Group Consumer Markets Director T: + 7 (495) 937 4477 (ext. 14043) E: danielstrishewsky@kpmg.ru Alexey Maltsev Strategy Group Consumer Markets Associate Director T: + 7 (495) 937 4477 (ext. 14933) E: alexeymaltsev@kpmg.ru Alexander Khvostov Strategy Group Consumer Markets Senior Associate T: + 7 (495) 937 4477 (ext. 14649) E: akhvostov@kpmg.ru
www.kpmg.ru
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