Eastern promise for sauce makers

- Last updated on GMT

Related tags: European union, Sauce, Russia

The market for sauces in Eastern Europe is worth in excess of €2
billion, and is likely to grow further once many of the countries
there join teh EU later this year. But market maturity in some
countries means that the growth rates of the last 10 years will be
difficult to sustain.

The report from emerging markets specialists Leatherhead Food International​, examined the sauces and dressings markets in six key countries - Russia, Bulgaria, the Czech Republic, Hungary, Romania and Poland.

"These countries have been chosen because they show a large potential forgrowth reflecting political and economic stability and a general rise inlevels of consumer disposable income adopting already the western style ofliving,"​ said report author Stephanie Melikian, in an interview with CeeFoodIndustry.com​.

The research took into account ketchup, mustard, variety sauces and cooking sauces, areas which accounted for over one million tonnes of production volume in the year 2002, giving it a value of €2.1 billion.

According to Leatherhead, the largest market is Russia, which accounted for 68 per cent of the total production volume - 683,100 tonnes. This was followed by Poland with a 19 per cent production volume share and the small but advanced Czech Republic market with a 5 per cent volume share.

The breakdown of sauce types reveals that mayonnaise is by far the most popular choice, with a 39 per cent volume share. The report indicates that ketchup is a close contestant with a 37 per volume share, followed by cooking sauces with 11 per cent, mustard with 8 per cent, variety sauces with 4 per cent and salad dressings with 1 per cent.

The high volume of mayonnaise is due mainly to its popularity in the Russian market, while in other countries ketchup proves to be the number one sauce of choice.

Growth within the segment has proved to be very strong in recent years, but according to the report the market is now displaying distinct signs of maturity, indicating that growth should level off in the coming years. Volume sales have been growing by 13.7 per cent throughout the region since 1999, but the projected figure for volume growth to 2007 is estimated at 8.2 per cent a year, bringing total volumes up to the 1.5 million tonne mark.

Melikian believes that future growth will now be derived from varietysauces, ready-made sauces and salad dressings, as these products are still new to the market and have the most room for further potential.

Trends that have affected the industry in recent years have included the growth of the fast food market - particularly hamburgers, pizzas and hotdogs - as well as the development of more convenient packaging. The report also says that, to a lesser extent, growth has been boosted by demands for foreign cuisine, which in turn have boosted sales of spice- and soy-based sauces.

"The development of fast food chains and the hectic lifestyle of consumers, including the emergence of working women, have led to an increase in demandfor convenience as ready-to-eat sauces and salad dressings have recentlybeen introduced in these markets,"​ said Melikian. "However as social discrepancies stillexist, the growth of ready-made sauces may still take a while as thepopulation will need time to accept the change in eating habits."

"Although a part of thepopulation, mainly rural dwellers, remains relatively traditional in its eatinghabits - opting for home-made salad dressing - there is a growing trendtowards variety sauces such as Mexican-type tomato sauces and other spicy flavours,especially for ketchup and soy sauces. As in Western Europe, consumersare becoming more adventurous and are looking for more flavours and taste."

Currently the market is dominated by several multinationals. In the all-important ketchup market, Heinz is a big supplier in Bulgaria, Czech Republic and Poland, while Unilever is market leader in Hungary and Poland. Norway's Orkla Foods is also active in Romania and Poland.

"The growth in the number of imported products such as Unileverand Heinz has threatened local producers."​ said Melikian. "In addition, as price is still amain issue, discount retailers such as Lidl, Penny and Kaufland are gainingpopularity on low price offers."

Dominant Eastern European players include Deroni in Bulgaria, Hame in the Czech Republic and Baltimor, which accounts for around half of all sauce sales in Russia.

Reflecting on the future of the market, it seems that there are a number of changes in store for the sector. The increasing trend for healthier products that is currently hitting western European markets is now starting to impact the sauces market in Eastern Europe as well.

"The main trend is toward variety and then convenience. There have been just a few'healthy' sauces launched in these markets, reflecting a demand for betterquality ingredients,"​ said Melikian. "Small producers can charge a more competitive price bylowering the quality of their product. For instance, some have changed thecontent of their ingredients by using oil in the mayonnaise or disguisingpale tomato colour with the addition of hydrocolloids. I believe that thehealthy trend in the sauces market will emerge in five years time."

As with all sectors of the Eastern European food industry, European enlargement is expected to have some impact on the way the industry operates in those countries affected.

"The future accession to the EU in 2004, with the exceptions of Bulgaria,Romania and Russia, is expected to bring some changes in the industrystructure. Many small- to medium-sized producers of sauces are likely toclose down because of failing to meet the health and safety requirements."

The full report, which contains detailed market analysis and an extensive range of statistics about the market can be bought from Leatherhead Foods International.

Related topics: Market Trends

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