Russians still in love with mayo

The eastern European sauces market is said to be worth some €2 billion annually. And nowhere in the region is the industry more valuable than in Russia. There the nation's love of mayonnaise is the driving force behind the majority of sauce sales, in contrast to the rest of Europe where ketchup is the number one sauce of choice. Which is why mayonnaise continues to be big business in the country. Indeed the industry is expected to end this year with a value of €1 billion, given continued double digit growth figures.

Balitmore's recently announced investment is significant because up until now the state of the sauces market in Russia has remained fragmented, with no clear leader. However the company is claiming that the new investment in its processing facility will change all that, upping production capacity to levels that will far exceed its competitors.

"Vegetable oil is one of main ingredients for mayonnaise,"​ said Dmitry Moroz, head of Baltimore's marketing department. "Naturally, having our own production of vegetable oil will enhance the company's production of finished goods, and in particular mayonnaise. Right now it is impossible to give an exact estimation of the impact this investment will have on the domestic market as everything depends on the level of demand.​

"However, increased manufacturing volumes are expected to occur for Baltimore following the launch of several new mayonnaise brand names. Obviously the crucial element to success at this point will be a focused sales and marketing strategy, to which the company is taking a serious but cautious approach. In order to achieve a successful new brand name the market potential has already been carefully studied by us."​

Baltimore's investment in its oil processing facilities includes the upgrading of its existing factory in Kolpino, St. Petersburg, with an estimated €10 million investment. The factory will resume an expanded production of mayonnaise, ketchup and mustards under a variety of the company's brand names this June.

Meanwhile the two oil processing facilities are in the pipeline. The first facility is located in Krasnodar Terriorty and is expected to start production at the end of the year. The second facility is to be located in the Rostov region, construction of which is due to begin at the start of 2005.

Once the two oil processing facilities come online there is hope that the company will be able to make inroads into the export market, with the enlargement of Europe bringing the possibility of greater opportunity.

"Currently there is a small market for the export of Baltimore mayonnaise brands to the CIS countries,"​ Moroz said. "Expansion of exports will inevitably and firstly include CIS countries. Following that we will then start to focus on the EU countries."​

Currently the market for sauces is highly fragmented, with many companies producing on a small scale for local markets. Baltimore is one of a handful of more dominant players, but currently only commands around 4 - 5 per cent of the entire market for mayonnaise in the country. However the company is hoping that the current level of investment in its production facilities and the launch of the new brands will significantly boost this figure, making it a clear leader.

However, Baltimore is by no means alone in its ambitions to expand in the sauces sector. At the end of last year global giant Nestle bought up domestic ketchup and mayonnaise producer Topchin Produkt, significantly increasing its position in the Russian market and pressurizing the position that Baltimore holds.

The interview for this article was bought about through the kind co-operation of Moscow-based market analysis company Market Advice​.