Quality to drive Russian food growth
Trade Development and Trade Ministry, food production is expected
to grow by 7.2 per cent in 2004. Simon Pitman spoke to the
Russian Ministry and found out that, although these figures maybe
optimistic, growth looks certain over the course of the next five
years as consumers opt increasingly for better quality products.
The report from the Economic Trade Development Ministry suggested that growth in the industry would continue apace this year, increasing significantly on the last year's 5.1 per cent rise in production volumes.
However, both dairy and meat processors were earmarked for slower growth in the report, with the meat sector unable to sustain the 10 per cent plus growth rate experienced in 2003 and the dairy sector likely to be hit by a drop in butter production and flat cheese sales.
Growth is also predicted in the food processing sector, but the Ministry's market research chief, Maria Tarasova, believes that the figure is more likely to be around 4 per cent.
"Until the end of the year I see domestic demand for processed foods remaining stable, but there will be no significant growth in food exports - a factor that might otherwise have boosted the industry. For the moment food exports are still centred around the CIS countries, but in the longer term there will probably be more of an emphasis on exports to European countries. Invariably this trend is likely to increase the quality of food exports as western European standards are relatively high."
However, Tarasova does agree that in the longer term production of processed foods in Russia is still likely to grow significantly. "In the course of the next five years there will almost certainly be growth, providing there is no major economic downturn or natural catastrophe," she said. "Since the early '90s the food industry has suffered greatly during the transition to a market economy. Now the situation is at long last starting to normalise and domestic demand is growing steadily. In the future, as the market shows increasing signs of maturing, it will be the niche markets that will show the most potential, as these are still far from being filled."
One of the biggest challenges the industry will face in meeting rising demand in the future is to try and update the archaic state of many production facilities. Tarasova points out that in many of the larger food factories - in particular those built before 1991 - much of the equipment is so obsolete the only way to modernise thoroughly is to rip out all the equipment and start from scratch. "This way manufacturers will be able to increase their volumes and the number of product lines they are able to manufacture."
Tarasova also says that quality will a become a key issue for the market in the future. "Recently the Russian consumer has begun to pay more attention to both quality and ingredients, and not just the price. This will mean that in the future there will be no room for bad quality foods, placing more of an emphasis on medium to premium class food products which are better produced."
This interview was bought about through the kind co-operation of Market Advice, the Moscow-based market research agency.
