Review of Russian Market of Sugar Confectionery
Research of the Company “Intesco Research Group”
Sugar confectionery is the category of everyday demand; this is the largest segment of Russian confectionery market. Consumption of sugar confectionery grows every year: during 2007-2011 per capita consumption increased by 1.6 kg/person to constitute 12 kg/person annually.
In 2010 Russian market of sugar confectionery saw almost 10% year-to-year increase in volume; in 2011 growth slowed down so the market volume increased just by 4% and reached 1.7 million tons.
In 2010 domestic products constituted more than 79% of sugar confectionery market in volume. Share of import was still quite large – one fifth of market volume. The trend of insignificant growth of import share changed to slight declining trend in 2011: share of import reduced by 0.3% down to 20.1%.
According to “Intesco Research Group’s” estimations, despite the forecasted increase of domestic production by 2.5% in 2012 share of import on Russian sugar confectionery market will still be growing in the context of Russia’s membership in WTO. By the end of 2013 Russian sugar confectionery market is forecasted to reach 1.81 million tons in volume with import share increased to 21%.
As it has been already mentioned, sugar confectionery is the largest segment of confectionery market with 57.8% of its volume in 2011. Until 2008 Russian confectionery production was mainly driven by baked products, but since 2009 production of sugar confectionery started to go straight up while production of baked confectionery was declining.
Russian market of sugar confectionery splits into four basic categories: chocolate; boiled sweets and other non-cocoa confectionery; marmalade, pastilla, jams and jellies; gum.
In 2011 chocolate was the largest category of sugar confectionery with 31.1% of market volume. Boiled sweets and non-cocoa confectionery was the second large segment with 20.6% of market volume. Share of the category of marmalade, pastilla, jams and jellies increased by 0.2% to reach 9.3% of sugar confectionery market in volume. Gum controlled 1.9% of market volume with 0.3% YTY increase.
In 2011 performance of sugar confectionery market improved significantly on the background of general stabilization of macroeconomics. Sales of sugar confectionery reached RUR 580.3 billion in 2011; in comparison to 2010 sales value increased by 18.3% or RUR 89.7 billion.
Share of Moscow in confectionery sales exceeded 18% while share of Moscow Region constituted more than 6%. Shares of Saint Petersburg and Samara Region constituted respectively 4.3% and 3.9%; share of Sverdlovsk Region was a little smaller.
During 2009-2010 Russian manufacturers tended to increase production of sugar confectionery and growth rate was increasing every year. In 2010 total volume of sugar confectionery production in Russia reached 1.42 million tons with more than 7.7% YTY increase in volume. In 2011 growth slowed down to the rate of 4.9%; total production volume constituted 1.49 million tons.
Production of sugar confectionery in Russia was mainly driven by Moscow Region and Moscow – respectively 14.4% and 13% of total domestic production in volume. Significant shares of domestic production were also controlled by Lipetsk Region, Belgorod Region and Vladimir Region – 6.2% to 7.5% of production volume. Manufacturers of Saint Petersburg, Kursk Region, Rostov Region, Samara Region, Penza Region and Kaliningrad Region provided 3.3% to 4.1% of total production volume of sugar confectionery in Russia.
In terms of product categories domestic production of sugar confectionery was mainly driven by chocolate – 30.3% in volume. Share of boiled sweets constituted 13%, of marmalade – 4.1%. Oriental confectionery, halvah and lokum (Turkish delight) provided respectively 3.7%, 2.2% and 2.2% of production volume respectively. Gum and drops had the smallest shares in domestic production volume – correspondingly 0.7% and 0.2%.
Most important manufacturers of boiled sweets in Russia were “Lipetskaja KF (Lipetsk Confectionery Factory) “Roshen” OJSC and “Rot Front” OJSC. The largest manufacturer of chocolate and milk-and-chocolate glazed sweets was “Mars” LLC. Major part of marmalade and pastilla offered on Russian market of sugar confectionery was produced by “KF “Udarnitsa” OJSC. Most important players in the category of chocolate were “Kraft Foods Rus” LLC and “KO “Rossija (Russia)” LLC controlling about a half of chocolate offer in Russia.
In 2011 manufacturer prices for sugar confectionery were growing and saw the average 9.3% increase in 12 months. The average manufacturer price for boiled sweets reached 62200 rubles/ton – plus 12.4% over previous year. The average manufacturer price for chocolate glazed soft sweets constituted in 2011 108500 rubles/ton; the average price for marmalade and pastilla grew by 13.1% and reached 68900 rubles/ton. The average manufacturer price of chocolate was 187900 rubles/ton in 2011.
Comparison of the average retail prices for different categories of sugar confectionery revealed that chocolate was the most expensive product group: 447.59 rubles/kg in March 2012 which was by 61.6% more expensive in comparison to chocolate glazed sweets (172.04 rubles/kg). The average retail price of marshmallow and pastilla was 160.59 rubles/kg. Boiled sweets were offered in retail on the average for 120.87 rubles/kg. Thus, the average price of chocolate was by 3.7 times higher in comparison to boiled sweets.
In Russia about 75.9% of population aged over 16 consumes chocolate tablets. Consumers of unpacked chocolate sweets sold by weight are 66.2% of Russians. Half of Russia’s inhabitants consume chocolate bars. Marmalade and pastilla are a little less popular – respectively 49.9% and 49.2% of Russians are consumers of the said categories.
In 2011 growth rate of import volume on the market of sugar confectionery slowed down to 2.3%. Import volume of jams, fruit jellies, marmalade and sweet spreads to Russia again demonstrated negative dynamics however it still exceeded import volume of 2009. Growth of import volume in the category of non-cocoa sugar confectionery went straight down to unimpressive 1% in 2011. Meanwhile in 2012 when Russia becomes full WTO member import volume of sugar confectionery is forecasted to increase by 19%.
Export of sugar confectionery from Russia in 2011 saw 10% YTY growth in volume and exceeded 132 thousand tons. No changes of export structure were seen in 2011. Export volume in the category of non-cocoa sugar confectionery in 2011 increased by 28%, in the category of chocolate – by 3%. Russian sugar confectionery was mainly supplied to three countries: Ukraine (about one third of export volume), Azerbaijan (about 15%) and Kirgizia (9%).
Full membership in WTO is an important step for Russian export of confectionery. WTO membership creates proper environment for expansion of Russian confectionery manufacturers abroad. Russian export of sugar confectionery is expected to keep growing in volume.
First months of 2012 showed that Russian market of sugar confectionery remains steady and predictable for business planning in terms of production and sales. Besides, the review market is ready to perform in the context of Russia’s full membership in WTO which means accelerated competition between domestic and foreign manufacturers.
Candidate of Economic Sciences
Counselor of General Director of
“Intesco Research Group”