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¹4/2016

CONTENT

DRINKS
Issues in Russian Wine Industry Development Strategies
Research of the Center for Investigations of Federal and Regional Alcohol Markets (“CIFRRA”)

Review of the Russian Market of Bottled Water
Research of the Company “ÍîReCaHELP”


CONFECTIONERY
Review of the Russian Confectionery Market
Research of the Information Agency “Credinform”


MEAT
Review of the Russian Poultry Market
Research of the Company “Market Analitika (Analytics)”


DAIRY PRODUCTS
Review of the Russian Dairy Market
Research of the Company “Global Reach Consulting”


INGREDIENTS
Review of the Foreign Trade Market of Malt*
Research of the Information-Analytical Company “VVS”


FRUIT & VEGETABlES
Imports of Nuts and Dried Fruit into Russia
Research of the Company “ID-Marketing”


PACKAGE
Review of the Russian Packaging Market
Research of the Company “ÍîReCaHELP”


TRADE SHOWS
International Trade Fair for the Meat Industry “IFFA-2016”


25th International “Beer-2016” Exhibition and Fair



FINANCE & LOANS
Russian Leasing Market in 2015
Research of the Rating Agency “RAEX” (“Expert RA”)





Review of Russian Market of Bottled Drinking and Mineral Water
Research of the Company “Step by Step”

Need for water is one of the basic demands of people. Today more and more consumers prefer to buy bottled water not only for drinking but also for cooking at home. During several recent years bottled water saw increase of popularity and demand. In terms of capital return ratio water bottling has no rivals among other soft drink businesses. Increase of demand for bottled mineral and drinking water in Russia is driven by the following factors:
* declining quality of tap water;
* improvement of living standards;
* promotion of health and wellness ideas.
In 2013 “Step by Step” group held the research of Russian market of bottled drinking and mineral water in order to find out its current trends and basic quantitative indices.
The market of bottled drinking and mineral water started to shape in Russia back in 1990s; however, consumption of mineral water in the country has a long history. In 1870s they started to bottle natural mineral water in ussia. Today Russian market of bottled drinking and mineral water is on the growth stage. Key peculiarity of the review market is low saturation. Transnational giants “PepsiCo” and “Coca-Cola” were the first to explore Russian market; in some time domestic manufacturers also entered the market of bottled drinking water and today their products are offered mainly in economy price category.
Analysts say that Russian market of bottled mineral water continues to grow, but increase of production volume has been slowing down during several recent years. According to “Step by Step’s” findings, production of bottled mineral water in Russia increased from 266 million decaliters in 2005 to 522.4 million decaliters in 2012. Thus, domestic production was growing by 9.6% in volume annually on the average. In H1 2013 Russia bottled 284.4 million decaliters of mineral water, plus 7.84% over H1 2012.
Meanwhile production of bottled drinking water in Russia demonstrates impressive growth. “Step by Step” monitors production volume of bottled drinking water (mineral water not considered) since 2011. According to “Step by Step’s” findings, in 2012 production of bottled drinking water saw 31.75% year-to-year growth in volume: from 129.62 million decaliters to 170.78 million decaliters.*FOOTNOTE In H1 2013 Russia bottled 99.15 million decaliters of drinking water, plus 20.07% over H1 2012.
Increase of production volume is mainly driven by consumer interest to health and wellness trend. Promotion of healthy living leads to decline of demand for carbonated drinks. Besides, as it has been already mentioned, today Russians use bottled drinking water both for thirst satisfaction and cooking at home. Offices are also among main consumers of bottled drinking water. However, it should be mentioned that though purchase of bottled water is practically obligatory for offices this segment is well developed only in cities. For instance, more than half of companies in Moscow and Saint Petersburg buy bottled drinking water. In this context demand for water delivery increases; this business is pretty profitable because it requires no license and production cost is low.
Both domestic and foreign players operate on Russian market of bottled drinking and mineral water. Share of import is small – about 10%. Exclusive distributors of foreign brands in Russia offer mainly premium products. In 2012 import volume constituted 70.4 million liters.
Import of bottled mineral and drinking water mainly comes to Russia from Europe; leading suppliers are Belgium, Armenia and France. Belgium is far ahead its rivals controlling almost 50% of import value. Meanwhile export of the review category goes mainly to CIS countries and Ukraine gets 44% of bottled mineral and drinking water exported from Russia.
Manufacturers controlling significant shares of the review market have the following common features:
* active marketing;
* wide product range;
* well-developed and strong distribution network covering periphery of Russia;
* offer of products in several price categories;
* promo accent on two and more brands.
Thus, the majority of manufacturers have several brands offered to several target groups. Today the market is dominated by two transnational holdings – “The Pepsi Bottling Group” and “The Coca-Cola Company”, pioneers of the review market. Aggregately these two players control about 40% of market volume. Meanwhile market volume demonstrates vibrant growth driven by activity of local manufacturers in the periphery. It should be mentioned that Russian market of bottled mineral and drinking water is getting increasingly consolidated as large companies acquire small local bottling plants.
The market also has certain geographical concentration of production facilities. For instance, North Caucasian Federal District, Southern FD, Far Eastern FD and Siberian FD aggregately provide about 75% of domestic production of bottled mineral and drinking water in volume.
Analysts highlight several ways manufacturers follow in order to increase their pieces of market pie. One implies extension of product range with new product lines of flavored mineral water. Another popular way is promoting the brand by accenting long history of water well and its multiyear popularity.
So, current consumption rate of bottled water in Russia is about 33 liters per person annually. In West Europe this index is by 5 times higher which evidences for large growth potential of Russian market. Till 2016 the market of bottled mineral and drinking water is forecasted to grow annually by 6-8% in volume on the average. By 2015 popularity of the review categories will beat carbonated soft drinks.

Anastasia Ptukha
Chairman of the Board of Directors

Tatiana Merzlyakova
Marketing Manager

“Step by Step” G

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