Branding in the Russian Meat MarketResearch by the Branding Company “Labelmen”
In 2016, according to Rosstat, production of meat in agricultural organizations increased by 5.9%. Pork production served as the main driver for growth. Production of pork and poultry have been demonstrating high growth dynamics during the past three years – +13% and +11% respectively. Domestic production is growing, and volumes of imports are decreasing.
According to Rosstat, growth in meat production continued in the first quarter of 2017 to the first quarter of 2016. Production of beef, pork, mutton and other types of meat increased by 105.6%; poultry production increased by 104.7%; output of convenience meat products grew by 108%.
Growth in the Russian meat market is due to increasing domestic consumption. Despite the ongoing decline in real incomes (-5.9% in real terms in 2016, according to Rosstat; -9% in April 2017 to April 2016) and a decrease in consumer spending, average per capita consumption of meat amounted to 73.4-73.5 kilograms in 2016 against 71.6 kilograms in 2015.
Meat and meat products are regarded as essential goods by Russians, and therefore consumption thereof is last to be reduced or abandoned. Moreover, according to the study by “GFK Rus”, growth in sales of more expensive compared to chicken meat varieties such as turkey and pork was observed in 2016.
The improved consumer sentiments in the first quarter of 2017 also allows one to expect further growth in meat consumption in Russia: according to “GfK Rus”, in the first quarter of 2017, for the first time since the 2014 crisis, Russian consumers’ sentiments became positive.
The meat market in Russia is capacious, steadily growing and poorly consolidated. According to “Agroinvestor”, the total share of the top 20 players equals 42% of meat produced in the country. The leaders of the market in 2016 were: “Gruppa “Cherkizovo” PJSC (Moscow), “Torgovy Dom (Trading House) “Prioskolye” CJSC (Belgorod region), “Miratorg” Agroindustrial holding, “BEZRK – Belgrankorm” Agroindustrial holding, “Resurs (Resource)” Group, “Charoen Pokphand Foods” LLC (“Ptitsefabrika (Poultry Farm) “Severnaya (Northern)” CJSC, Leningrad region), “Belaya Ptitsa (White Bird)” Agricultural holding, “Prodo” Group, “Akashevo” Agricultural holding, “Rusagro” Group, “Agro-Belogorye” Group, “Agrokompleks im. N.I. Tkacheva (Agricultural Complex named after N.I. Tkachev)” JSC, “KoPitaniya” Agroindustrial holding, “Sibirskaya Agrarnaya Gruppa (Siberian Agrarian Group)” JSC, “Agrosila Group” CJSC, “Zdorovaya Ferma (HGroup, “AgroPromkomplektatsiya” Group, “Horoshee Delo (Good Deed)” Agritulcural Group, “SITNO” Group, and “Komos Group” Agroindustrial holding*. The three leaders of the market account for around 16% of the Russian production in slaughter weight. For comparison, the top 3 players in the dairy market account for 52%.
Large capacity, low rate of consolidation and high geographical fragmentation are the reasons of the low branding rate in the meat market. Local players dominate in most regional markets – the former are perceived as local producers rather than brands by consumers. Nevertheless, gradual market consolidation by the top 20 players, results in branding becoming more important. Players use various branding strategies.
For instance, “Cherkizovo”, the leader of the market, actively develops its portfolio of product brands connected to the main corporate brand “Cherkizovo”. Its closest pursuer “Miratorg”, on the contrary, focuses its activity on developing one brand. The top 20 sample demonstrates an almost even distribution of brand architecture types.
Among consumer choice criteria, credibility of the producer is key and requires players to make clear links of their products to corporate brands.
Brand portfolios and hybrid architectures (strong corporate brand plus partial use of the corporate brand in product brand identification and promotion) evolved by players active in the market of mergers and acquisitions. These companies primarily include “Cherkizovo”, “Prodo” and “Komos Group”.
For players whose development is primarily organic (“Miratorg”, “Prioskolye”, “Ostankino”), monobrand is the most widespread type of brand architecture.
The low level of market consolidation and branding leaves players considerable freedom in choice and use of various brand architectures. However, in the long term a more structured and clear order of brand architectures in accordance with product specialization is expected.
Today the key choice criteria for consumers of various types of meat (pork, beef or poultry) are guaranteed stable quality, safety and freshness of the product. These unique benefits can be translated by corporate umbrella brands, present in different product and price segments (“Miratorg”, “Zdorovaya Ferma”, “Agrokompleks im. N.I. Tkacheva”).
However, in the medium term, as consolidation, competition and branding increase in the market, success of brands will increasingly depend on how much the stated brand benefits correspond to consumer factors of choice, which will require them to focus more clearly on product and price or geographic markets.
The basic consumer choice criteria in pork and poultry are similar (guaranteed quality), but additional criteria vary greatly. Pork is perceived as harmless delicious meat, and qualities such as juiciness and flavor are important for it. For poultry, on the other hand, the most important characteristics would be healthiness and affordability. Combining these product categories in one brand blurs the field of consumer benefit, thus lowering attractiveness and competitiveness of the trademark.
Another important brand differentiator is product freshness. In the segment of chilled convenience meat (minced meat, convenience meat in pieces) federal players (“Miratorg”, “Ostankino”) are unable to provide meat with a shelf life of less than 10 calendar days for logistics reasons, which is used by strong local players such as “Myasokombinat (Meat Processing Plant) “Samson” (Saint Petersburg), producing goods with the shelf life of 7 days and thus confirming freshness of their products, which is the key consumer characteristic for the category in question.
Among brand differentiators, the cultural aspect needs to be highlighted. Culinary traditions are an important element of national cultures and a matter of pride and self-identification of various communities. One of the solutions in this regard is to intentionally develop cosmopolitan brands offering modern products in convenient packaging for urban residents: “Miratorg” TM (“Miratorg”), “Papa Mozhet (Dad Can)” (“Ostankino”), “Naleteli (Swoop Down)” (“Agrosila Group”), “Samson” (“Samson”), “Dalnie Dali (Faraway Distances)” (“Agro-Belogorye”), “Ekol” (“Optimum” LLC, Moscow region). Another way is to clear positioning of brands as products for certain cultural and ethnic groups (halal products – “El-Safa” TM (“Prioskolye”), “Latifa” (“Petelino”); kosher foods – “Elyon” TM (“Elyon” LLC, Moscow region)).
Below are the specificities of branding in the Russian meat market:
1. Moderate consumer patriotism and thus preference of local brands by elderly consumers; lack of patriotism by the younger audience: the significance of local brands should not be overstated – most of them are ‘strong’ due to weak market competition.
2. Capacious product categories including goods with various characteristics (in quality, price, shelf life, nature of consumption, consumption situations etc.): in the long term portfolios of federal brands in each product category and regional multiproduct brands are relevant.
3. The market is too poorly branded to accept narrow focused trademarks for separate consumer audiences (brands for men, brands for millennials etc.): in the medium term using one product brand in each category is possible.
In the coming years, as a result of further market growth, consolidation processes, increasing retail network requirements and changing consumer preferences, further gradual branding in the segment will take place. Farm products and products sold by weight in retail chains will retain strong positions in the market; however, brands will increasingly attract consumers by meeting their demand for quality, fresh, diverse and safe products in modern and convenient packaging.
* Companies are arranged in descending order of shares in physical terms.
Branding Company “Labelmen”