Review of the Russian Sausage MarketResearch by the Company “Market Analitika (Market Analytics)”
The specificity of the Russian market of sausage products is the fact that it is virtually exclusively being filled with domestic products, the share of imports being insignificant.
The economic crisis of the recent years was primarily a blow to sausage producers. According to the National Association of Meat Processors, sales during the period from 2015 to 2016 dropped by 8-10% total. A decline in company profitability took place as well. According to chairman of the board Anatoly Morozov, in 2014 growth in costs of sausage products equaled 45% and retail prices thereof only increased by 19%, whereas in 2015 growth in costs and prices equaled 15% and 5% respectively. The decline in purchasing power makes more reasonable price growth in the industry impossible, and as a result small and medium-sized enterprises suffer losses and close, leaving the remaining shares available for large manufacturers.
In the situation formed, a further decline in demand for sausage products in favor of chilled meat and convenience meat is a possible threat to the market. The analysis of production dynamics in said industries indirectly reflects the possibility of this scenario happening. The volume of sausage production has been decreasing, whereas production of chilled, frozen and convenience meat keeps growing.
The sausage production volume index has not dropped below the level of 2010. The only exception was 2016, when there was a decline of 1% to 2010. It is important to consider that the Russian population has grown by almost 4 million since then, which once again confirms declining demand for this product category.
Among federal districts the Central Federal District is leading in terms of sausage production – its share amounts to 63% of all sausages produced in Russia. The lowest amounts were accounted for by the North Caucasian and Crimean Federal Districts – their total share in production amounted to slightly over 1%.
The analysis of production by region revealed that a decline occurred in five federal districts, whereas four federal districts demonstrated a slight increase.
The Central Federal District leading in the meat processing industry increased its production volumes in 2016 compared to 2015 (2% growth) – however there is a decline to 2014 (by almost 2%).
The Volga Federal District, which is also among the leaders in production, demonstrated a similar picture, except that compared to 2015 production remained at practically the same level.
Two more federal districts that increased their sausage production volumes over the last year are the Crimean and North Caucasian Federal Districts. However, their results hardly affect the overall situation in the country, as these regions happen to be outsiders of the meat processing industry. Assessing the dynamics in the Crimean Federal District is impossible for several reasons, whereas for the North Caucasian Federal District it can be done, and its dynamics distinguish the region among others: it is the only federal district of the country where a decline in production to the previous year has taken place only once since 2010 – by 6% in 2014. In this regard, the North Caucasian Federal District can be called the most resistant to challenges in the market, despite the small production volumes.
Output volumes in the Northwestern and Siberian Federal Districts started to decline in 2013 – the decrease in the former fluctuated from 1% to 5%, and the decrease in the latter equaled 6%.
In the Far Eastern Federal District production decline in 2016 was almost 2% to 2015 and 10% to 2014.
Two regions – the Ural and Southern Federal Districts – have been demonstrating signs of production crisis since as early as 2010–2011– since that time a constant decline in sausage production volumes has been recorded. In 2016 production dropped by over 3% to 2015 in the Ural Federal District and by 10% in the Southern Federal District, which is the sharpest annual decline compared to other regions.
Volumes of foreign trade decreased as well: a significant decline in 2016 compared to 2014 can be observed in sausage imports. Even though exports did not drop as substantially, the overall structure of imports and exports underwent significant shifts.
The analysis of production volume, import and export dynamics indicates a reduction in the volume of the sausage product market.
In the given situation, when a redistribution of market share among large players became possible and the latter partly (the situation may worsen in the future) became hostages of the consumers and their purchasing power in the context of the overall economic situation, consumers are particularly interesting for market studies.
The markets of meat and processed meat are among the main directions for research at “Market Analitika”. In addition to the regular analysis of indicators common for the industries, the company works on consumer research. For instance, “Market Analitika” conducted a survey among sausage product consumers in December 2016*.
Within the study, consumer preferences in sausage product brands were distinguished in three segments – cooked sausages, uncooked sausages and wieners.
According to the findings, almost one third (32%) of cooked sausage preferences in Moscow and Moscow region are distributed among three local producers: “Ostankinsky Myasopererabatyvayushciy Kombinat (Ostankino Meat Processing Plant)” (“OMPK”) OJSC, “Myasopererabatyvayushchiy Zavod (Meat Processing Plant) “Rublevsky” LLC and “Dymovskoe Kolbasnoe Proizvodstvo” LLC.
“OMPK” is leading in two other federal districts (Central and Northwestern) in terms of cooked sausage preferences. Consumers in the Siberian, Southern and Volga Federal Districts appear to mainly prefer cooked sausages produced by local enterprises.
It should be noted that consumer preferences in sausage brands are not always directly connected with how well-known they are. For instance, the most well-known producers in the cooked sausage segment in the Southern Federal District are “Sochinsky Myasokombinat (Sochi Meat Processing Plant)” OJSC, “Dymovskoe Kolbasnoe Proizvodstvo” and “Mikoyanovsky Myasokombinat (Mikoyan Meat Processing Plant)” CJSC (Moscow), whereas only the former is among the three leaders in preferences for the segment of cooked sausages.
In conclusion one can say that the influence of local large producers has increased during the past few years – equipment upgrades that they carried out now allows them to successfully compete with more popular Russian producers.
* Online survey for Moscow and Moscow region as well as the Central, Northwestern, Siberian, Southern and Volga Federal Districts (300 participants in each region – men and women aged 18-50); the total number of respondents is 1,800.