Review of the Russian Ice Cream MarketResearch of the Company “NeoAnalytics”
According to “NeoAnalytics”, today the Russian market of ice cream is developed sufficiently. The market has a seasonal factor, which affects the volumes and structure of consumption. However, the Russian market is falling behind European markets to a large degree.
The main feature of the Russian ice cream market is that nowadays a more competitive environment is gradually being formed, and the market is growing and structuring itself. Another characteristic of the Russian market is domestic production having a share of around 97% in the structure, according to the Federal State Statistics Service (Rosstat). Thus, the share of imports is as low as about 3%. In the short term no changes in said structure are expected. Imported ice cream is mainly delivered from distant foreign countries and for the most part falls on the premium price segment.
Starting with late 2014, a decline in macroeconomic indicators had a dual effect on the ice cream market. Firstly, in 2015 a decline in ice cream consumption occurred due to decreasing monetary incomes of Russian citizens. In 2016, however, the volumes of consumption increased and growth in production volumes was observed accordingly. On the other hand, the crisis gave impetus to the market through increasing exports against the national currency weakening to the euro and the US dollar. It is expected that demand for exports is what will contribute to the increasing dynamics in volumes of domestic ice cream production.
In addition, the share of ice cream imports will also keep decreasing due to the difference in purchase prices in foreign currency, which makes said products more expensive and thus not competitive for a number of segments.
Russian ice cream industry has mainly adapted to the crisis, which can be confirmed by a significant growth in domestic production volumes in 2016. At that volumes of domestic consumption and exports increased as well. The volume of exports in 2016 amounted to about $ 37.4 million against $ 30.6 million in 2015.
The volume of domestic production of ice cream in 2016 increased by 7.8%, according to Rosstat, amounting to 406.6 thousand tons. It should be noted that 2016 was exceptionally fortunate for ice cream producers. It is expected that in 2017-2018 the trend towards an increase in ice cream output volumes in the Russian Federation will continue and will mainly be due to growing exports.
The dynamics of ice cream production volumes in the Russian Federation have a seasonal nature, which directly correlates with the structure of demand. An increase in demand can be observed from March to August, and the volume of supply grows accordingly. In the summer months of 2016 the volume of production reached 59,693.02 tons, whereas the figure for January, November and December equaled 13,965.71 tons.
In the overall structure of ice cream production the largest share falls on plombir ice cream and equals 40.8%.
In the overall structure of ice cream production by federal districts the leader is the Siberian Federal District with the share of 25.8% in 2016. It should be noted that the top three leaders in production (Siberian, Volga and Central Federal Districts) account for 66% total in the overall structure of ice cream output. The Ural, North Caucasian and Far Eastern Federal Districts produced the least ice cream, their shares amounting to 5.3, 3.8 and 1.6% respectively.
From 2014 to 2016, the Siberian, Volga and Central Federal Districts were also leading in production volumes. Said trend is expected to continue in 2017.
In general, Russians prefer ice cream as a dessert or delicacy, as noted by 88% of consumers. Only 12% of respondents consume ice cream on a regular basis*.
According to the estimate by “NeoAnalytics”, ice cream cones are in most demand, their share in the overall consumption structure amounting to 31% today.
In the demand structure in terms of price segments, a large share belongs to the mid-price segment, which occupied 56% in 2016.
Among flavors, Russians tend to prefer traditional products with chocolate flavor (chosen by 30% of respondents). The three leading flavors in terms of consumer preferences also included creme brulee and vanilla.
AVERAGE MARKET PRICES
According to Rosstat, in 2016 the maximum average price for ice cream was recorded in the Central Federal District, including Moscow, and equaled 470.05 rubles per kilogram. The Northwestern Federal District was second with the average price of 412.5 rubles per kilogram. The lowest price was observed in the North Caucasian Federal District, where it equaled 262.5 rubles per kilogram, which was caused by a number of factors. The first reason was the size of the federal district. In addition, consumption of ice cream in the North Caucasian and Southern Federal Districts was roughly at the same level – however, the figure for the Southern Federal District is higher because it includes statistics for the Crimean Federal District as well.
All in all, in 2016 a systematic increase in the dynamics of growth in the average price for ice cream was observed across all federal districts of Russia.
TRENDS AND PROSPECTS
In the medium term, according to “NeoAnalytics”, growth in the volume of the Russian ice cream market is expected. According to forecasts, in 2017 the market size will grow by 5% and will amount to 450 thousand tons against 420.6 thousand tons in 2016. The positive dynamics will primarily concern increasing domestic production volumes. “NeoAnalytics” predicts that in 2017 the volume of ice cream production will grow by 7.5%, amounting to 437 thousand tons. In 2016 virtually all manufacturers demonstrated growth in ice cream output volumes.
In addition, the share of exports will increase. The most attractive countries in terms of exports in 2017-2018 will include China and the CIS. Against the weakening ruble Russian products became competitive in addition to being demanded in terms of taste qualities. Imports, on the other hand, will not face any radical shifts – their share in the overall market structure is minimal and has a declining trend.
It should be noted that in 2017 the competitive struggle for consumers will become much more intense. Prospects for market participants will highly depend on the effectiveness of the respective companies’ marketing policies, introduction of new brands, line expansion, and experiments with design and flavors.
New players will also play an important role in the reshuffling of forces in the market. In particular, in June 2016 “R&R Ice Cream”, a British ice cream producer, announced its plans to enter the Russian market. Production will be launched as part of a joint venture at a factory of “Nestle Russia” LLC in Zhukovsky, Moscow region. According to “R&R Ice Cream”, the company is second in ice cream production volumes in Europe and third in the world as a whole.
According to estimates by “NeoAnalytics”, the structure of demand by price segments will undergo slight changes. Moderate growth in Russians’ real incomes will serve as the main driver (according to the Ministry of Economic Development, in 2017–2019 incomes will increase by 3.8% in total), which will, in turn, cause a slight increase in the shares of products in the premium and mid-price segments due to a reduction in the share of products in the low-price segment.
In the structure of production by federal districts, no changes are expected to take place. In 2017 the leading positions will still belong to the Siberian, Volga and Central Districts, their total share amounting to around 70% in the overall ice cream output structure. However, in 2018 the Central Federal District may surpass the Volga Federal District due to launching new “R&R Ice Cream” production units.
According to forecasts by “NeoAnalytics”, in the medium term the share of plombir in the overall ice cream production structure will increase and will amount to approximately 45-47% in 2017, against 40.6% in the previous year.
* The survey was carried out at www.neoanalytics.ru in January-February 2017. The sample size was 1,000 respondents.
Research Company “NeoAnalytics”
“MScin Social Management”