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Review of the Russian Market of Chocolate Products

Research by the Company NeoAnalytics
According to NeoAnalytics, changes are currently being observed in the Russian chocolate market, and there have been positive trends.
It should be noted that in 2015 the market was undergoing a crisis in particular, a decline in volumes was recorded in virtually all segments. Average growth for all segments in 2015 equaled -14.8%. Positive dynamics were only demonstrated by segments such as chocolate candy domestic production and exports (4.6% each) as well as overall chocolate and chocolate candy production (only 0.8%). The market on the whole was facing a decrease in demand caused by growth in prices against declining personal incomes. In addition to ruble devaluation, the price increase was affected by the global situation in the cocoa market.
However, 2016 demonstrated positive results, and growth could be observed in all market segments. Average growth reached 9.6%, getting close to the figure of 2013 (in 2014 it equaled 14.6%, -1.1% compared to 2013). Dynamics were the most positive in chocolate candy exports, growth in volumes amounting to around 50%.
All in all it is expected that the positive trend will continue in 2017.

The volume of chocolate production in 2016 amounted to 567 thousand tons, having increased by 5.5% over the year.
In 2016 the volume of packaged chocolate production equaled 118.9 thousand tons, demonstrating an 8.4% increase compared to the previous year.
The volume of chocolate candy production last year reached 448.1 thousand tons, having increased by 4.7% over the year.

In 2016, the volume of chocolate imports amounted to 38 thousand tons with an increase of 12.8% compared to 2015.
The volume of chocolate candy imports in the given time period amounted to 36.9 thousand tons, having declined by 2.6% during the year.

The volume of Russian chocolate exports in 2016 equaled 43.1 thousand tons, with a 3.4% growth.
The volume of chocolate products in 2016 amounted to 157.3 thousand tons, having increased by 49%.

In 2016 the size of the Russian chocolate and chocolate product market equaled 441.5 thousand tons, having decreased by 4.4% during the year. A considerable increase in chocolate candy exports played an important role in the market size decline.

In the structure on the market volume, the main share over 83% falls on domestically produced goods. The share of imports in 2016 amounted to 17%. A trend for an annual decline in imports can be observed over the 5 years its share decreased by 22.7%.
According to NeoAnalytics, in the structure of supply present in the Russian market, the largest shares are accounted for by chocolate bars and candy sold by weight 45 and 33% respectively. The shares of chocolate bar snacks and packaged candy amounted to 11 and 9% respectively
The largest share in the segment of chocolate bars falls on chocolate in 100 gram packages its share in the segment is around 70%. 150-200 gram bars are more of a niche product, and so are individual mini bars and aerated chocolate. It should be noted that chocolate bars with additives are more popular.
Among all categories, demand remains stable in the segment of candy sold by weight, as it belongs to products of daily demand. In the segment of candy boxes a decline in demand is taking place due to part of the consumers switching to candy sold by weight.
Another category that continues to develop is chocolate products with toys designed for kids.

The domestic market of chocolate confectionery is consolidated. Around 67% of the market is occupied by 5 companies, 4 of which are formed with foreign capital involved and belong to Western companies: Obyedinennye Konditery (United Confectioners) Holding (Russia), Mars LLC (Mars Inc., USA), Nestl? Russia LLC (Nestl?, Switzerland), Mondelez Rus LLC (Mondel?z International, Inc., formerly Kraft Foods, Germany), Ferrero Russia CJSC (Ferrero SpA, Italy).

Further growth in prices for raw materials and final products is expected in the Russian market of chocolate and chocolate products. It is expected that demand for chocolate products will keep declining and some consumers will be switching to cheaper confectionery, such as gingerbread or cookies.

In 2016, average manufacturer prices for chocolate and chocolate products (except candy) equaled 599.2 rubles per kilogram and increased by 63.14% during the year. Average manufacturer prices for chocolate candies reached 250 rubles per kilogram (23.52% growth over the year).

All in all, according to NeoAnalytics, today the Russian market cannot be called saturated enough in terms of chocolate consumption volumes, and potential for its growth remains. As national statistics indicate, in 20142015 the Russian market was experiencing a crisis. In 2016 a positive trend was formed. 20172019 are expected to be a period of recovery from negative figures for the industry.
From 2017 to 2019, 5% growth is forecasted for the market, and by 2019 it is expected to have reached the pre-crisis level. Said growth will be contributed to by positive dynamics of domestic production, average market growth of which will amount to 5-7%. In addition, the stabilization of the countrys economy (optimistic forecast) will serve as the main driver for market growth.
Growth in domestic production volumes will be followed by an increase in exports. Chocolate products are a segment with the most potential in this regard. In 2016, the volume of exports of said products amounted to 157.3 thousand tons, having increased by 49%. In 20172019 the segment will retain its positive dynamics. Over 50% of exported goods go to the following 3 countries: Kazakhstan, Belarus and Azerbaijan.
It is expected that the share of imports in the structure of the Russian market volume will be slowly declining. However, according to NeoAnalytics, the situation may change after 2020: according to the forecast, the main importers of chocolate candies in 20172019 will be Germany and Poland. The share of imported products from Switzerland accounts for a small share of just 5% in the overall structure of imports.
Due to prices for cocoa beans having grown globally in 20152016, Russian manufacturers increased their output of chocolate with a lower cocoa content. Additionally, production of chocolate with various fillings and additives (nuts, cereals, dried fruit etc.) increased. It is expected that this trend will stay until 2017, as the vector of demand is aimed at consumption of budget-friendly products.
All in all, in the long term it is expected that manufacturers will start diversifying their supply, thus offering new goods to the market. In particular, a new trend has formed in todays market, namely production of organic goods (including chocolate) containing honey instead of sugar. However, it should be noted that said trend will mainly dynamically develop after 2020, provided that a positive correction in macroeconomic indicators takes place.

Olga Lutseva-Er,
General Director
Research Company NeoAnalytics,
MScin Social Management