Features of Branding in the Russian Cheese MarketResearch by the Branding Company “Labelmen”
In any market, commercial success of brands depends on several elements:
* market growth and prospects for branding;
* conditions for brand differentiation;
* changes in consumer preferences, creating opportunities for brand development.
Let us look at the Russian cheese market in terms of meeting them.
CONSUMPTION GROWTH AND PROSPECTS OF BRANDING IN THE CHEESE MARKET
The cheese market is among food markets with the most stable growth in Russia. According to “Euromonitor International”, in 2011–2016 volume of cheese sales in value terms increased by 62.1%, among them processed cheese by 53.7% and unprocessed cheese by 65.7%. The market growth in physical terms amounts to 0.5%.
At the same time, in recent years growth rates in unprocessed cheese sales slowed down, whereas sales of processed cheeses retain stable growth. In 2016 the growth rate for processed cheeses amounted to 6.7% against 3.6% for unprocessed cheeses.
There are several drivers for branding in the cheese market.
Low Consumption Volumes in the Product Category and Potential for Growth
Average per capita consumption of cheeses in Russia equals 5.5 kilograms per year. In Europe the figure equals 20 kilograms per year – in France in particular it reaches 27 kilograms and in Finland it amounts to 26 kilograms. Consumption will be steadily increasing with growth of disposable incomes, as consumers perceive cheeses as ‘quality’ food products, which replace ‘low-value’ products (potatoes, cereals, macaroni and others).
Growth in the Share of Packaged Cheeses in the Structure of Sales
The share of packaged cheeses in the sales structure in the Russian Federation was 4.7%, whereas in 2015 it increased to 13.4%. For comparison: in Germany this figure equaled 68% in 2015. The share of packaged cheeses in the structure of sales in the Russian Federation is rapidly growing, and prospects for further growth look very promising as well.
Embargo and Import Substitution
The share of domestically produced goods in the Russian cheese market amounted to 45% in 2013, whereas in 2015 it was 73%.
The food embargo imposed in 2014 as well as the devaluation of the ruble changed the structure of cheese consumption in the Russian Federation. One of the consequences of the limits on imports was the shortage formed for some cheese varieties such as blue cheeses, extra-aged hard cheeses and semi-hard cheeses.
Developed national markets are characterised by strong domestic producers dominating in them (“Valio” in Finland, “Arla Foods” in Denmark, “Lactalis” and “Savencia Fromage & Dairy” in France). As the market develops, competitive Russian companies will have more opportunities to consolidate it. The top 10 players of the Russian cheese market currently account for 25% in monetary terms. For comparison: the top 3 dairy market leaders control 52.2%.
CONDITIONS FOR BRAND DIFFERENTIATION
Strong and popular brands can be distinguished in the cheese market. However, packaging ideas and design of successful brands have remained practically unchanged since the moment of their launch. The category of traditional cheeses is conservative despite the dozens of new brands emerging in the market every year: many brands do not renew their design for decades and occupy similar semantic territories. All this provides great opportunities for development of ‘expansionist brands’.
As a rule, brands that introduce new capacious semantic categories to an overly conservative product category in Russia achieve significant success. For instance, success of brands by “Umalat” CJSC from Bryansk (the brand is fifth in market shares in value terms) is achieved with the balance between the ‘relevance of the product category’ and ‘brand uniqueness’ characteristics. Relevance of the product category in this case implies cheese colours, popular varieties in the range; uniqueness – advanced, modern and bold design making the brand stand out on the shelves and be attractive to consumers.
Success by the brand “Brest-Litovsk” (“Savushkin Produkt (Savushka’s Product)” OJSC, Belarus) was achieved with the balance of the ‘relevance of the product category’ and ‘brand uniqueness’ characteristics, relevance of the product category implying positioning in a popular semantic category ‘natural and quality dairy products from Belarus’, and uniqueness implying positioning in the unique semantic territory ‘pre-revolutionary Imperial Russia’ as well as original natural design of the package against bright and aggressive design solutions by competitors.
CHANGES IN CONSUMER PREFERENCES AND OPPORTUNITIES FOR BRAND DEVELOPMENT
Despite the conservatism in the product category, consumer behaviour in the cheese market is characterised by dynamism. Whereas during almost all of the 2000s the key criterion for brand choice was ‘European quality’, since 2009 it has been ‘naturalness’ and ‘variety’. Starting with the mid 2010s, millennials – people born between 1985 and 2000 – have been increasingly affecting consumer behaviour in the category.
Let us look at the main consumer trends in the cheese category and the influence of millennials on the category.
‘Snackification’ / ‘Fragmentation’
* The main buyers in the category are young people aged 18–30.
* The variety in consumer preferences and readiness to try new products give producers vast opportunities.
* Regular snacks for pleasure as well as healthy snacks (with nuts, fruit, or cereals) are guaranteed success by manufacturers.
* The segment of healthy snacks is relevant.
Naturalness and Functionality
* Consumer demand for functionality and healthiness determines virtually all other current trends.
* New brands and product formats are created in response to this trend.
* From a niche category of consumption (e.g. for sportsmen), proteins turned into a product of everyday demand by consumers of different ages.
* The most widespread and healthy source of proteins is dairy products.
* The number of new products involving ‘high protein content’ in North America increased by 29%.
* In Europe and Asia, consumption of proteins keeps steadily growing: during the past 2 years, 30% of buyers in Asia and 11% of buyers in Europe increased consumption thereof.
Clear Label / Direct with the Consumer
The fashion for Clear Label is a reaction to clever marketing ploys. Following the fashion for straightforward advertising (no asterisks, small print and the like), the ‘honest’ Clear Label is gaining popularity.
According to “PwC” (“PricewaterhouseCoopers”), by 2020 millennials will account for 50% of labour resources, and as consumers they will define trends for most product categories. Due to this one may expect a further increase in complexity and fragmentation in consumer preferences within the cheese category. At the same time overall consumer preferences for the category will be reflected differently in separate subcategories (fresh brine cheeses / semi-hard traditional cheeses / specialty and delicacy cheeses / aged cheeses / processed cheeses, and others), which will open up new market niches and drivers for development to brands.
Steady growth in cheese consumption, a wide product range and opportunities for product differentiation, high consumer propensity to brands and at the same time Russians’ readiness to try new, convenient or healthy things – all this characterizes the market as attractive for development of already existing brands and entry of new ones. True success requires not only clever use of management, financial, technological and marketing tools, but also product and brand innovations following important consumer trends.
Branding Company “Labelmen”