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Review of the Russian Market of Healthy Foods
Research by Consulting Company Foresight 24

Review of the Russian Market of Healthy Foods

Research by Consulting Company Foresight 24
Growth of the healthy foods market is a direct consequence of changes in consumer behaviour models. A recent study by Deloitte has shown that the traditional consumer choice criteria in the food market namely, price, taste and quality are inseparable from a new group of criteria: health & wellness, as well as safety and transparency (consumers want to know what exactly they consume). Healthy eating has been turning from a trend into a way of living all across the globe.
Following the markets of other countries, the Russian market has been starting to actively move towards new consumer demands, which form under the influence of various factors.
The key factors include growth of the incidence rate of the population, which stimulates demand for preventive and curative foods.
According to a global survey by Nielsen, 67% of Russian consumers actively monitor their diet in order to prevent various diseases, whereas 39% of respondents limit the amount of sugar and fats in their diet. Changes in dietary habits directly affect consumer behaviour. 74% of Russians carefully study the product composition before buying food and drinks. Around 70% of Russian consumers state that they are ready to overpay for products that do not contain unwanted components.
The growing popularity of sports and healthy eating in cities plays an important role as well. Healthy living is being actively promoted and sports are getting support at the state level.
The increasing pace of urban life is leaving less and less time for cooking and eating, which stimulates demand for fast and healthy snacks.
Services of nutritionists and professional fitness trainers for weight loss and control have been gaining popularity.
Finally, another important factor affecting changes in consumer behaviour is the activity of manufacturers in the R&D field* as well as promotion of innovative food products, which allows them to form demand and attract customers from competitors.
Several years ago, one could still only speak of isolated healthy food products or niches in the Russian food market, whereas today healthy trends have penetrated virtually all product categories. This situation fully matches trends in foreign markets, which have been demonstrating booming demand for health & wellness products, which include the following groups:
* healthy snacks, which have already switched from the category of granola bars to their own separate large product category, which includes a whole range of snack foods, including drinks: for example, TM Brainfoods fruit and nut mixes (Brainfood LLC, Moscow), TM Bionova protein bars (NovaProdukt AG LLC, Moscow), and TM Khlebny Spas (Bread Saviour) biscuits with cereals (KF (Confectionery Factory) Khlebny Spas LLC, Moscow);
* products enriched with vitamins and fatty acids, for example chicken eggs of Extra Omega-3 Aktiv trademark (Ptitsefabrika (Poultry Plant) Roskar JSC, Leningrad region) or chicken eggs of Sinyavinskoe Effekt trademark with selenium (Ptitsefabrika (Poultry Plant) Sinyavinskaya CJSC, Leningrad region);
* products enriched with probiotics and prebiotics; for example, Resource Optimum trademark dietary supplement with pre- and probiotics (Nestl? Rossiya LLC), J7 Tonus trademark nectar with prebiotics (PepsiCo Holdings LLC), BIO-Balans trademark bio-yoghurt (Danone v Rossii (Danone in Russia) Group), and Poleznye Produkty (Healthy Foods) trademark bio-yoghurt with probiotics (Sernursky Syrzavod (Creamery) CJSC, Mari El);
* bread and bread products with nuts, seeds, dried fruit, rye flour, bran, whole grain flour and other ingredients for example, bread by TM Gerkules (Hercules): (Khlebny Dom (Bread House) OJSC, Saint Petersburg) or bran bread of RM Harrys (Harrys SNG LLC, Moscow region);
* -free products that is, foods not containing sugar, preservatives, gluten, lactose, artificial dyes or flavours, including clear label goods: e.g. protein sugar-free ice cream of TM Prolce (Kachestvennye Produkty (Quality Products) LLC, Saint Petersburg), sugar-free plombir ice cream of TM Chistaya Liniya (Clean Line) with honey (Chistaya Liniya LLC, Saint Petersburg), gluten-free amaranth puffed cakes of TM Di&Di (Korporatsiya Di end Di (Di & Di Corporation) LLC, Saint Petersburg), Mr. Ricco Pomodoro Speciale trademark ketchup (Nefis-Bioprodukt CJSC, Tatarstan), Valio Eila tadermark lactose-free milk (Valio LLC, Saint Petersburg), and Ice Cro Vegan trademark lactose-free ice cream (Il Mio Morozhenko LLC, Moscow);
* products with reduced sugar and fat content: for example, Gallina Blanca trademark broth with lowered salt content (Europe Foods GB CJSC, Nizhny Novgorod region), mayonnaise of TM Calve Legkiy (Light) (Unilever Rus LLC, Moscow), cheese of TM Karat Domashniy Legkiy (Carat Domestic Light) (Moskovskiy Zavod Plavlennykh Syrov (Moscow Processed Cheese Plant) Karat);
* foods for vegetarians, vegans, and raw vegans, the number of which in Russia has been increasing every year (according to a study by Mintel Global Food and Drink Trends 2017, the amount of vegan foods and drinks in the world increased by 257% in 2016 compared with 2012);
* vegetable goods with a high nutrient content, or superfoods, which are not very popular in Russia yet (goji berries, quinoa, chia and others);
* foods with seaweed (e.g. Laminaria noodles, aimed to replace traditional wheat noodles), which have been gaining popularity abroad: nori crisps of TM Sen Soy (Sostra LLC, Moscow region) or crisps of TM Fine Life (private label by Metro Cash & Carry LLC) made from nori with olive oil;
* coffee substitutes (e.g. golden anti-inflammatory latte drink with turmeric, cocoa butter, ginger, black pepper, cinnamon, honey and non-sweetened vegetable milk);
* sports nutrition for mass consumption, rather than only for professional athletes;
* organic foods, produced without chemical fertilisers, herbicides and pesticides as well as without GMOs, dyes, stabilisers, thickeners, vegetable oils instead of milk fat etc.: for example, TM Ubrech (Zhivoy Produkt (Live Product) LLC, Dagestan), Ecor (EcorNaturaSi Spa, Italy), Geo Goods and Fitnessier (Geo Goods LLC, Novgorod region);
* fermented products, beneficial for intestinal health and digestion (miso, kimchi, sauerkraut and others);
* herbal goods, virtually unrepresented in Russia at the moment; one of the three key trends of the global healthy foods market trends according to a study by Technavio, along with growing demand for probiotic natural and functional foods and increased consumer interest in innovative packaging.
Despite the classification provided above, no consensus has been reached in Russia or abroad on what types of products exactly make up the market of healthy foods. This is mainly due to the dynamic development of the market leading to the emergence of new product types every year. In addition, all market participants acknowledge that one of the main difficulties is the lack of common understanding of the term healthy eating to begin with as well as the lack of state market regulation in terms of certification. These factors make it incredibly difficult to reliably assess the volume of the healthy foods market.
A review of the range of products for healthy eating allows one to distinguish two primary groups, development of which in the future will go hand in hand:
1. traditional foods (industries), reacting to changes in consumer behaviour models through new products based on the traditional range (e.g. bread, yoghurts, confectionery);
2. healthy foods, i.e. new products designed specifically for the target audience (e.g. protein bars for athletes, diabetic supplies).
Products for healthy eating are in the mid- and high-price segments. The use of natural ingredients (including flavours, preservatives, dyes, extracts, quality sublimates etc.), enrichment with vitamins and micronutrients, specific production technologies and innovative packaging lead to the price for said products ending up 1.52 times higher than the price for regular alternatives. For instance, it is particularly noticeable in the dairy market and in the market of bakery products.
It is important to note that the crisis and the sanctions have served as a driver for Russian manufacturers every year, more and more domestic products for healthy eating have been emerging in different categories, serving as a decent alternative for imported goods. However, foreign companies with production facilities located in Russia (Mars, Nestlé, Danone and others) remain the flagships of the market in question. These companies are first to bring new products to the Russian market (e.g. Activia Drink & Go by Danone).
Observations of the dynamics of foreign trend penetration into the Russian food market in 20132017 show that they tend to appear in the Russian market with a delay of 13 years.
Todays consumers want to know what they eat. One of the ways for manufacturers to earn consumer confidence is to constantly confirm the naturalness and quality of goods they produce (forming brand transparency).
New tools of quality and naturalness confirmation have been implemented, including mobile applications such as Shopwell, Open Label and the Smart Label platform, which make goods and supply chains transparent to consumers (block chain technology).
In Russia, this approach is already being used by major producers of functional dairy goods, emphasising their naturalness and healthiness. For instance, buyers are offered the option to track farms which supply milk; the production process is explained; product healthiness is confirmed by scientific studies.
Today, brands have to adopt simple yet apparent characteristics, the presence of which can be verified by consumers and which do not require long explanations and descriptions (the so-called anti-authentic marketing). Said trend in Russia has been increasingly actively used by small farms, providing consumers with packaged goods with a short shelf life. Another example is the appeal for GOST norms by manufacturers, which orient consumers at a certain quality level and product composition while also creating the association with the Soviet times, when there were virtually no unhealthy foods in stores. This method is used by producers of sausages, ice cream and other goods. Following this wave, small manufacturers who offer handmade food products made according to ancient, time-tested recipes (craft beer, handmade chocolate, home sour cream and others) have great chances to enter the market.
Another trend is the global movement towards the health & wellness lifestyle. Apart from this, healthonism and weight management take priority. Healthonism (health plus hedonism) is a trend connected with the desire to combine consumption of foods bringing pleasure, and health benefits (e.g. alhocolic beverages with antioxidants, products with lowered sugar content, healthy fast food). Weight management is a system of weight control, which involves complex work on losing or controlling ones weight. Various mobile applications by manufacturers are part of this programme, aimed to establish direct communications between companies and brands and their consumers, and to inform consumers on benefits as well as methods of cooking and consumption of the food products. Examples would be European offers such as Danone Inside, Unilever, Activia VIP, Nestlé and others.
Finally, expansion of the healthy product range creates space for healthy lifestyle foods, collections of food products for cooking certain meals, farm products and others, thus significantly simplifying the selection process for the consumer. Said approach is virtually non-existent in Russia today.
The trends mentioned above require Russian companies operating in or planning to enter the market of healthy foods to take the following measures:
1. constantly being on guard, analysing the Russian and foreign markets, actions of competitors and suppliers, studies and patents in the field of food products, consumer behaviour and adjacent markets, and being on the lookout for ideas for new products at all times;
2. establishing constant consumer feedback through social media, focus groups, feedback forums and other means;
3. recycling existing recipes and developing new ones, all of which meet the demands and standards of the healthy & wellness lifestyle of different target audiences;
4. giving top priority to product taste healthy goods can no longer not taste good;
5. encouraging consumers to try brand new products with unfamiliar flavours, focusing on healthiness and naturalness;
6. making the benefits of the ingredient combination obvious to the consumer (e.g. probiotic yoghurts with fruit or bran bread);
7. forming alliances with ingredient and packaging suppliers, which are typically first to know about new market trends;
8. constantly working on reducing production costs in order to make goods affordable to both mid-and high price segment, and the low-price segment (forming mass demand);
9. focusing on products for breakfast, dinner and snacks in promotion, as they are the key meals for modern urban residents. For instance, producers of light kefir often position it as a snack or light dinner for those who watch their weight (e.g. kefir product trademark BioMax Legkiy (Light) by Wimm-Bill-Dann Produkty Pitaniya (Food Products) OJSC, and kefir drink Aktivia by Danone);
10. paying attention to packaging, which has to:
* be convenient for consumption (for example, portion packs or packages for eating on the go bio+protein Activia Drink & Fit by Danone);
* be convenient for storage (zipper packs or packaging suitable for microwaves TM Tselebnik chicory by Slavkofe LLC (Moscow) and TM Svalia natural milk porridge (AB Pieno Žvaigždés, Lithuania));
* be convenient for transportation while being transparent and visible;
* draw attention and demonstrate all advantages of consumption to potential buyers.

* Research and development activities.

Elena Ponomareva,
Candidate of Economic Sciences, member of the Russian Marketers Guild