The segment of sugar confections is, perhaps, the most traditional and even the most conservative, and therefore it is primarily oriented towards the domestic market. However, it is in this segment that the main trends shifting the confectionery market on the whole towards healthier, more responsible consumption have been emerging.
The segment of sugar confections is the second largest segment of the Russian confectionery market, and is possibly the most heterogeneous and diverse in both product types represented and in consumption specifics. Such product varieties as hard candy of traditional Soviet brands, jelly candies brought to Russian from abroad, zefir and pastila or oriental sweets are all part of it.
Most confections produced in the URRS fell on sugar confections, namely on hard candy, caramels and toffees; the local – mostly rather poor – population could afford them at the time. Zefir and pastila were ‘deficit’ goods and thus they could rarely be found; chocolate was also expensive in addition to being in short supply as well, and was mainly accessible to residents of large towns and cities. It is no surprise that as a result, the accounting system which the country inherited includes only 5 chocolate product varieties, 2 of which are candies, whereas the number of categories of sugar candies alone in it is more than 12.
The market is changing, however: as the borders were opened, Russian consumers were introduced to the vast range of sweets; they got to discover the flavor of Swiss chocolate and learned that zefir and pastila could be represented in numerous forms and delicious flavors even within a single store. Against the newly attained abundance of confections, traditional Soviet varieties of sweets have faded out somewhat, and some of them even began to lose their consumers.
In 2017, the segment of sugar confections shrank the most – output volumes within the category in Russia declined by 3.1% to 1.07 million tonnes, even though production of confectionery on the whole across the country demonstrated growth by 2.5%, reaching 3.63 million tonnes. Moreover, exports of sugar confections decreased as well in 2017, having dropped by 10.4% to 52.2 thousand tonnes. It should be noted, however, that volumes of sugar confection exports have never been significant in comparison to flour and chocolate confections. On the whole, exports of confectionery goods in the past year demonstrated a 5.9% increase and reached 430.4 thousand tonnes. In 2018, imports of sugar confections began to decline – in January–February 2018 they decreased by 7.7% to 4.7 thousand tonnes against the similar period of 2017. Among other things, consumption of all sugar confection varieties in Russia on the whole has been declining, too: in 2015 said indicator equaled 8.21 kilograms per capita per year, whereas in 2017 it was already at 7.9 kilograms.
What exactly has been happening? And can one speak of overall weakening interest in sugar confections among Russian consumers and them switching to other types of sweets?
There is no straightforward answer to these questions. This has a lot to do with the wide product diversity in the segment of sugar confections. For instance, consumption of caramels has been on the decrease – in 2017, Russians consumed 1.2 kilograms of these products per year per capita, whereas in 2018 consumption declined to 1.1 kilograms. If the whole segment of sugar confections is considered, the share of caramels in the total volume of output in 2017 amounted to 14.6%, whereas in 2015 is equaled 15.8%. At the same time, production of zefir, pastila and jellies during this period of time increased substantially, from 55.5% of the total volume of sugar confection output in 2015 to 57.1% in 2017. Sugar oriental sweets, on the contrary, reduced their share from 21.5 to 19.4% during the time period in question.
There are multiple reasons for the outflow of consumers. In crisis, buyers tend to abandon expensive chocolate and cakes in favor of more affordable sweets; the relatively inexpensive sugar confections happened to be among the latter in 2015–2016. However, as consumer sentiments began to improve, consumer interest in more expensive varieties of confections, such as chocolate or candies, started growing as well. This is exactly how the situation was progressing in the market in 2017. On the other hand, within the segment of sugar confections, consumers have been switching from traditional categories to modern ones and those that position themselves as natural and innovative – for example, jelly candies have been growing in popularity. Adult consumers have been increasingly concerned with and paying attention to healthy eating, in particular to carbohydrate and sugar consumption. The category of sugar confections has enough products to offer in this context – for instance, pastila and jellies with lowered sugar content, positioned as natural and often prepared according to traditional recipes; sweets produced from fruit purees without sugar added or with low amounts thereof; snack bars from dried fruit, grains and nuts.
The fact that sugar confections include sweets positioned as healthy and produced with reduced sugar content or without any sugar altogether (e.g. fruit puree pastila and jellies) constitutes a paradoxical situation. In this regard, it is worth addressing the question of segmentation yet again – the market and consumer demands are changing so rapidly that the segment itself now needs fundamentally different, or at least more detailed, segmentation. If it continues being evaluated according to outdated standards, the overall picture will keep getting increasingly distorted over time. For instance, the categories of chocolate or flour confections are both fairly homogeneous, include products similar to each other in characteristics in terms of composition and price, and attract buyers with similar consumer habits. In the segment of sugar confections, however, products are extremely diverse – for example, caramels, halva and zefir have distinct differences among each other in terms of both characteristics and consumption; a consumer fond of mashmallows or gummy worms may show zero interest in halva or nougat, and vice versa.
It is the second year that the imposition of additional burden on the confectionery market in the form of taxes on unhealthy goods (containing fats and/or sugar) or advertising restrictions is discussed in Russia. Right now it is too early to give an estimate on the possible consequences of such measures – however, said trend is already gaining relevance in the West. It is unlikely that Russian regulators will resist the temptation to replenish the budget through new taxes under the convenient disguise of striving for public health. Moreover, demand for healthy foods among Russian consumers is becoming more and more pronounced – these products do not just include goods containing no ‘chemicals’, but also those with sugar content as low as possible. According to the CMRC, consumption in the sub-category of pastila and jelly confections (mainly jelly candy, pastila and zefir) increased from 4.2 kilograms per year per capita in 2015 to 4.3 kilograms in 2017 through products positioned as more natural (without artificial colorings, flavors and enhancers) as well as through sugar-free confections and sweets with lowered sugar content.
As has been stated above, sugar confections form the second largest segment in the confectionery market, following flour confections with a long shelf life, and also constitute the second largest segment after chocolate confections in terms of consumer expenditures. Sugar confections accounted for 27% of Russians’ consumer expenditures on confectionery goods in 2017. And finally, the segment is the least consolidated one – the share of the five largest players occupies around a quarter of the market. This is due to the great diversity within the segment as well as its traditional nature and focus on the domestic consumer. Because of its low consolidation, today the segment of sugar confections serves as a vast platform for experiments and innovations. It is often small and medium-sized enterprises that are particularly sensitive to and react promptly to changes in consumer preferences and are more prone to brave experiments with new products. Therefore it is no wonder that the healthy eating trend is currently a niche occupied by smaller domestic market participants, with few exceptions. However, in the future the trend may be supported by the market leaders, as it gains momentum and popularity and regulation of sugar-containing good production becomes stricter.