In 2018, the Russian market for confectionery has been experiencing a real upturn. All key indicators have been on the increase, including consumption, output, sales, imports and exports of confectionery. Imports of confections into Russia are particularly impressive. During the first half of this year, volumes of imports increased by 27% compared with the similar period of the previous year, reaching 128.5 thousand tonnes valued at $ 396.8 million. Following several crisis years, Russian consumers regained their desire to try something new and still scarce in the domestic product range. Foreign manufacturers were there to address the increased demand. Nevertheless, the second half of 2018 may not turn out to be as successful in terms of rapid growth: the recent considerable drop in the ruble exchange rate, which imports are highly susceptible to, is likely to have an impact on import dynamics, resulting to a lowered annual growth rate.
Confectionery imports were particularly heavily affected by the crisis. After the ruble crashed in late 2014, it did not take most Russian stores long to correct the pricing tags for confections supplied from abroad. Whereas before New Year 2015, muscovites could find famous Swiss branded chocolate priced at 80–85 rubles per 100-gram bar, immediately after the holidays it already cost 120 rubles. The plummeted ruble spoiled the Russians’ appetite for sweets for the following 2 years—and it is imported chocolate bars, candy and cookies that “suffered” the most together with them. During the first months of 2015, the volume of confectionery imports into the Russian Federation dropped almost twofold. The trend persisted throughout 2015–2016, and the situation only began to shift in 2017. Only the current year 2018 has indicated that Russian consumers are ready to spend money on goods that domestic manufacturers do not tend to produce.
Since 2018, it has become apparent that foreign producers have been actively expressing interest in the Russian market. In mid-2018, supply dynamics increased even more. What exactly is happening?
All in all, the history of the Russian confectionery market can be divided into two periods: pre-2014 and post-2014. Imports are also subject to said division. Prior to 2014, more than half of confections imported into Russia were of Ukrainian origin. These were mainly inexpensive confectionery goods competing with Russian products in the lower price segments. After 2014, the following countries became Russia’s key confectionery suppliers instead: EU countries (namely Germany, Poland, and Italy), Belarus, and Kazakhstan. At the same time, more than half of confectionery products supplied to Russia are currently goods within the higher price segments produced in the European Union and Switzerland. Said geography caused a serious recession in 2015, whereas today it serves as a driver for rapid growth.
Three years ago, prices for confectionery goods in Russia jumped by 25–40%, turning basic sweets, in particular chocolate, into luxury items in the eyes of the Russians, let alone expensive imported confections, which became virtually unaffordable to most consumers. Quite expectedly, average consumers were reducing their expenditures through avoiding such “optional” items as chocolates: those simply became too expensive. Imported confections, which used to be expensive as is and jumped in price even more, obviously did not stand a chance. Whereas in the relatively prosperous 2012–2013, the share of imported confections in consumption only amounted to 12%, in 2015 it dropped more than twofold, reaching 5.3%. Priorities switched from thriving to surviving.
By 2017, Russian consumers had got used to the new prices for sweets; at the very least, they stopped growing. Tired of abstaining from certain goods for so long and having to save money, the Russians began to compensate for the lack of other pleasures in life by purchasing sweets (primarily the simple and affordable chocolate). In 2015, total consumption of confectionery amounted to 23.1 kilograms per year per capita, whereas in 2018 it reached 24.5 kilograms; consumption of chocolate confections in particular during the time period increased from 3.9 to 5.1 kilograms. Consumer interest in expensive Western European confections began to recover as well; this primarily concerned chocolate. The level of confidence in said products from Germany, Belgium, and Switzerland is very high in the Russian society.
Therefore it is no surprise that, in 2018, supplies of chocolate confections increased the most in Russia: during the first half-year they grew by 35.3% and reached 37.2 thousand tonnes. Imports of flour confections were also growing at impressive rates (35%, to 73.3 thousand tonnes). The segment of sugar confections was not particularly successful in comparison, the volume of supplies having declined by 3%, amounting to 18.5 thousand tonnes. However, said segment in Russia has been losing consumers.
Another pre-New Year high season is awaiting us. During the fall, documents for future tenders for procurement of gifts for kids are put together, retailers prepare for rush demand, and manufacturers increase confectionery output dramatically. Confectionery importers are well aware of this specific seasonal trend in Russia, and will likely not miss the opportunity to actively participate in it. According to the CMRC, growth in imports of confections of all categories will amount to 25–30% in 2018. The share of imported confectionery will increase to 8–8.5%. These volumes are, of course, not the same as those achieved before the crisis. It is worth considering, though, that the confections themselves are not the same either: they are of different quality and belong to other price categories compared with the products which were supplied to the Russian market in the past. A lot more brands have emerged in the meantime as well. Even though the Russian market is subject to significant fluctuations in demand due to the unstable economic situation, it remains extremely attractive: consumption of confections in Russia is lower than in the West, whereas consumer preferences are similar. In addition, it should be noted that major food product consumers such as China and India turn out to be rather problematic for Western suppliers in terms of confectionery due to the national specifics of their preferences.
The ever-growing health and wellness trend, which encourages consumers to reduce the sugar content in their diets, is making business increasingly challenging for confectioners in the West. In Russia, on the other hand, the official discourse around the subject has been much less active lately;
confectioners are among the main consumers of Russian sugar, in production of which Russia has only recently started being self-sufficient, which required significant efforts and financial resources as well as a lot of time.
Finally, the number of gourmet consumers and “intellectuals”, ready to overpay for exclusive goods and unique product characteristics (e.g. chocolate with rare flavors, produced from exceptional cocoa from a certain distant tropical country), has been growing in Russia; Western market players have more than enough to offer to them.