Ready meals are becoming increasingly popular in Russia as incomes rise, and manufacturers are looking to meet increasingly sophisticated consumer demand with higher quality products. Emily Woon of Euromonitor International reports.
Growing demand for high-quality products and rising incomes have resulted in a substantial development of the ready meals market in Russia. According to Euromonitor International’s latest research, retail value sales of ready meals reached US$1.2bn in 2005, representing dynamic growth of 19% on the previous year. Retail volumes grew by 14% in 2005 to hit 230,000 tonnes.
The faster pace of value growth over volume underlines the quality shift, with more high-end products being launched in order to meet increasingly sophisticated consumer demand.
Between 1998 and 2005, the volume output of meat-based ready meals increased by 3.5 times, on the back of growing demand for convenience food primarily among working consumers with busy lifestyles. Another reason for such dynamic growth in ready meals sales is that prices of raw meat have grown much faster than those of ready meals since 1998.
On the other hand, sales of vegetarian ready meals were limited to 8% of the frozen ready meals sector and 2% of canned ready meals in 2005. The share of vegetarian canned ready meals increased slightly in 2005, thanks to the growing consumer interest in healthy foods, and the wider availability of such products. Despite this, the vegetarian culture has gained little popularity in Russia, where meat is still widely preferred as the main ingredient in daily eating patterns.
Frozen ready meals represent the largest and best performing sector within ready meals. In 2005, retail value sales hit $1bn, representing impressive growth of nearly 22% on the previous year. While Russians preferred entrecôtes (rib steak) five years ago, they now buy ready-made pelmeni (traditional Russian dumplings) or packaged cutlets in order to save time. As such, pelmeni account for about 60% of the frozen ready meals sales.
The pelmeni market is particularly well developed in major cities such as Moscow and St Petersburg. Therefore, manufacturers are now looking for development opportunities in the provinces. Meanwhile, provincial companies are developing ambitious plans to enter the key cities and fight for a piece of the action. In view of the increasingly competitive environment, manufacturers are stepping up their efforts to improve quality in order to target high-end consumers.
Canned/preserved ready meals sales totalled $24m in 2005, accounting for only 2% of Russia’s ready meals sales. The market remains fragmented, as there are many canning/preserving factories across Russia dating from Soviet times. Volume sales for canned/preserved ready meals improved slightly in 2005, largely due to the expansion of supermarkets into the provinces. The fact that this sector is dominated by well-known foreign brands, such as Globus (from Hungary) and Bonduelle (from France), has somewhat raised the profile of canned/preserved ready meals and thus helped to boost sales.
Nonetheless, manufacturers still face an uphill task when attempting to boost sales of canned/preserved ready meals as consumers are not eager to buy such products, which are widely perceived to be less healthy and contain a high level of preservatives.
Meanwhile, other types of ready meals, such as dried and chilled products, as well as chilled pizza and dinner mixes, have a negligible presence, as neither manufacturers nor consumers appear ready to consider them.
Bagged salad is a relatively new phenomenon in Russia. It is considered to be a high-end, specialty product and is rarely purchased by consumers at large. However, a few of the biggest agricultural enterprises in the Moscow region began to produce fresh-cut salads in the early-90s, targeting high-end consumers. The market for fresh-cut salad remains small, with retail sales of around US$0.2m in 2005.
Sales of prepared salads have never taken off in Russia for a number of reasons. First, Russian households have a strong tradition of preparing food at home, which means most consumers are used to buying fresh ingredients and preparing salads at home. Second, the price of fresh-cut salads is several times higher than non-cut fresh salad produce. However, a few Russian manufacturers began to produce fresh-cut salad in response to demand from McDonald’s restaurants. Indeed, foodservice companies are currently the main customers for fresh-cut salad, with retail sales accounting for less than 20% of the total market by volume.
Further growth forecast
Sales of ready meals in Russia are expected to double by 2010, mainly as a result of the ever-growing demand for frozen ready meals. Euromonitor International expects the continued increase in consumer purchasing power and busy lifestyles will boost sales of frozen ready meals in Russia going forward. Sophisticated demand will stimulate manufacturers to enhance their products with new flavours and attractive packaging.
With regard specifically to pelmeni products, manufacturers will have to improve quality across all price segments if they want to keep consumers interested. Consumer polls show that those who find premium pelmeni too expensive will stop buying altogether, as cheaper lower-quality products seem to be a poor substitute for increasingly quality-conscious consumers.
Quality improvements also have an important role to play in changing negative consumer perceptions in the canned/preserved ready meals market. If quality improvements are successfully executed, Euromonitor International expects that the canned/preserved ready meals will grow faster than the review period (1998-2005) at 18% per year to 2010.