The market for sweet and savoury snacks in Russia was the fastest growing in the world, in value terms, during the 1998-2004 period. Helped by the incorporation of snacking into general consumption patterns, croutons, crisps and dried calamari are among the most popular products. Euromonitor looks at current and future trends.
The market for sweet and savoury snacks in Russia was the fastest growing in the world, in value terms, during the 1998-2004 period. According to the latest report published by global market analyst Euromonitor International , the market increased by 13% in volume and 11% in value terms in 2004 to reach retail sales of US$982m, generated mainly by rising real incomes and the penetration of snacks into general consumption patterns.
Local produce witnessed a boom
Following the fall in demand for snacks after the financial crisis in 1998, the market has regained volume and has been developing quite dynamically, with Russian companies rapidly expanding their range of new products. A few years back, sweet and savoury snacks in Russia were mainly represented by imported chips/crisps and nuts, with croutons making their fist appearance in the market. Since 1999, new products, such as dehydrated calamari, dried fruits, tortilla chips and pretzels, have appeared on the market, with hundreds of new Russian brands being introduced.
The majority of sales of snacks take place in the two largest cities of Moscow and St Petersburg and only a few brands operate in provincial markets. Snacks in provinces are promoted by local manufacturers, which produce relatively small volumes, greatly affected by seasonal factors. “The closer a market is to the capital, the less important the seasonal factor becomes, and so the bigger companies are likely to be operating in the regions around the big cities,” says Fanija Samak, a packaged food analyst at Euromonitor International.
Preferences and attitudes towards novelties and big pack sizes
Russians are very open to novelties and their snacking preferences in the two major cities are becoming similar to each other. Consumers in St Petersburg traditionally placed the emphasis on healthy food whereas Muscovites welcome new exotic flavours. People in St Petersburg are, however, now becoming more accustomed to buying fatty croutons and nuts with artificial additives. Euromonitor International can reveal that flavour, colour and shape diversity are important choice factors and allow manufacturers to “experiment” with new launches.
In addition, there is a growing preference for bigger pack sizes. Families now demand greater volumes because chips/crisps and croutons are eaten when going out of town or holding parties at home, but also because large packages have a lower unit price.
Croutons and chips battle it out
All snack types compete with each other, but the fiercest competition involves chips/crisps and croutons. The sector breakdown has substantially changed with the emergence and rapid development of croutons, which in 2004 accounted for 34% of total snacks in value terms compared to 6% in 1999, affecting the chips/crisps’ share, which declined from 45% in 1999 to 28% in 2004, according to Euromonitor International.
The bulk of chips/crisps sales are imported, while croutons are only made by local manufacturers. A few years ago these products were not positioned in the same segment, as croutons were seen as a simple and cheap snack. However, due to an increase in bread prices in 2000, crouton production became less profitable and manufacturers were faced with a decision of whether to reduce quality or to position the product in the upper segment.
Small enterprises, having opted for reducing quality, disappeared from the market while large companies went on branding their own products, which led to increased prices. As a result, croutons were able to compete in the same segment as chips/crisps, significantly intensifying the competition. Thanks to this competition, the flavour range and package type for chips/crisps and croutons has greatly improved and enhanced, with the flavour range now encompassing 45 flavours.
It is believed that foreign companies lost momentum a few years ago when they underestimated the potential for crouton sales. “Russian companies, on the other hand, took a chance on croutons and now only local manufacturers rule this successful product area,” adds Samak.
Croutons part from beer
The main motive for consumption in this sector is “to have a snack” and the motivation for snacking with beer is more relevant for croutons than for chips/crisps. Chips/crisps sales are more stable than those of croutons because chips/crisps is a branded subsector that can target upper income consumers.
Regardless of manufacturers’ claims that trends in beer no longer affect snacks, in the provinces snacks continue to be bought for consumption along with beer. Nevertheless, companies are attempting to separate the consumption of snacks from beer, as beer sales are developing less dynamically. Manufacturers have already launched “non-beer” brands positioned for use in “gatherings with friends” or “snacks for football”. Other companies go as far as to suggest eating snacks instead of ice cream, or alongside alcoholic cocktails.
Nevertheless, a group of manufacturers that are not spurning opportunities to cooperate with beer breweries still exist. According to Euromonitor International, some of these companies produce croutons and nuts under popular beer brands to ensure strong positions for their product in the marketplace.
Seafood snacks are a popular novelty in packaged format
In addition to croutons and chips/crisps, Russians also have a tradition of consuming dried salty fish along with beer. This home-made product is still very popular and a few years ago manufacturers began packaging dried tiny fish and calamari and successfully positioned them as snacks for consumption with beer. Manufacturers are targeting the products to male workers in the 25-35 age bracket who are the main consumers of beer. Dried calamari, seen as a delicacy, prevails over dehydrated fish in terms of popularity.
Euromonitor International anticipates the dynamism of the market to slow down in the near future, although it will still record a healthy performance. The recent positive trend of rising GDP will continue and underpin the purchasing power in the country, which is, in turn, expected to lead to higher per capita consumption of snacks.
Companies are expected to include nuts, calamari, dried fish and sunflower seeds in their assortment, in addition to new snack types and flavours. One such new snack includes dried stroganina, launched in the premium segment by the Russian company Mak Market OOO. Stroganina is an old traditional snack made out of dehydrated meat and is likely to gain share in sweet and savoury snacks and compete with calamari.
Euromonitor International also expects foreign companies to move their production to Russia in order to avoid import tax, helping to make products affordable to a wider group of population. New trends in lifestyles and fashions will, moreover, play a greater role in eating habits for snacks.