Unilever return boosts Russian ice cream market
two-year absence has helped push up volume sales in the first half
of 2003. But with quality concerns holding back potential growth,
and consolidation almost inevitable, the future is likely to be
turbulent, claims Market Advice.
After a two-year absence, Anglo-Dutch food company Unilever returned to the Russian ice cream market in the first half of 2003, a move which helped lift overall sales in a market which is growing slowly but steadily.
According to the latest market analysis from Moscow-based Market Advice, total ice cream sales grew by 3.5 per cent in the first six months of the year, but growth could be higher still if the quality of many of the ice cream brands available was improved.
There are still many brands available in Russia which are made with vegetable fats rather than dairy fats - because this is cheaper - but these products are often regarded as poor quality imitations of 'real' ice cream, Market Advice said.
In order to combat the negative effect that such products have on the market as a whole, the National Union of Ice Cream Producers has developed a new national standard for ice cream production which it is hoped will see more high quality products and lift consumption levels back to those seen in Soviet times.
Total volumes in the first half of 2003 reached just over 195,000 tons, compared to 376,000 tons for the whole of 2002, around 60 per cent of total production capacity. Annual per capita consumption is around 2-2.5 kg. Average ice cream consumption in western Europe is six to seven litres and 12 litres in the United States.
As with most food and drink sectors in Russia, there is fierce competition between domestic and international producers in the ice cream segment. The largest domestic manufacturers are the Ice-Fili (based in Moscow), Talosto in Saint-Petersburg and Inmarko (headquartered in Novosibirsk), while the leading foreign players are Nestlé, which operates a plant near Moscow, Unilever and Baskin Robbins.
Market Advice's consumer surveys show that young Russian consumers prefer foreign brands such as Nestlé and Unilever, while the older consumers prefer the local brands.
Unilever stopped making its Algida brand ice cream in Russia in 2001, but the recent decision to invest heavily in all its Heart brand ice cream operations (such as Ola, Wall's and Algida) prompted the company to return to a market where the brand was already well established.
But the company's return has not been entirely successful, with the price of Algida ice cream - around 25 roubles - pricing it beyond the means of many consumers, both in Moscow and in less affluent regions. The average selling price for most competitor brands is between five and 10 roubles.
Speaking to Market Advice, the Union of Ice Cream Producers said that it expected Unilever to extend its presence in the Russian market through acquisitions, perhaps even as early as the end of this year. The most likely candidates for takeover, according to the Union, are the number one producer Ice-Fili, which makes around 20,000 tons a year, or its main rival Ramzay.
For more information about Market Advice's reports contact Katrin Myagkova or visit the website.