Russian edible oil output rising steadily

Related tags Fat

Russia's biggest producer of oils and fats, the NMZhK group, has
steadily increased its output over the last year, an indication of
the steady growth in a sector where local and foreign players are
vying for dominance.

NMZhK currently controls 25 per cent of the Russian mayonnaise market and 32 per cent of the country's margarine market, and increased its share of both in the first nine months of the year.

Mayonnaise output from the various plants which make up the group (Nizhegorodsky Oils and Fat Plant JSC, Samarsky Fat Plant JSC and Permsky Margarine Plant JSC) was 53,326 tons, with the Samara plant alone lifting output by 87 per cent. Margarine production increased by 8 per cent to 111,349 tons, leaving total output of edible oil products at the group some 7 per cent ahead of the market as a whole.

The Russian oil and fats market is growing steadily - according to the company SoyuzMargarinProm, the mayonnaise market has grown by 13 per cent and the margarine market by 1 per cent over the past nine months - but further opportunities for expansion are likely to be hard to come by. NMZhK believes that the segment will continue to grow for five more years at best.

The national market for margarine is hardly saturated (NMZhK's Khoziayushka brand is the most popular, and its only main rival is Unilever's Pishka brand, and even that is known mainly in the European part of the country) but its fragmented nature, dominated by a plethora of local producers and brands, makes growth opportunities difficult.

Although margarine is still a relatively new category in Russia - a country where butter has reigned supreme - there are hundreds of brands now available, and many are likely to fall by the wayside as the market enters an inevitable period of consolidation.

"When we move into new markets, we most often encounter problems such as consumers' loyalty to locally manufactured products and a lack of interaction with the retail trade, as well as the artificially low prices offered by local producers,"​ said Mikhail Konovalov, deputy marketing manager of NMZhK, told​.

Konovalov said that NMZhK's success was due to its emphasis on quality products. "Our consumers can be sure that regardless of which of our plants made the product, the taste and quality are excellent. Besides that, our range of margarines and mayonnaises is large enough to satisfy the demands of consumers, whatever their income bracket or preferences."

But perhaps NMZhK's biggest asset is its extensive distribution network which means that the group's products are available in every grocery store in European Russia.

Changing consumer habits are also likely to offer opportunities for the company in the future. According to NMZhK's market research, younger consumers are more open to oil-based products such as sauces, mayonnaise and spreads than older people, who are still rooted in the dairy culture.

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