Quality focus driving growth for Solnechnie Produkti

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Russian edible oils producer Solnechnie Produkti has reported sales
growth in excess of that for the market as a whole, the second
major producer to do so in as many weeks. As with market leader
NMZhK, Solnechnie Produkti's growth has been helped by strong
distribution and an increasing focus on quality, writes Angela
Drujinina.

In the first nine months of the year, Solnechnie Produkti lifted margarine production by 14.3 per cent, mayonnaise output by 24 per cent and vegetable oil volumes by some 84.9 per cent, well ahead of the total market growth for these product sectors (0.9 per cent for margarine, 13 per cent for mayonnaise and 27.5 per cent for vegetable oil).

The company's total production of oil-based products was 167,603 tons during the period, while vegetable oil output was 151,934 tons of vegetable oil.

"We achieved the volume growth thanks our recent investment in modern production equipment. The decision to centralise administrative functions and quality control has helped reduce costs, as well as allowing us to pool the market knowledge of our various regional production subsidiaries to better focus our marketing,"​ Alexander Volkov, director of Solnechnie Produkti, told CEE-foodindustry.com​.

The company's aggressive new marketing strategy has ambitious aims: to double the volume of mayonnaise sales, to increase the company's share of the margarine market by 35 per cent and gain a significant foothold in the vegetable oil market, with a market share of 5-7 per cent. Solnechnie Produkti said it hoped to lift sales to $270 million by the end of 2004 as a result of the programme.

The strategy has also involved a significant reduction in the number of brands the company produces, allowing it to focus on those with the largest market shares and the most widespread distribution.

The first fruits of the strategy are beginning to be seen, with particularly strong sales from the Chudesnitsa and Olivier mayonnaise brands in the first nine months of the year, according to Elena Florova, the company's marketing director. Mayonnaise sales have also been boosted by the expansion of the company's distribution network from Siberia and the Russian Far East to the European regions.

For margarine, however, growth is dependent not so much on expanding distribution to new parts of the country but rather in attracting new consumers, particularly older ones, according to Florova.

The rising popularity of ready meals and other convenience products means that younger Russians spend less time preparing food, which means that margarine for use as a bakery ingredient is more likely to be bought by senior consumers, the company said.

Margarine also has the added problem of having to compete with butter, which still remains the most popular spread in the Russian market. Whereas in western Europe butter and margarine are increasingly interchangeable, in Russia the oil-based product is only really used as an alternative to butter in baking or frying. Furthermore, its distribution remains limited to the major cities, while butter is sold across the country.

Solnechnie Produkti said that high quality butter also had a very positive image among Russian consumers, especially in the provinces, while margarine was seen as a cheap, low quality alternative which could be fallen back upon in times of hardship - an image which is likely to be hard to shift.

Total Russian margarine sales amount to around $600 million a year, according to Solnechnie Produckti, while mayonnaise revenues are around $800 million and vegetable oils sales are $1-1.3 billion. Total edible oil product sales are therefore around $2.4-2.7 billion a year, the company said.

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