For the first time since 2008, even though slightly, the Russians decreased their expenditures on fast-moving consumer goods (by more than 1% during the past year*). Despite the fact that purchases have been getting more frequent, the average check has been declining (-2%). As food products make up the main share of expenditures in the FMCG consumer basket, a decline in their consumption and expenditures on them has an impact on the overall market dynamics. Does this imply that Russians have been eating less, or are they simply spending money on something else? Is it possible that some other factors are affecting said consumer behavior?
An analysis of the Russians’ consumer basket reveals that most money is still spent on meats (frozen and chilled red meat and poultry, processed meat, offal, pâtés;s, sausages, and meat delicacies). However, volumes of sales within the category dropped by more than 7% in monetary terms over the past year. In physical terms, the market shrank by around 4%. Expenditures on bakery goods have been declining at similar rates, and this category has been demonstrating the most rapid reduction in volume terms (by more than 7%). The most significant rates of expenditure decline were observed in the “eggs” category (almost -14%), even though it only dropped by approximately 5% in physical terms.
Dairy products (any dairy goods, including cheeses and butter) are second in consumer expenditures with the share of 16%, having grown by 2% in rubles but decreased by more than 2% in tonnes).
Among categories growing in expenditures, frozen goods (frozen dough; convenience bakery and pastries; fruit and vegetables; ready meals; ice cream) can be highlighted – they demonstrated growth by more than 4%. In terms of consumption, the categories of beverages (water; juices; soft drinks, carbonated and non-carbonated; alcoholic beverages; tea; coffee) and baby food were the fastest to increase and grew by 3 and 6% respectively in physical terms.
Russian consumers have been redistributing their incomes, giving preference to dairy and frozen goods as well as baby food in their expenditures.
Said behavior is partly due to the tendency to save. This statement can be confirmed by the fact that in 50% of FMCG market categories, the share of promos exceeded 19%. Moreover, in certain categories the share of promos is approaching 50%.
However, Russian buyers have been demonstrating other behavior settings apart from the practical and efficient approach. For instance, the “GfK Consumer Life” global research, which monitors changes in consumer behavior, identifies 12 global consumer trends**. Let us examine how certain global trends and personal values of Russian consumers affect their purchases of meat products.
“Health and wellness”. Among other things, this trend sparked an increase in consumption of turkey and lamb – by 12 and 10% respectively. Said growth is ensured by cities with the population of up to 1 million. It is interesting to note that large cities have been demonstrating two-digit growth in rabbit meat consumption, which increased by more than 12%. At the same time, the average price for this meat variety exceeds 400 rubles per kilogram.
“New experiences”. Consumers are clearly open to experimenting with new meat varieties and flavors in order to diversify their diets. For instance, there has been a 20% increase in consumption of kupati (Georgian spicy sausages) with the average price of more than 320 rubles per kilogram. Once again, the most significant input in this growth is made by cities with the population of up to 1 million. Russian million cities have been demonstrating a positive trend as well, although it is not as pronounced despite the fact that residents of these cities are prone to purchasing more expensive goods.
“Immediate access and innovations for convenience”. Due to lack of free time and as a result of active and busy lifestyles, consumers in large cities raised their expenditures on ready meals from meat and poultry (59%), chopped steaks (more than by 25%), and lula kebabs from poultry meat (by almost 16%). Such categories as “poultry cutlets and meatballs” and “bacon” also increased in tonnes, by 3 and 2% respectively.
It should be noted that it is in large cities that overall consumption of meat dropped the most: the reduction almost reached 11% in physical terms, whereas expenditures dropped by almost 14%. This trend has to do with two main factors – more frequent snacks, lunches and dinners outside the home, and development of delivery services.
“High expectations”. The category of marbled beef and convenience foods from it in Russia has been expanding, having demonstrated growth by more than 13% in physical terms and by 15% in monetary terms. Said growth is currently achieved exclusively through cities with the population of up to 1 million. Million cities did not demonstrate changes in the market volume in tonnes, whereas its monetary value even decreased somewhat, which reflects the more competitive environment for retail trade as well as pressure from restaurants.
“A conscious choice”. Consumers in cities with the population of up to 1 million tend to opt for chicken despite reduced expenditures on it (growth in physical terms equals 2%, whereas in monetary terms there is a decline by 5%), frozen ready meals from meat in dough (growth by more than 2 and 5% respectively), liverwurst (growth by more than 9% and around 5% respectively), and canned meat and poultry (growth by more than 12 and 14% respectively).
There are various factors underlying such consumer behavior. Whereas in million cities decreased expenditures on food is largely due to consumption outside the home and searching for ready solutions, in small towns this may be connected with saving strategies and switching to more affordable options. Nevertheless, exemplified by such products as marbled beef (including convenience meats) and meat sausages and kupati, one may speak of a gradual distribution of city trends across the regions as well.
It should be noted that, on average, households spend approximately 1,860 rubles per month on meat, including ready meals from meat. In terms of purchase volumes, a quarter of all meat (26% in physical terms) is bought in the form of wieners, sausages and meat delicacies. According to the study by “GfK”***, demand for these meat products in Russia during the time period analyzed dropped by 3%. The category of meat delicacies has been declining the most. Just like the meat category as a whole in retail trade, readymade meat products are experiencing pressure from rational consumer behavior. In addition, health and wellness trends affect the category, and so does the development of the catering industry, namely the HoReCa channel and delivery services.
Consumption of sausages and meat delicacies has only been growing in the Northwestern and Ural regions, whereas the most avid ready meat lovers – namely the Volga, Central, and Far Eastern regions – reduced their purchases.
Among meat products, Russians like cooked sausages and wieners the most – together, these categories occupy half of all sales in tonnes. Compared with 2017, however, the volume of purchases fell somewhat – by 1.7 and 2.6% respectively. The category of dry-cured sausages, on the other hand, is growing (by 4% in physical terms) despite the high prices for goods within it. Consumption of fatback and salo (non-rendered lard) has dropped the most (-22%).
The largest meat manufacturers in Russia are “Ostankinsky Myasopererabatyvayushchiy Kombinat (Ostankino Meat Processing Plant)” OJSC (Moscow); “ABI Product” holding company; and “Cherkizovo Group” PJSC. These companies are the top leaders in volumes of sales in monetary and physical terms. In addition, the top 30 most popular producers include private labels of “Auchan” and “Magnit (Magnet)” retail chains. The top 30 manufacturers make up 51.6% of all expenditures and 52.3% of all physical volumes of meat products in the Russian Federation for the period from July 2017 to March 2018.
* July 2017 – June 2018 compared with July 2016 – June 2017, according to the consumer panel by “GfK Rus” (all Russia, a sample of 10 thousand households).
** According to “GfK Consumer Life 2016/2017”.
*** “GfK” studied trends in the market for ready meat meals (sausages and meat delicacies) in Russia – research was conducted based on the data from the consumer panel by “GfK” covering urban and rural areas of Russia; purchases of 10 thousand households during the period from July 2017 to March 2018 were analyzed and compared with the similar period of the previous year. The following segments were examined: sausage products and meat delicacies, including cooked sausages, wieners, cooked smoked sausages, dry-cured sausages, semi-smoked sausages, ham, brisket, fatback and salo, bacon, pork loin, neck, liverwurst, and others.
Customer Relations Director
Consumer Research Panel Department