Russian dairy group Wimm-Bill-Dann yesterday (24 November) announced it had acquired Siberia-based dairy producer Moloko Isilkulya. The yoghurt, flavoured milk and baby food producer added that it is looking at expanding further in Eastern Russia. Here we take a look at the Russian dairy market with the help of Euromonitor’s Dairy Products in Russia report, Datamonitor’s Dairy in Russia report and Business Monitor International’s Russia Food & Drink report.
- The retail value of the Russian dairy market increased from RUR497bn (US$15.89bn) in 2009 to RUB545.24bn in 2010. This is expected to reach RUB957.68bn by 2015, according to figures from Euromonitor.
- In particular, sales of drinking milk products grew by 22% in current value terms in 2009, to reach RUB112.4bn. Wimm-Bill-Dann holds a strong lead, with a value share of 20% in 2008, followed by Unimilk Kompania, with a 15% share of the market. Sales of drinking milk products are expected to grow at a CAGR of 2% in constant value terms, to reach RUB126bn by 2014, according to Euromonitor.
- Sales of yoghurt and sour milk drinks in Russia grew by 19% in current value terms in 2009, to reach RUB97bn. WBD again continued to lead the category in 2008, with a value share of 28%, while Danone ranked second with a near 11% value share. Sales of yoghurt and sour milk drinks are expected to grow at a CAGR of 4% in constant value terms over the forecast period, to reach RUB118.5bn in 2014, according to Euromonitor.
- Sales of all other dairy products, including fromage frais, quark, sour cream, condensed milk and dairy-based desserts, grew by 18% in current value terms in 2009, to reach RUB84bn. Again, WBD leads the category with a value share of 14% in 2008. Sales are expected to grow at a CAGR of 3% in constant value terms over the forecast period, to reach RUB96.7bn in 2014, according to Euromonitor.
- WBD maintains the dominant position in the Russian dairy market, with a 33.7% share in terms of value, according to Business Monitor International’s Russia Food & Drink report. The company is mainly focused on packaged food, where it has a presence in dairy products and baby food. In 2008, 74% of the company’s net revenue derived from dairy products, while 9% of sales stemmed from baby food. However, in the first nine months of 2009, baby food increased to account for 11% of the company’s turnover.
- WMD’s Lianozovsky dairy plant is considered to be the largest dairy plant in Europe, according to Euromonitor, with a production capacity from 1,200 to 1,500 tonnes of milk a day. The plant outputs around 1,300 units of finished products a day, including brands; Doctor Vita, Chudo, and Domik v Derevne.
- Danone is the second-largest player in the Russian dairy market with an estimated 16.4% market share, according to Datamonitor. However, this figure is now likely to have changed, as this year the firm merged its Russian fresh dairy business with local firm Unimilk. Danone said the deal would create a business that generated annual sales of EUR1.5bn and spanned Russia, Ukraine, Kazakhstan and Belarus.
- The Russian dairy market is “highly price sensitive”, according to Datamonitor, as buyers will tend to opt for the cheaper option, especially in the milk market, subsequently enhancing buyer power. Manufacturers target end-users with their branding strategies, or develop more individuated, premium products, such as organic yoghurt, to counter balance the power of the buyer to make purchasing decisions on price alone, according to Datamonitor.
- Key suppliers to the Russian dairy market are dairy farmers. Typically, a large scale dairy processing and packaging company has many individual or cooperative farms supplying them with milk. However, hedging is often used by the larger players, due to the commodity nature of the market with prices fluctuating on a daily basis. Key players will buy supplies on the future market, with an agreed price for future supplies in order to not be caught out by unexpected price jumps.
- The majority of the market share in the Russian dairy market is made up by regional and national players. Suppliers commonly integrate forwards where dairy co-operatives offer farmers the opportunity to access larger markets and use capital items such as packaging and processing plants. According to Datamonitor, the dairy market is fairly easy to enter as a small enterprise, however in order to supply to the mass market consumer companies need to be large and have some level of integration if they are to successfully enter the market.
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