Russia - Ice Cream

Market Profile

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ABOUT DATAMONITOR

ABOUT DATAMONITOR
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TABLE OF CONTENTS

TABLE OF CONTENTS Market Overview ...................................................page 4 Competitive Landscape .......................................page 5 Leading Companies..............................................page 7 Executive Summary..............................................page 8 Market Value..........................................................page 9 Market Segmentation .........................................page 10 Market Shares ..................................................... page 11 Distribution..........................................................page 13 Market Forecasts ................................................page 14

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Market Overview

MARKET OVERVIEW
On a global scale, ice-cream consumption in Russia is relatively low at around 2.6 kilograms per person a year, compared with 16 kilograms in the US, 17 in France and 18 in Canada. However, it is high when compared to the European market. The Russian ice cream market grew in 2001, to reach a value of $1 billion, a far greater amount than the previous year. This could be because the country experienced a good summer, which is when most ice cream is sold. Over the following five years, the market is expected to grow steadily, as better quality ingredients and more efficient distribution networks are introduced. The market has a bigger value for outdoor sales than the value for purchases for indoor consumption. This is because domestic manufacturers have done little to position ice cream as a family product; being satisfied with the spontaneous, and impulsive consumption that outdoor sales veer towards. Also people dont consider it to be something they can have at home for dessert. However, the situation is beginning to change and the proportion of sales of boxed ice cream for home consumption is growing. In Moscow there are two cafes which sell ice cream, food and alcoholic drinks: Sever and Moskovskoye Morozhenoye. Since Russians are more likely to buy ice cream on impulse than as a take-home dessert, these restaurants are thriving, and it is expected that places like these will multiply in the future. There is a tendency for Russians to dislike foreign manufacturers. The situation would be helped if the Russian public believed that all the ingredients for ice cream originated locally. But this is often not the case: for example, apart from the sugar content, all of Baskin Robbins ingredients are imported. In fact, the sector as a whole is extremely dependent on imports. Unia and Multifrost are two of Russias major distributors of ice cream and frozen foods. They believe that imported chemicals and freezing equipment are of better quality than locally produced components. If a more intense cost-cutting procedure was introduced, such as sourcing nationally rather than internationally, then the import taxes, insurance and transport costs would be removed, and this in turn would reduce labor and production costs. Market Definition The ice cream market includes dairy-based, water-based, yogurt-based, impulse, take-home and that sold through food service.

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Competitive Landscape

COMPETITIVE LANDSCAPE
Research highlights - Domestic manufacturers dominate the market as Russia has traditionally been a closed economy and has prevented the influx of foreign companies that other nations have experienced - Mars has recently introduced its products to the market and has so far performed well, thus intensifying competition in the market - There is strong competition between regional manufacturers and Moscow based manufacturers Domestic manufacturers dominate the Russian Ice Cream market, with foreign producers accounting for less than 2%. Switzerland s Nestle started local production at a joint venture in the Moscow Oblast town of Zhukovsky in 1997. A year later, the international food giant acquired an ice-cream distribution network throughout the country, as well as kiosks and refrigerator counters in stores. Nestle is marketing its products quite aggressively, but with annual output of about 16,000-17,000 tons -compared with the total industry s 346,000, foreign companies have probably been scared off by the difficulties of competing against domestic manufacturers, who can sell ice cream at four to seven rubles per cone. Nestle sells cones at eight to 13 rubles. Baskin-Robbins built their first small cafe on the Old Arbat in 1993. Since then, 15 more franchise units have opened in the capital, making a total of 82 in Russia and 93 throughout the C.I.S (Common Independent States - Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyz Republic, Moldova, The Russian Federation , Tajikistan, Turkmenistan, Ukraine and Uzbekistan) Mars has recently introduced its ice cream range to the main areas of Russia, and has had a greater measure of success than the other international companies. Its Mars and Snickers ice creams are seen as good impulse buys, with an already established brand name. Mars also produces Bounty, Dove, Opal Fruits, Milky Way and Twix. The real competition in Russia s ice-cream market is between Moscow-based and regional ice-cream makers market, with regional ones creeping ahead with various advantages. Many formerly state-owned ice cream makers based in Moscow still have old management and prefer old operation methods, being unwilling to spend money on marketing and advertising. In this situation, new regional companies like Russky Kholod, whose main production facilities are in Barnaul, capital of Altaysky Krai, are stepping up their presence in the Moscow market, as well as nationwide.

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Competitive Landscape

These companies are taking advantage of lower labor costs in the regions, which allow them to offer lower-priced products.

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Leading Companies

LEADING COMPANIES
The leading companies in the Russian icec ream market are listed below. Local Companies - Ice-Fili - Lakomka - Molochnoye - Rusky Kholod - Bovodino - Hulliver - Fakel - Iceverk International Companies: - Baskin Robbins - Haagen-Dazs - Nestle - Mars

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Executive Summary

EXECUTIVE SUMMARY
Market Value The Russian Ice Cream market grew by 5.5% in 2001, to reach a value of $1 million. Market Segmentation I Dairy-based accounts for the largest sector of the Russian Ice Cream market, representing 84.7% of the market in value terms. Market Share I Mars products account for the largest share of the Russian Ice Cream market, with 36.4% of the market in volume terms. Market Distribution Traditional Grocers account for the largest share of distribution in the Russian Ice Cream market, with 41.0% of the market in volume terms. Market Forecast In 2006 the Russian Ice Cream market is forecast to reach a value of $1.03 million, an increase of 1.8% since 2002.

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Market Value

MARKET VALUE
The Russian Ice Cream market grew by 5.5% in 2001, to reach a value of $1 million. The compound annual growth rate of the market in the period 1996-2002 was 1.2%. The strongest growth was in 1997, when the market grew by 5.8%. The largest fall in the market was recorded in 2000, when the market shrank by 7.4%.

Table 1: Russian Ice Cream Market Value: $ Mn, 1996-2002

Year 1996 1997 1998 1999 2000 2001 2002e
CAGR, 1996-2002 1.2%

Market Value ($ Mn) 941.6 996.2 1,041.0 1,031.1 954.8 1,007.6 1,012.6

% Growth

5.8% 4.5% (1.0%) (7.4%) 5.5% 0.5%

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Market Segmentation

MARKET SEGMENTATION
MARKET SEGMENTATION I
Dairy-based accounts for the largest sector of the Russian Ice Cream market, representing 84.7% of the market in value terms. Water-based represents the smallest sector of the Russian Ice Cream market, representing 15.3% of the market in value terms.

Table 2: Russian Ice Cream Market Segmentation: % by Value, 2001

Sector Dairy-based Water-based % Share 84.7% 15.3%

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Market Shares

MARKET SHARES
MARKET SHARE I
Mars products account for the largest share of the Russian Ice Cream market, with 36.4% of the market in volume terms. The top three companies in the Russian Ice Cream market (Mars, Lakomba, Molochnoye) account for 59.4% of the market between them. The Other segment accounts for 0.9% of the market.

Table 3: Russian Ice Cream Market Shares: % by Volume, 2001

Company Bovodino Fakel Hulliver Ice-Fili Lakomba Leningradskoe Mars Molochnoye Morosko Other % Share 5.3% 3.4% 4.4% 5.8% 12.0% 10.7% 36.4% 11.0% 10.0% 0.9%

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Market Shares

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Distribution

DISTRIBUTION
Traditional Grocers account for the largest share of distribution in the Russian Ice Cream market, with 41.0% of the market in volume terms. The Other segment accounts for 26.3% of the market.

Table 4: Russian Ice Cream Market Distribution: % by Volume, 2001

Distribution Channel Kiosks Other Standard Grocers Traditional Grocers % Share 29.5% 26.3% 3.2% 41.0%

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Market Forecasts

MARKET FORECASTS
MARKET FORECASTS
In 2006 the Russian Ice Cream market is forecast to reach a value of $1.03 million, an increase of 1.8% since 2002. The compound annual growth rate of the market in the period 2002-2006 is predicted to be 0.4%.

Table 5: Russian Ice Cream Market Value Forecast: $ Mn, 2002-2006

Year 2002 2003 2004 2005 2006 Market Value Forecast ($ Mn) 1,012.6 1,017.5 1,022.4 1,025.3 1,030.6 % Growth 0.5% 0.5% 0.5% 0.3% 0.5%

CAGR, 2002-2006 0.4%

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