Saga raises quality in Russia's canned food
domestic canned vegetable sector by starting up production of
European quality products inside Russia with the ability to
undercut some of the more established importers and foreign
players, reports Angela Drujinina.
The fact that foreign manufacturers of canned vegetables lead the Russian market is explained very simply: the Russian climate makes it almost impossible to grow enough fruits and vegetables of the necessary ripeness to match the quality of canned vegetable products produced in other parts of Europe.
However, Saga has decided to outwit nature by importing vegetables from European suppliers and processing them in Russia. This has enabled the firm to set up three new domestic brands similar in quality to their western counterparts and competitive on price.
The group now has two brands spanning the middle and lower price ranges - Veselye Ovosi and DIS - with can prices starting at RUB 14 (€0.39).
Most recently Saga has also launched a premium Cosaga brand that "use vegetables from the best western suppliers, which also supply raw materials for leading cannery and frozen vegetables manufacturers," according to marketing manager Irina Kandakova.
Popular products include green peas, sweet corn, beans and olives. All are made at the firm's factory in Smolensk oblast, though the firm declined to disclose how much it had invested in new production equipment.
Saga, already a well-known manufacturer of canned dairy products, only moved into vegetables in 2003 when it began importing ready-canned products from its business in Spain. Now, its recent moves to begin manufacture in Russia highlight a growing trend for domestic production within a rapidly developing market.
Industry experts said that manufacture of canned vegetables rose 24 per cent to 4,658 conventional cans from 2002 to 2003, and market players believe potential for future growth is still very big.
Russia's biggest canned vegetable producer is Pomidorprom, which posted sales of about €7.7 million for the first half of 2004.
However, the market remains quite open with Pomidorprom claiming a combined market share of sauce, canned fruit and vegetables of 15 per cent. Indeed, rival firm Baltimor recently announced it would spend €3 million on improving capacity at its canning factory to try and gain ground on Pomidorprom.
Consolidation on the domestic market should help to improve quality standards but also help to build up domestic brands with strong consumer recognition.
This may provide a good investment opportunity for foreign firms, especially those facing increased competition from the domestic players. For example, Hungarian vegetable canner Globus, already being squeezed by higher vegetable prices and distribution costs, has Russia as its biggest export market.
