Western breads bring fresh opportunities to Russian bakery market

By Lindsey Partos

- Last updated on GMT

Related tags: Russia

New high-margin opportunities for bakers continue to open up in Russia as the economy flourishes, fuelling consumer purchasing power and raising demand for western-style breads and confections.

According to the World Bank’s June 2007 report, the strengthening of the ruble and stable growth in personal incomes are expected to help expand the retail market’s size to €510bn by 2011.

A key driver in the growth of consumer goods - of which food products represent a significant slice - is the staggering upward curve in consumer buying power. Recent figures from investment bank Lehman Brothers reveal that, while in 2002 Russians earned about $160 per month, today they earn $540.

And while the Russian bakery sector is currently seeing absolute growth dawdling at one to two per cent year-on-year, the market for high-margin western-style products shows promising gains.

"Wealthy Russians are ready to pay for exclusive bread, such as ciabatta, and Russian firms are starting to answer this growing need,"​ Angelika Meier, a media consultant for the upcoming show Modern Bakery Moscow told BakeryAndSnacks.com.

Russians consume, on average, about 100 kilos of bread per annum. Traditional Russian, dark bread - that for bakers only rakes in a low 3 per cent margin - still dominates the market. But as consumer desire for western-style products evolves, so do opportunities for "new, higher-margin product varieties",​ Meier continues.

The Russian bakery market is made up of about 1000 bread factories, each producing between 30 to 50 tons a day, with 10,000 further small and medium-sized businesses contributing to the market.

This year's Modern Bakery show takes place in Moscow between 13 and 16 October, with an estimated 16,000 visitors and over 200 exhibitors.

While visitors, according to the show’s organisers, will be technologists from bread factories, bakery directors, and SME bakery representatives, the exhibition will also address supermarkets "because they are increasingly installing their own bakeries, and we want to mirror this trend", says Meier.

And into the exhibitor mix will be food ingredients firms and companies providing processing and packaging machinery. The majority of the 207 exhibitors will hail from Europe, with a big slice - 45 firms - from Germany, 50 from Russia, and 22 from Italy.

Mirroring the sprinting growth of the Russian confectionery market – which is expected to grow for chocolate alone, on average, by a considerable 15.3 per cent in value and 5.4 per cent in volume between 2007 and 2012 – the Modern Bakery exhibition will also present "many companies in the confectionery industry".

Overall, strong macroeconomic conditions in Russia continue to attract interest from foreign firms, including those hailing from the food sector. Foreign investment for the first half of 2007 totalled $67bn, according to Russia's daily online site Kommersant, compared to $14bn in Poland for 2006.

Indeed, a multitude of western European supermarkets have already entered the burgeoning Russian market, and the French retail giant Carrefour announced it is set to open its first hypermarket there at the beginning of 2009. The firm said it will invest $100m as part of its project in the Krasnodar region of southern Russia.

Related topics: Markets

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