5 August 2008 - The market for frozen bread in Russia, which is currently estimated at USD 600 million, has the potential to grow 25-30% per year, argues Natalya Smetanina, Marketing Coordinator at Lantmannen Unibake.
Smetanina claims that the production of frozen bread is extremely profitable for shops and HoReCa (hotels, restaurants and cafe/catering/casino) as it can be stored for long durations, has wide assortments.
Smetanina believes that the difference between the production of fresh bread and frozen bakery products consists of freezing and storage costs, which vary between 15 to 30%). At the same time, expenses relating to the return of unsold products by the customers are decreasing.
It is expected that the potential of HoReCa sector for market growth will remain significant. However, the retail market is considered to be very promising, and the highest growth rates are anticipated in the nearest future, adds the Marketing Coordinator. According to the experts, the retail market will account for a 78% share of the frozen bakery market in Russia by 2011.
The market is fast-growing, adds Smetanina. Indeed, for the past decade traditional bread and bakery products production has decreased in Russian factories. Bread consumption in the country has dropped from 80kg per capita in 1997-1998 to 60 kg. However, she believes that this does not mean that Russians consume less bread. Instead, she argues that the market has evolved as consumers seek a more balanced as well as a wide range if quality bread products. Frozen bakery growth is also connected with the population’s income growth.
The Russian market for frozen bakery products, however, is much younger than in Europe, which peaked in the 1970s and thus has more possibilities to grow. In western countries frozen bakery products amount to 80–90% of the whole bread market, while in Russia, the share is only 10–15%, but it is constantly growing.
Frozen buns, baguettes, croissants and pastry appeared in Russia only in the 1990s. Smetanina’s company, Lantmannen Unibake (formerly Cerealia Unibake) entered the Russian market in 1992 and became one of the first companies to sell frozen bakery products and launched its own production in Russia in 2006 after the opening of its factory in Yegorievsk, near Moscow in 2004. The facility has two production lines for baguette
bread and frozen buns.
Smetanina argues that frozen water-logged bread is cheaper to manufacture than partly baked frozen products as its production requires less energy. On the other hand, large special boxes are necessary to make products ready for consumption. For this reason, frozen partly or completely baked products are in great demand. Furthermore, they can be prepared quickly and heated in ovens.
However, Smetanina also says that the sector’s main challenge is that the prices for bread are controlled by the State. Meanwhile, raw material costs are steadily growing. Therefore the profitability of bread production is very low. As a result, many bakeries and bread baking plants in Russia are being closed.