There are many cheese classifications. All in all, the market split sinto four basic segments: yellow hard cheeses, white soft cheeses, processed smoked sausage-shaped cheeses, and processed spread cheeses**. Depending on price, consumption traditions in Russia and peculiarities of this or that cheese type the named segments significantly differ in volume/value and maturity both of supply and demand. For instance, hard cheese enjoys the highest demand in Russia being traditional and universal everyday food – unlike the other three categories which are related to special consumption situations.

MARKET PLAYERS

Competitive landscape in each of cheese categories on Russian market is different. For instance, white soft and processed spread cheeses are highly branded and quite mature with leaders controlling significant market shares. In the category of white soft cheese the group of leading suppliers includes “Arla Foods” (Denmark), “Flechard S.A.” (France), “Hochland SE”, “Kaserei Champignon Hofmeister GmbH & Co.KG” (Germany), “Lactalis Group”(France), “Molochny Zavod (DairyPlant) “Giaginskij” OJSC (Republic of Adygea) and concern “Unilever”(UK-Holland)***. The category of processed spread cheeses is mainly distributed in Russia between large international operators – “Hochland”, “Lactalis Group” and “Valio Ltd.” (Finland). Significant share in this category is also controlled by“Karat” OJSC (Moscow).

Meanwhile the categories of yellow hard cheeses and processed smoked sausage-shaped cheeses on Russian market are less branded and consolidated. In the category of yellow hard cheeses major rivals are not different brands but brands and non-branded products. A lot of Russian and foreign suppliers – including companies from former Soviet republics – compete in this segment. Supply in the category of processed smoked sausage-shaped cheeses is almost completely provided by Russian manufacturers; the group of leaders here includes “Vamin Tatarstan” OJSC, “Maslosyrzavod (Butter andCheese Plant) “Porkhovskij” (PskovRegion), “Omskij Zavod PlavlennykhSyrov (Omsk Processed CheesesPlant)” LLC and “Ryazanskij ZavodPlavlennykh Syrov (Ryazan ProcessedCheeses Plant)” OJSC.

Market operators use different branding strategies. European manufacturers operating on Russian market usually have brand portfolio with umbrella brands – if any – including no more than two product lines. Meanwhile Russian manufacturers more intensively exploit umbrellabr and strategy: very often they offer a wide product range under onebrand.

Today on Russian cheese market the highest demand and most vibrant performance is demonstrated by the largest category – yellow hard cheeses. So, this review further on will be dedicated exactly to this category.

PRICE SEGMENTATION

Russian market of yellow hard cheeses is still in its infancy in terms of price segmentation. There are only two definite price categories: “economy” and “standard and moreexpensive”. Economy cheeses are mainly non-branded products and brands with negligible shares insales. Strong and promising brands are offered in the price category “standard and more expensive” – examples are “Frico” (“Friesland Campina”), “Natura” (“Arla Foods”), “President” (“Lactalis”), and “Valio”(“Valio”). Premium brands are rather weak on the market because the category itself is yet to develop.

CONSUMER PREFERENCES

Russian consumers think that selection of Russian yellow hard cheeses is narrow, though exactly domestic manufacturers enjoy higher consumer credit because domestic products are perceived as fresher,more natural and of higher quality. Besides, consumers attribute freshness to cheeses sold by weight andstore-packed offerings. Cheeses infactory package are perceived as lessfresh and more expensive.

Today about 80% of sales volume in hard cheeses is provided by unpacked products. On the current stage of Russian cheese market development attractive package is not yet achoice-driving factor for consumers. However, in short-term perspective as the market will be getting more branded importance of package is set to grow.

Consumer choice is currently driven by sheer functionality: product exterior – color, density, shape,and piece weight; package/expiry date; price. Importance of emotional and value attributes is only to be settled. The majority of consumers have poor knowledge of brands offered by the market. According to consumers, this situation is determined by lack of information and advertising, and in some cases – by unattractive logos of manufacturers on package.

LOW-BRANDED MARKET

Currently Russian market of yellow hard cheeses is rather lowbranded. Non-branded products have a large share of the market; besides, the majority of existing brands have no or poor communication with consumers failing to capture their attention.

As it has been mentioned above,Russian consumers have a vague idea of cheese brands offered by the market. The majority of respondents were at a loss to name the brands they know. Exclusions of this rule were “Oltermanni” and “Lamber”; in Moscow the third brand in this group was “Svalja”.

Peculiarity of Russian cheese market is high loyalty to cheese type and not to brand. In European countries share of branded products on cheese market reaches 95% while in Russia this index hardly exceeds 10%. Medium-branded market implies that branded products constitute 50% of supply. So, Russia is just making its first steps on this way. Still, cheese production in Russia grows, the market develops, and share of branded products increases underpinned by accelerating competition. In short-term perspective share of Russian branded products on cheese market isset to grow, accompanied by increasing consumer awareness on brands.

MARKET DEVELOPMENT TRENDS

In the summary we’d like to highlight that today Russian market of yellow hard cheeses demonstrates competition rather between non-branded and branded products than between the brands. One of key market trends is gradual growth of branded products’ share in sales and increase of brand lines in number. Some of Russian consumers already demonstrate certain brand awareness. However, brand awareness rarely stimulates consumers to try the product. The situation is set to change drastically in short-term perspective.

Another important trend is promotion of foreign and pro-European brands. European style of cheese brand name is getting increasingly popular. This tendency is close to one more trend currently gaining popularity – accenting the brand’s origination from traditional cheese-making countries like Switzerland and Holland. Example is “Frico”(“Friesland Campina”) positioned as cheese made in Holland; brand promotion is based solely on this fact. Same strategy is used by “Jarlsberg” (“TineSA”, Norway) promoted as Norwegian cheese.

Accenting product naturalness is also an important trend in branding. The best example inthis respect is “Arla” (“Arla Foods”) declaring naturalness as corporate value and mission. This ideais supported by development of organic products, creation of web page dedicated to product naturalness and environmental issues. Besides, in the frames of this strategy “Arla” has special promotions of brands like, for instance, “Natura”.

“Natural” naming is very trendy on FMCG markets – on cheese market this trend is especially obvious.

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* The review is based on open source information and “Comcon’s” findings.

** Classification used by “Nielsen Russia” in open source publications on cheese marketis applied here. This classification considers basic technologies of milk and curd treatment as well as cheese ripening types, i.e. organisms involved in ripening process.

*** Hereafter the companies are arrangedalphabetically.

Authors: Dmitry Golovnev, Olga Kostina

The article has been issued in"RUSSIAN FOOD & DRINKS MARKET MAGAZINE" №4 in 2010

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