Market trends and branding of cream cakes and pastry in the North-West (english version)

No secret, success of any company depends on selection and skillful application of various business tools: in technologies, finance, management, and marketing. Branding and brand management as business tools are getting increasingly popular over recent times. This review prepared by experts of "Coruna Branding" is about practical aspects and achievements of branding on the market of cream cakes and pastry in the North-West of Russia.

WHAT’S IN A NAME

Wide selection of cakes and pastry in retailis not making news. Consumers are very picky and disloyal, easily switching between brands and manufacturers in search for something special or suiting the moment. Nobody bothers remembering the brands — maybe just incase of extremely tasty cake or pastry.

Ask Saint Petersburg consumers about manufacturers of cream confectionery they remember and most frequently you’ll get fournames — “Nevskie Berega (Neva Shores)”, “Sever (North)”, “Metropol”, and “Karat Plus”.These four Saint Petersburg manufacturer splus Moscow “Fili-Baker” aggregately control three fourth of the market of cream cakes andpastry in North-West Federal District.

Currently the leader in retail coverage —both in retail chains and independent stores ofSaint Petersburg — is “Konditersky Kombinat (Confectionery Integrated Facility) “Nevskie Berega” OJSC. The company offers a widechoice of confectionery: classic pastry, tiny desserts,“everyday” cream cakes, special occasion cakes and pies.

Saint Petersburg companies “Konditerskoe Proizvodstvo (Confectionery Facility) “Sever” OJSC and “Metropol” OJSC focus on development of branded cake-shop chains which today are the major distribution channels of these manufacturers. Besides, the named two companies pay special attention to branded baked products.

Products of “Karat Plus” CJSC demonstrate high presence in retail chains and independent stores of Saint Petersburg, and also in its own small branded chain. Products of “Petra+” LLC is worth special note. This company is the supplier of the socalled “Middle Asian confectionery” distributed via branded departments in “O’Key”chain, and also the manufacturer of creamcakes and pastry. This company focuses on fruit cream cakes and large-size cakes — 1.2kg and larger.

Products of Moscow manufacturer “Fili-Baker” LLC are also well-known in Saint Petersburg. High retail coverage is registered with such cream cakes as “Sancho” and “Pancho” offered by the manufacturer in various sizes from tiny cakes in plastic cups to classic sizecakes (about 1 kg). One more external supplier of the review market is Cake Factory “Mirel” (“Khlebprom” OJSC, Chelyabinsk) — this manufacturer demonstrate shigh retail coverage but poor sales.

TAKE THE TOOL!

During 1980s Russian cream confectionery market was dominated by classic butter creamcakes, but during 1990s and up to 2004— 2006 major trend and key to success was product innovations. For instance, during 1990s the brand “Nevskie Berega” succeeded with a newline of cream cakes decorated with fruits and thus beated the acknowledged leaders — “Sever”and “Metropol”.

During the same time a new brand — “KaratPlus” — successfully entered the market with yoghurt cakes specialty of which were lighty oghurt cream and berries. These cakes were peculiar for totally new enjoyable taste with intriguing sour berry tint. Yoghurt cream cakes “Karat Plus” conquered consumer hearts in ablink of an eye while democratic price helpedto conquer their purses. However, the brandfailed to win high consumer awareness: simple white package was hard to differentiate andthe product recipe was not patent protected. Rivals took advantage in this weakness immediately. For instance, “Sever” and “Metropol” extended their product lines with low-calorie cream cakes and literally flooded their branded chains with this novelty; “Nevskie Berega” held aggressive promo campaign to support thelaunch of their new lines of similar products.

JUST ONE LOOK...

After success of light yoghurt cream cakes manufacturers continued to experiment withrecipes and technologies in the search for anew star. All kinds of unimaginable confectionery kept appearing on shop shelves: cornicles with marshmallow cream, cola flavored cakes,pastry with nougat, sponge cake with halvah.

In 2004 the brand “Nevskie Berega” again stole the thunder with a new product — tiny dessert profiteroles. The novelty was welcomed by the market and very soon appeared in the product lines of other market players.

However real breakthrough at that time wasmade by a new kid on the block — “Fili-Baker”. This Moscow manufacturer offered a real hit; in a year with no promo support sour-cream cakes “Pancho” and “Sancho” of “Fili-Baker” conquered 10% of market volume, outrangingin sales volume all non-local brands. It was areal market hit: specialty cupola shape, specialty chocolate-and-cream decoration, specialty beaten sour-cream, and original names. Specialty sweet-and-sour taste of sour-cream cakes made a great alternative to yoghurt cakes; besides, the product was also positioned in economy segment.

“Karat Plus” suffered the most from successof “Fili-Baker” novelty. The companyresponded with bright ad videos on TV, andpoint-of-sales promo events. But despite allefforts this player lost a piece of market pie.During 2008–2009 “Karat Plus” was forced toclose part of branded confectionery departmentsin “Dixy” chain; it also lost positions intraditional retail.

Success of “Fili-Baker” was so impressive because other non-local brands failed to win any significant shares of the review market during 2004–2008 despite of all efforts. For instance,“Malika” LLC (Moscow) with cognominal brand was promoting ellipse-shaped creamcakes and drop-shaped pastry. Moscow confectionery “U Palycha (At Palych)” (TM (“Ot Palycha(From Palych)” was offering high-quality expensive products — classic cream cakes “Napoleon”, “Ptichie Moloko (Pigeon Milk)”, and “Prague”. Federal brand “Mirel” was extending its presence in retail supporting its products byactive promo campaign. In 2007 “Mirel” managed to outpace even market leaders in retail coverage but this didn’t help the company towin larger share of sales and force out strong local brands from top lines.

SOUR-CREAM IS NOT A BRAND

The gauntlet thrown down by “Fili-Baker” was very soon picked up. Rivals used the same tricks against the new comer that performed well enough against “Karat Plus”. Saint Petersburg consumers were well aware about the cakes “Sancho” and “Pancho” but knew nothing about “Fili-Baker”. Product package was simple and common failing to differentiate fair the brand among the rivals, it had no unique hard-to-copy attributes for “copyright” protection. Thus, when consumers were asking for “Sancho” cake in a store they were offered similar product of popular manufacturers “Sever”, “Metropol”, and “Nevskie Berega”.

So, being safe again from this new rival, market old-timers went on with their regular market strategies: “Sever” and “Metropol” —to development of their cake-shop retail, and “Nevskie Berega” — to promo support of its cognominal brand. Besides, market leaders continued their search for a new market hit. For instance, “Nevskie Berega” launched new specialties with pine-apples, semolina cream, honey-and-custard sponge, mint, and marchpane. “Sever” and “Metropol” made accent on new baked specialties.

Meanwhile “Fili-Baker” made unlucky new launches: pastry “Tartlets”, cream cakes “K Chayu(Tea Cake)” and “Melodiya (Melody)”, andpies that had no positive respond from consumers. Rivals were going on while popularityof “Fili-Baker” skidded.

Stories of “Karat Plus” and “Fili-Baker” arequite edifying. Unlike other new comers, these brands managed to win significant shares of sales with their innovative products but innovations proved to be not enough to keep what was conquered.

Real long-term success requires more than just a new market hit. Any great product can becopied, and consumer preferences are versatile. True success demands easy product identificationand loyal consumer base — things only strong brand can provide. Strong brand shapes in consumer mind attractive and recognizable image with meaningful and valuable advantages. What are these advantages?

EMOTIONAL ACCENTS

Inarguable fact: sweets are consumed to indulge. That’s why manufacturers of these products should first of all touch emotional strings of consumers. In a store consumers will transfer these emotions to products. For instance, cakes “Kartoshka (Rum Balls)” of prestigious brand “Metropol” and the same kind of cakes under poorly known inexpensive brand “Izyuminka (Zest)” are absolutely different products in consumer mind. The first is appropriate for special occasions while the second would be good enough only for everyday tea at home. Rational attributes like low calorie, affordable price, and sustained quality are also important but far less important than emotional attributes. Accent onemotions significantly improves efficiency of advertising and marketing communication ofthe brand.

SUMMARY

As it has been already mentioned above, market success depends on skillful application of business tools in management, finance, technologies, and marketing. Time is the fairest judge: during mid 1990s — first half of 2000s the market of cream cakes and pastry was reined by product innovations, but since the second half of 2000s brand management technologies gained the upper hand. All marketleaders are already using these tools. Market is a self-regulating thing and its progress will stimulate the companies still hesitating touse marketing tools. The sooner they do it the sooner they get the chance for success. Prosperity rule of thumb is to investigate the leaders, learn from them, and beat them.

Authors: Dmitry Golovnev, Elena Medvedkova

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