Tapping the Russian produce market: retail trends, growth potential
Russian fruit consumption has undergone dramatic changes over the last decade and supermarkets are seeking new ways to raise the produce profile. With Worldfood Moscow kicking off next week, at www.freshfruitportal.com we speak with RK Marketing general director Irina Koziy to discuss what exporters to this nation of 143 million people need to know. She says retailers are taking a more active role in procurement from all over the world with expectations per capita fruit intake will continue on its upward trajectory.
Koziy sums up Russia's fruit import market significance with reference to her country's most beloved fruit.
"The only really commercially grown fruit here is apples, but Russia is still the largest importer of apples in the world," she says.
"Russia is a huge market for any types of imported fruits, mostly because we don’t grow too many fruits in Russia due to the cold climate and lack of tradition probably.
"Russians are eating more fruit almost every year; we had very little consumption of fruit a couple of decades ago in the 1990s, but now consumption is constantly growing."
She says the average Russian was consuming 34kg of fruit per year in 2009, compared to less than 20kg 10 years ago.
"Even if we compare to China, the average Chinese person consumes 50 kilograms of fruit per year, while an American eats 126 kilograms, so there is a long way to go and a long way to grow."
The expert says Russia's hypermarkets, supermarkets, convience store chains and independent retailers are growing rapidly and changing their approach to fresh produce at the same time. The two biggest players are Magnit which has the most stores (5,309), and X5 Retail Group which has the highest revenue (US$15.5 billion in FY2011).
"They are developing their fresh produce displays, trying to put a variety of each particular produce category into it, trying to offer consumers with different varieties of apples, grapes, pears, everything.
"It’s very interesting to see even how the mentality of retailers is changing, because a few years ago they were just saying yellow pears or green pears, but now they know the varieties, they know the specifics of each product and they try to communicate that to consumers."
She says despite this progress, the situation has not been the same for citrus displays.
"In most cases in retail outlets citrus is still understood and presented to customers as a commodity.
"They have oranges, mandarins, grapefruit, but that’s it; the fruits are not really differentiated by the specific variety, there are only very few retailers that start to put the variety of oranges for example on the label and the display."
Country-of-origin labeling can also be dubious, depending on the retailer concerned.
"Technically it’s supposed to be present on all the labels but it's not 100% correct. Sometimes it’s messed up and you can see that fruit originating from the United States for example are labeled as Argentinean, or with some other very strange mistakes at retail.
"When we conduct fresh produce promotions one of the important things we try to do is label the product correctly; we try to teach the retailers to do it, because there’s no way to promote a product if it’s not properly labeled or there’s no way for the consumer to find this particular product on the shelf."
For the fruit that is labeled correctly, an attentive consumer would see that Morocco and Turkey are the leading citrus suppliers to Russia, followed by South Africa and Egypt.
"It’s kind of a shame that the Chilean supply to Russia is less than half a percent of all citrus that goes to the country," Koziy adds.
"Australia is a little bit above Chile, something around 1%.
"Citrus are one of Russia's favorite fruits and we have a long term New Year tradition of eating oranges and mandarins in that time; Russians really consume a lot of citrus."
The procurement push
She says one of the most interesting recent trends is that a lot of the large Russian retailers are trying to enter the import business as well.
"They are participating in selecting the product that they’re going to buy, they’re participating in selecting the suppliers, and sometimes they even have their own import department and do direct imports.
"I know if we talk worldwide it’s not such a strange thing, but for Russia it’s a very recent trend, it’s only existed a few years.
"Magnit is doing it and while X5 is doing it through several importers, but they are already selecting some of the fruits and suppliers abroad, connecting their importers with the product and suppliers they want to deal with."
She says the Union of Independent Retailers is also sourcing its own imports.
"This is an association that unites numerous independent retail chains - some small with 20-30 stores and some large with over 200 stores - and all of them are too small to deal with imports directly, but within the union they’ve created something called the trade supply system.
"It acts like a purchasing tool for all the smaller retailers that are a part of the union, and also does direct imports of fruit for all the retailers."
Koziy says most Russian buyers prefer a consignment system but will buy a product at a fixed price if they really need it.
She divides Russia's fruit imports into three geographic areas; St Petersburg which covers the entire central and northern parts of the country; Novorossiysk on the Black Sea coast which supplies the southern part of the country; and the area around Vladivostok and Nakhodka, which serve the far eastern parts of Russia and eastern Siberia.
"Russia is a huge country, 9,000km long, and of course some of the northern destinations for example are quite difficult for getting the product there; fruits are perishable and a lot of fruits are perishable quite fast.
"So the more you go inside the country and to the northern part of it, the less fruits are available there and less are consumed, and they can be only supplied by vessels."
Koziy says pome fruit took up a third of the total in a recent study asking Russians what their favorite fruits were, with apples at 22% and pears at 11%.
She adds grapes are popular as well while blueberries witnessed a surge in consumption last Northern Hemisphere winter.
"Grapes are almost 100% imported product; their shelf life is quite short so the importers are trying to arrange their supplies to cover the whole year, buying grapes from all over the world.
"One of the interesting stories was the success of Chilean blueberries in Russia.
"A lot of Russian retail chains were able to sell the amounts of blueberries originating from Chile that they never even dreamed of selling because the price was good, the fruit was of good quality, and it arrived on time for the winter season; so, a lot of consumers tried Chilean blueberries and I’m sure there will be larger potential for this berry in the following seasons."
As far as other berries are concerned, Russians enjoy strawberries and raspberries but tend to only eat the fruit during their own season.
"This is probably mainly because the products are very expensive through the wintertime, and the sales are mostly made in upscale stores and high-end supermarkets.
"There is a potential for other types of berries also if there would be a good supply, a good introduction and a reasonable price."
She says tropical fruits still have a long way to grow and more awareness is needed if they are to succeed.
"These fruits are not traditional for Russian consumers and there is a need to educate consumers on how to eat it - should you choose it for a meal, how do you select the best fruit?
"A lot of Russians are afraid of buying pineapples or mangoes as they don’t know the ripening quality or how to understand if it's good to eat."