The Outlook for the Sausage and Deli Meat Market in Russia

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1 The Outlook for the Sausage and Deli Meat Market in Russia

2 The Outlook for the Sausage and Deli Meat Market in Russia 2 Summary Between 2006 and 2008 sales of sausages and deli meats in Russia were increasing, having reached their high of 2.4 million tons by the end of this period. However, in 2009 the growth gave way to a decrease, and the volume of sales went down to 2.2 million tons. Cooked sausages, as well as fresh and fresh smoked sausages are 2 biggest segments of the Russian sausage and deli meat market. In 2010 their market share equaled 64%. In 2010 the volume of sales of all types of sausages increased. Sales of deli meats and smoked sausages grew at the quickest pace. The volume of sales of deli meats went up by 8.9%, and that of smoked sausages grew up by almost 9.1%. The growth rates of the value of sausage and deli meat sales have lately exceeded the ones of the volume of sales. The growth of the sales value had been primarily stimulated by increasing prices for sausages. Between 2006 and 2010 the average price for sausages and deli meats rose by 57.4%, i.e. from rubles per kilogram to 239 rubles per kilogram. According to BusinesStat, by 2015 the value of sales of sausage products will have totaled 939 billion rubles. The Outlook for the Sausage and Deli Meat Market in Russia contains the essential data, necessary to comprehend the current market opportunities and conditions and to assess the future prospects, covering such points as: The overall assessment of the economic environment in Russia Size and capacity of the sausage and deli meat market Balance of demand for and supply of sausages and deli meats Number of customers and their consumption patterns Economic output, total exports and imports, the volume of merchandise in storage Cost price, retail price, import and export cost Ratings of the industry in terms of economic output and sales revenue Financial and economic profiles of leading enterprises In the report the products are categorized the following way: Cooked sausages Semi-smoked sausages Smoked sausages Deli meats Fresh and fresh smoked sausages Other sausage products The report presents an account of top sausage producers, including: Ostankino Meat Processing Plant, Mikoyan Meat Processing Plant, Cherkizovo Meat Processing Plant, Tsaritsino, Velikie Luki Meat Processing Plant, Starodvorskie Kolbasy, Rostov Sausage Factory Tavr, Dubki, Sochi Meat Processing Plant, Klinskiy Meat Processing Plant, PIT-Product, Myasnaya Galereya, Pavlovskaya Sloboda Meat Processing Plant, Myasoprom Korovino, Dymovskoe Kolbasnoe Proizvodstvo, Stupino-Ostankino Meat Processing Plant, Kungurskiy Meat Processing Plant.

3 The Outlook for the Sausage and Deli Meat Market in Russia 3 BusinesStat carries out researches into the global sausage market as well as local markets. The survey of the Russian market contains data concerned with different regions of the country. Along with reports on the national market, BusinesStat offers researches into the sausage markets of Moscow and Saint Petersburg. The survey is based on the official statistics, obtained from: Federal State Statistics Service of the Russian Federation Ministry of the Economic Development of the Russian Federation Ministry of Agriculture of the Russian Federation Federal Customs Service of the Russian Federation Federal Tax Service of the Russian Federation Apart from the official statistics, the survey also contains the results of the research done by BusinesStat: Survey of consumers of meat products Audit of meat product retail trade Survey of experts of the meat product market

4 The Outlook for the Sausage and Deli Meat Market in Russia 4 Table of Contents CONDITION OF THE RUSSIAN ECONOMY Basic Characteristics of the Russian Economy Table 1. Volume of nominal and real GDP, Russia, (trillion rubles) Table 2. Volume of real GDP and its index, Russia, (trillion rubles; %) Table 3. Fixed investment from all sources of financing, (trillion rubles; %) Table 4. Total exports and imports, Russia, (billion dollars) Table 5. The average annual exchange rate of the US dollar to the Russian Federation ruble, Russia, (RUR / USD; %) Table 6. Consumer price index (inflation rate) and producer price index, Russia, (% deviation to previous year) Table 7. Population size, including migrants, Russia, (million people) Table 8. Actual disposable household income, Russia, (% deviation to previous year) - 15 Opportunities of the Russian Economy CLASSIFICATION OF SAUSAGES AND DELI MEATS Sausages Deli Meats DEMAND FOR AND SUPPLY OF SAUSAGES AND DELI MEATS Supply Table 9. Volume of supply of sausages and deli meats, Russia, (thousand tons; %) Table 10. Forecast of the volume of supply of sausages and deli meats, Russia, (thousand tons; %) Table 11. Production, import and in-stock balance of sausages and deli meats at the beginning of the year, Russia, (thousand tons) Table 12. Forecast of production, import and in-stock balance of sausages and deli meats at the beginning of the year, Russia, (thousand tons) Demand Table 13. Volume of demand for sausages and deli meats, Russia, (thousand tons; %) Table 14. Forecast of the volume of demand for sausages and deli meats, Russia, (thousand tons; %) Table 15. Volume of sales and export of sausages and deli meats, Russia, (thousand tons) Table 16. Forecast of the volume of sales and export of sausages and deli meats, Russia, (thousand tons) Balance of Demand for and Supply of Sausages and Deli Meats

5 The Outlook for the Sausage and Deli Meat Market in Russia 5 Table 17. Balance of demand for and supply of sausages and deli meats, including in-stock balance at the end of the year, Russia, (thousand tons; %) Table 18. Forecast of the balance of demand for and supply of sausages and deli meats, including in-stock balance at the end of the year, Russia, (thousand tons; %) SALES OF SAUSAGES AND DELI MEATS Volume of Sales Table 19. Volume of sales of sausages and deli meats in Russia, (thousand tons; %) - 26 Table 20. Forecast of the volume of sales of sausages and deli meats in Russia, (thousand tons; %) Table 21. Volume of sales of sausages and deli meats by type, Russia, (thousand tons) Table 22. Forecast of the volume of sales of sausages and deli meats by type, Russia, (thousand tons) Value of Sales Table 23. Value of sales of sausages and deli meats in Russia, (billion rubles; %) Table 24. Forecast of the value of sales of sausages and deli meats in Russia, (billion rubles; %) Table 25. Value of sales of sausages and deli meats by type, Russia, (billion rubles) Table 26. Forecast of the value of sales of sausages and deli meats by type, Russia, (billion rubles) Retail Price for Sausages and Deli Meats Table 27. Average retail price for sausages and deli meats, Russia, (rubles per kilogram; %) Table 28. Forecast of the average retail price for sausages and deli meats, Russia, (rubles per kilogram; %) Table 29. Average retail price for sausages and deli meats by type, Russia, (rubles per kilogram) Table 30. Forecast of the average retail price for sausages and deli meats by type, Russia, (rubles per kilogram) Table 31. Average retail price for the first grade cooked sausage by region, Russia, (rubles per kilogram) Table 32. Average retail price for the premium grade cooked sausage by region, Russia, (rubles per kilogram) Table 33. Average retail price for the semi-smoked sausage by region, Russia, (rubles per kilogram) Table 34. Average retail price for the smoked sausage by region, Russia, (rubles per kilogram) Table 35. Average retail price for fresh and fresh smoked sausages by region, Russia, (rubles per kilogram) Table 36. Average retail price for deli meats by region, Russia, (rubles per kilogram) Correlation between the Average Retail Price and the Inflation Table 37. Correlation between the average retail price for sausages and deli meats and the inflation, Russia, (%)

6 The Outlook for the Sausage and Deli Meat Market in Russia 6 Table 38. Forecast of the correlation between the average retail price for sausages and deli meats and the inflation, Russia, (%) Correlation between the Volume of Sales, Value of Sales and the Average Retail Price Table 39. Correlation between the volume of sales, value of sales and the average retail price for sausages and deli meats, Russia, (thousand tons; rubles per kilogram; billion rubles) - 43 Table 40. Forecast of the correlation between the volume of sales, value of sales and the average retail price for sausages and deli meats, Russia, (thousand tons; rubles per kilogram; billion rubles) CONSUMPTION OF SAUSAGES AND DELI MEATS Number of Consumers Table 41. Number of consumers of sausages and deli meats, Russia, (million people; %) Table 42. Forecast of the number of consumers of sausages and deli meats, Russia, (million people; %) Share of Consumers in the Population Table 43. Share of consumers of sausages and deli meats in the population of Russia, (%) Table 44. Forecast of the share of consumers of sausages and deli meats in the population of Russia, (%) Volume of Consumption and Average Expenditures Table 45. Volume of consumption of and average expenditures on purchase of sausages and deli meats, Russia, (kilograms per year; rubles per year; rubles per month) Table 46. Forecast of the volume of consumption of and average expenditures on purchase of sausages and deli meats, Russia, (kilograms per year; rubles per year; rubles per month) PRODUCTION OF SAUSAGES AND DELI MEATS Volume of Production Table 47. Production of sausages and deli meats, Russia, (thousand tons; %) Table 48. Forecast of the production of sausages and deli meats, Russia, (thousand tons; %) Table 49. Production of sausages and deli meats by type, Russia, (thousand tons) Table 50. Forecast of production of sausages and deli meats by type, Russia, (thousand tons) Table 51. Production of sausages and deli meats by region, Russia, (thousand tons) Production Cost Table 52. Cost of production of sausages and deli meats, Russia, (rubles per kilogram; %) Table 53. Forecast of the cost of production of sausages and deli meats, Russia, (rubles per kilogram; %)

7 The Outlook for the Sausage and Deli Meat Market in Russia 7 Table 54. Cost of production of sausages and deli meats by type, Russia, (rubles per kilogram) Table 55. Forecast of the cost of production of sausages and deli meats by type, Russia, (rubles per kilogram) Ratings of Producers Table 56. Rating of companies, producing sausages and deli meats, by economic output, Russia, 2009 (thousand tons) Table 57. Rating of companies, producing sausages and deli meats, by net revenue, Russia, 2009 (thousand rubles) EXPORT AND IMPORT OF SAUSAGES AND DELI MEATS Trade Balance Table 58. Balance of export and import of sausages and deli meats, Russia, (thousand tons) Table 59. Forecast of the balance of export and import of sausages and deli meats, Russia, (thousand tons) Volume of Export Table 60. Volume of export of sausages and deli meats from Russia, (thousand tons; %) Table 61. Forecast of the volume of export of sausages and deli meats from Russia, (thousand tons; %) Table 62. Volume of export of sausages and deli meats by country, Russia, 2010 (tons) Value of Export Table 63. Value of export of sausages and deli meats from Russia, (million dollars; %)64 Table 64. Forecast of the value of export of sausages and deli meats from Russia, (million dollars; %) Table 65. Value of export of sausages and deli meats by country, Russia, (thousand dollars) Average Export Price Table 66. Average export price for sausages and deli meats, Russia, (dollars per kilogram; %) Table 67. Forecast of the average export price for sausages and deli meats, Russia, (dollars per kilogram; %) Table 68. Average export price for sausages and deli meats by country, Russia, (dollars per kilogram; %) Volume of Import Table 69. Volume of import of sausages and deli meats, Russia, (thousand tons; %) Table 70. Forecast of the volume of import of sausages and deli meats, Russia, (thousand tons; %) Table 71. Volume of import of sausages and deli meats by country, into Russia, (tons)69 Value of Import

8 The Outlook for the Sausage and Deli Meat Market in Russia 8 Table 72. Value of import of sausages and deli meats, Russia, (million dollars; %) Table 73. Forecast of the value of import of sausages and deli meats, Russia, (million dollars; %) Table 74. Value of import of sausages and deli meats by country, Russia, (thousand dollars) Average Import Price Table 75. Average price for import of sausages and deli meats, Russia, (dollars per kilogram; %) Table 76. Forecast of the average price for import of sausages and deli meats, Russia, (dollars per kilogram; %) Table 77. Average price for import of sausages and deli meats by country, Russia, (dollars per kilogram; %) ECONOMIC INDICATORS OF THE INDUSTRY Financial Result of the Industry Table 78. Sales revenue (net), Russia, (billion rubles) Table 79. Selling and administrative expenses, Russia, (billion rubles) Table 80. Production cost, Russia, (billion rubles) Table 81. Gross profit on sales, Russia, (billion rubles) Economic Efficiency of the Branch Table 82. Economic efficiency of the branch, Russia, (%; times; days) Investments Table 83. Investments into the branch, Russia, (million rubles) Labor Resources Table 84. Labor resources, Russia, (thousand people; billion rubles; thousand rubles per annum) ECONOMIC PROFILES OF THE LEADING COMPANIES Ostankino Meat Processing Plant, JSC Registration Data Company Management Employee Number Subsidiary Companies Major Shareholders Economic Output by Product Type Accounting Balance Sheet (Form 1) (as of the end of the accounting period) Profit and Loss Account (Form 2) (for the accounting period) Financial Indicators of the Company Mikoyan Meat Processing Plant, CJSC Registration Data

9 The Outlook for the Sausage and Deli Meat Market in Russia 9 Company Management Employee Number Subsidiary Companies Major Shareholders Economic Output by Product Type Accounting Balance Sheet (Form 1) (as of the end of the accounting period) Profit and Loss Account (Form 2) (for the accounting period) Financial Indicators of the Company Cherkizovo Meat Processing Plant, JSC Registration Data Company Management Employee Number Subsidiary Companies Major Shareholders Economic Output by Product Type Accounting Balance Sheet (Form 1) (as of the end of the accounting period) Profit and Loss Account (Form 2) (for the accounting period) Financial Indicators of the Company Tsaritsino, JSC Registration Data Company Management Employee Number Subsidiary Companies Major Shareholders Economic Output by Product Type Accounting Balance Sheet (Form 1) (as of the end of the accounting period) Profit and Loss Account (Form 2) (for the accounting period) Financial Indicators of the Company Velikie Luki Meat Processing Plant, JSC Registration Data Company Management Employee Number Subsidiary Companies Major Shareholders Economic Output by Product Type Accounting Balance Sheet (Form 1) (as of the end of the accounting period) Profit and Loss Account (Form 2) (for the accounting period) Financial Indicators of the Company

10 The Outlook for the Sausage and Deli Meat Market in Russia 10 Condition of the Russian Economy Basic Characteristics of the Russian Economy Table 1. Volume of nominal and real GDP, Russia, (trillion rubles) Trillion rubles (current prices) Trillion rubles (prices of 2003) Source: Ministry of the Economic Development of the Russian Federation In 2008 the GDP of Russia was 41.4 trillion rubles on the current basis. At the year-end the economic growth equaled 24.6% in nominal terms (in current prices, unadjusted for inflation) and 5.6% in real terms (in fixed prices for 2003). Nevertheless, the GDP decreased by 6% in The rapid growth of the Russian economy in the middle of the 2000's was made for by 3 major factors: Record income of energy product and metal exporters Availability of financial resources to the Russian enterprises on the credit and stock markets Permanent income growth and availability of consumer loans Pumping of the economy with easy money and rush demand urged the manufacturers and distributors to augment trade stocks, hoping for greater demand. With the beginning of the crisis availability of loans plummeted, devaluation reduced attraction of import, and consumer pessimism prevailed in the market. The stocked merchandise became surplus. Consumers refused to do shopping, and production started slumping without orders. Customers went on strike: instead of spending, they began to save money. By mid-2008 Russian banks and companies had accumulated a significant amount of foreign debt, which equaled 540 billion dollars. It is worth noting that this amount was accumulated for 3.5 years, because as of January, the foreign debt amounted to 100 billion dollars. The very loan abundance rather than oil sales proceeds was the main factor of the economic growth in the country in the mid-2000s. However, as soon as the foreign credit sources turned out to be inaccessible, the whole Russian economy suffered a great shock. According to Sergey Aleksashenko, the director of macroeconomic researches at the State University Higher School of Economics, 40% of the foreign debt of Russian banks and companies were short-term. Since mid-2008 and until the end of 2009 banks and companies were bound to pay off 200 billion dollars. Besides, 200 billion dollars are to be added to this sum as an amount which was not received by the Russian economy, because exactly the same amount had been invested into the country economy during the previous 1.5 years. Thus, the total credit shrinkage approximately amounted to 400 billion dollars, which equal 25% of the Russian GDP. The greatest losses in Russia fell on the financial, construction, automobile and metallurgical industries, that were greatly dependant on the investments, loans and external economic conditions. The rest of the industries suffered as well, to a greater or lesser extent. The demand was the same only for staple foodstuffs and essential commodities. However, manufacturers of these goods incurred losses because of the prolonged arrears in payment from distributors and retailers. In 2009 about 37 thousand of companies were dissolved in Russia, 30% of which were liquidated due to bankruptcy. Such companies as KrasAir, IzhAuto, Avia, Betalink, Tsifrograd, Dixis, Neotorg and Tyumenenergobank went out of business as well.

11 The Outlook for the Sausage and Deli Meat Market in Russia 11 In 2010 the Russian GDP started to grow, backed by the trade balance improvement and the growth of oil prices. Pumping the budget with money allowed continuing large-scale investments into the economy. Investments were made into companies with a state stake, into the sector of state purchases and social aid. The investments stimulated recovery in demand.

12 The Outlook for the Sausage and Deli Meat Market in Russia 44 Consumption of Sausages and Deli Meats In the current chapter the market is analyzed in terms of consumption patterns. Account is taken of all the consumers, including foreigners living in Russia, because they can be consumers of sausages and deli meats, too. In order to collect data about consumption of sausages and deli meats in Russia, BusinesStat carries out annual standardized surveys of consumers of sausages and deli meats with the sample of 4,500 respondents. Number of Consumers Table 41. Number of consumers of sausages and deli meats, Russia, (million people; %) Number of consumers (million people) Dynamics (% deviation to previous year) Source: BusinesStat, Standardized Survey of Sausage Product Consumers, All-Russian regular survey, Sample of 4,500 respondents Table 42. Forecast of the number of consumers of sausages and deli meats, Russia, (million people; %) Number of consumers (million people) Dynamics (% deviation to previous year) Source: BusinesStat, Standardized Survey of Sausage Product Consumers, All-Russian regular survey, Sample of 4,500 respondents Consumers of sausages and deli meats are regarded as people who consume these products at least once a month.

13 The Outlook for the Sausage and Deli Meat Market in Russia 45 Share of Consumers in the Population Table 43. Share of consumers of sausages and deli meats in the population of Russia, (%) Population of Russia, including foreigners (million people) Number of consumers (million people) Share of consumers in the population of Russia (%) Source: Federal State Statistics Service, BusinesStat Table 44. Forecast of the share of consumers of sausages and deli meats in the population of Russia, (%) Population of Russia, including foreigners (million people) Number of consumers (million people) Share of consumers in the population of Russia (%) Source: Federal State Statistics Service, BusinesStat The share of sausage and deli meat consumers in Russia is very high. These products are included into the consumer goods basket of the majority of Russians.

14 The Outlook for the Sausage and Deli Meat Market in Russia 69 Table 71. Volume of import of sausages and deli meats by country, into Russia, (tons) Country Austria Belarus Belgium Brazil , , Canada China Czech Republic Denmark Estonia Finland France 1, Germany Hungary Ireland Israel Italy Kazakhstan Latvia Lithuania Moldova Netherlands, the , , Poland Portugal Serbia Slovakia Spain 1, , , Sweden Ukraine United States of America, the 2, , , , Yugoslavia All countries 11, , , , ,570.9 Source: Federal Customs Service of the Russian Federation. Customs Declaration / Transit Entry for participants of the foreign economic activity "Record of Cargo and Vehicle Transit across the Border. Index Import of Sausage Products" reflects the net amount of the goods, carried across the Russian border during the year. The measurement unit Net cargo - tons" is obtained from weighing the cargo at the border, exclusive of the vehicle and package weight. Unit of account: all enterprises engaged in foreign economic activities in Russia.

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