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AAK Insight Magazine nr 2 2016

Growth markets – a closer look Russia: Sanctions spur local production The past year in Russia saw a 13 percent 10 official inflation and a double-digit rouble devaluation. International sanctions have put investments on hold as focus has been on securing existing businesses rather than planning future expansions. The economic situation has weakened Russian consumers’ spending power while the embargo has opened up possibilities for local producers and non-EU countries. AAK’s General Manager in Russia, Vadim Dzyavoruk, explains how the enormous potential in a vast, growing market could be utilized. With an up-and-coming dairy industry, a bakery segment under constant development, and a well-established chocolate and confectionery industry, there is undeniably great potential in the Russian market for edible oil solutions.   The chocolate and confectionery industry in particular offers great growth opportunities despite the region’s current economic situation. The industry saw a 25 percent decline in 2015. Russian consumers’ purchasing power is under pressure which has resulted in an increased interest in mid- and lower-priced products.   “In a situation like this, consumers become more rational moving purchases towards less expensive candies and even biscuits”, says Vadim Dzyavoruk, General Manager AAK Russia. “Chocolate coated biscuits was actually the fastest- growing product group in 2015 with a 13 percent growth as it has become an affordable alternative to confectionery products.”   The confectionery industry, as well as the dairy and bakery industries, are driven by large multinational corporations and there is a great interest in becoming less dependent on imports and more focused on local production. Herein AAK sees important growth opportunities.   “Our customization plant in Saint Petersburg is very supportive of CBE projects”, says Vadim Dzyavoruk. “At AAK we want to increase the number of co-development projects focusing on solving problems concerning shelf life and quality, and we want to promote affordable solutions within CBE, CBR and filling fats to existing as well as to new customers.” Promising dairy market Despite Russia’s economic situation the dairy segment has shown some good development for a number of years. In 2015, the CAGR of the Russian dairy market was 3 percent.   Due to the import embargo, the Russian dairy market is currently driven by lowering costs and not by emphasizing health benefits. This is applicable especially for dairy fat alternative solutions to quark products, cheese products, sour cream, and non-dairy cream. It also applies to the Russian ice cream market, with an annual volume of approximately 350,000 MT, where 60 percent is produced with dairy fat alternatives.   “Due to all of this we run several projects for alternative solutions for ice cream”, says Vadim Dzyavoruk. “Co-development projects and joint trials with customers are scheduled in our pilot plants to deliver customized products for ice cream producers.”


AAK Insight Magazine nr 2 2016
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