Overview of Russian fish market unveiling dynamic positive trends

Russian Sea Group of Companies engaged in fish import and processing has come forward with projection that the volume of the Russian seafood market will reach 5-6 billion USD in the current year 2007. The figure includes 2.5 billion USD for ready-to-eat value-added products such as marinated herring (750 million USD), delicatessen items from Atlantic salmon, Pacific salmon and trout (400 million USD) and salmon caviar (180 million USD), according to Esmerk.

Through the group's competitors such as Santa Bremor Company, have made a more modest forecast, they still expect an impressive market growth of 20-25% per year.

Though disagreeing in their forecasts of the market growth figures, a great many of Russia's large market suppliers have been reporting a rising trend of fish quality and quantity on the domestic market, according to Gastronomia I Bakaleya magazine. The tendency has been also spurred up by processors' diversification of the product range thanks to the use of up-to-date equipment.

Vesna

The consumer demand has been rising while some Russian processors have been hit by problems connected with the lack of raw fish. In particular, general manager of Vesna factory Marina Tanina quoted by the magazine says that this year the factory's raw fish suppliers from Astrakhan have been facing more serious problems as compared to previous years.

The shortage has been observed not only for expensive fish species (sturgeons), but also for cheap species such as vobla (Caspian roach), silver carp, etc. The reasons behind the shortage can be attributed mostly to worsening ecological situation and poaching.

The raw fish shortage is partly compensated by farmed products, but there is another problem of smaller size of farmed fish not always fitting for processing.

The most promising segments of the Russian fish market are those of balyk-style fish products (mostly large-size valuable fish species, smoked or dried), marinated fish and ready-to-eat fish. Balyk-style fish products have always enjoyed a strong demand and the trend is forecasted to persist.

The marinated fish market has been developing extremely dynamically with producers tending to experiment with new marinades and sauces and consumers welcoming those novelties.

Growth of consumer interest in ready-to-eat fish products and easy-to-cook frozen products has been observed not only in the fish sector, but in other sectors as well.

As for the fish market segments, the demand for frozen fish products for microwaves (fillets, fish with garnish, etc.) as well as for pastes, rolls, minces and fish cake pastes is forecasted to grow in the coming months, Marina Tanina surmised.

Developments on the Russian caviar market have been attracting much attention of analysts as the consumer demand for caviar has been rising while the supply of natural caviar has been decreasing and the trend has become a driving motive for processors to introduce a range of imitation products. Many companies produce analogues of sturgeon and salmon caviar from cheaper fish, for instance, analogue black caviar from pike. Such products are completely natural and have good taste resembling natural fish caviar. Anyway, market players say that sturgeon and salmon caviar will always be on the market either in their natural form or in the form of natural analogues.

Baltiiskaya Gildia

Andrey Shulepin (head of the sales department of Baltiiskaya Gildia Company) quoted by the magazine also thinks that at present the situation on the Russian fish market has been improving to stable. As for the canned fish segment, the current trends are aiming at improvement of the food quality and diversification of the product range, thus heading for increasing consumption of canned fish.

Attractive presentation of products to final consumers is believed to be one of the most promising means of boosting sales on the market. Consumers think it important that fish products, canned, marinated, filleted or easy-to-cook, should be high quality, conveniently packed and its cooking should not take much time.

Baltiiskaya Gildia reports a sales growth for ready-to-eat and canned products and the firm's spokesman Andrey Shulepin says that though the positive market trends have been growing more and more evident, the market segments still have to undergo changes in order to improve the current situation.

The most urgent problems of the fishery industry are connected with the so called seasonal character of fish catches. That peculiarity of the market supply results into large fluctuations of prices in the course of the year or even into a complete absence of the product on the market.

The second, but no less important category of problems covers issues connected with the technological process. At present, far from all the companies can satisfy consumers' requirements as to product quality and range. Though some plants have been investing into a complete refurbishment of their production facilities, many of them are still in a poor condition. The same situation has been observed onboard fishing vessels.

The domestic supply of raw fish harvested by the Russian fishermen has been not so good either except for catches from the Russian Far East Basin, Andrey Shulepin complained. Imported fish accounts for approximately 75% of all the raw fish delivered to Kaliningrad processors. In Murmansk the share of imported raw fish is lower at 50%. Caspian sprat seems to have completely vanished and the supply of freshwater fish is not large enough to provide full load of all the production facilities and there is no demand for large volumes of freshwater fish products. On the other hand, Russian consumers welcome new species never inhabiting the nation's lakes, rivers or seas and the consumers' growing wealth has been pushing the demand for imported canned fish, shellfish/mollusks and convenience products as well as for the so called exclusive items.

To crown that all, Andrey Shulepin has concluded the Russian fish market will develop towards further expansion of product range, quality improvement and enlargement of processing capacities which will inevitably lead to a rising share of the market segment.

DMP Holding

Vsevolod Ostrovlyansky, director of marketing of Moscow-based fishing and processing DMP Holding, as quoted by the magazine thinks that the share of fish and other aquatic products in Russia's consumer basket will continue growing year-on-year. The factors positively influencing the process are as follows:

• a huge potential of Russian aquatic stocks;
• formation of the middle class and growth of purchasing capacity;
• growth of technologies applied by processors;
• growing value of healthy food;
• government regulatory incentives increasing attractiveness of the domestic market for fish processing companies.

DMP Holding, which is engaged in production of snacks from pink salmon, flounder and smelt, is especially interested to form a niche market for its premium-class fish snacks made from the raw fish harvested in the Russian Far East. While the fish snacks market has been already formed and sales of the products will hardly rise to a great extent, the niche of premium-class fish snacks has been displaying the growth rates exceeding those in the market in general.

The holding has established direct connections with fish processing companies based in Sakhalin and Kamchatka. The volumes of shipments satisfy the holding's need with the product quality reported as fairly high.

One of the challenges for the holding is to find new options to expand the range of its premium-class snacks. At present the company has been facing a problem of sourcing yellowfin tuna. None of famous Russian suppliers can offer freshfrozen tuna and purchases of freshfrozen fish on the international market are complicated by various restrictions, Vsevolod Ostrovlyansky underlined.

Resta

Valery Kolikov, commercial director of Moscow-based fish processing company Resta, says, as quoted further by the magazine, that his firm is interested in dynamic developments of the national raw fish stocks. The quality of imported fish is usually higher than the quality of Russian fish and the local producers will be certainly happy to see that changing.

In the meantime, the current situation with the supplies of salmon species (chum, pink, coho, sockeye, etc.) has grown much better. The fishing companies based in the Russian Far East have been reporting good catches with the fish quality being fairly high.

However, as for supplies of herring fillets, especially Atlantic herring fillets, the Russian suppliers are much behind their foreign colleagues. Actually, the Russian fishermen have a lot to learn from foreign fishermen. For instance, the raw fish (Atlantic salmon, trout, etc.) shipped by the Norwegian companies is normally well-graded, finely packed and looks much better than the products originating from Russian suppliers. The thing is that foreign producers think about every detail to provide convenient storage and transportation of their products.

To turn the situation for the better, the authorities should carry out measures to encourage modernization of old and construction of new modern plants for primary processing in the vicinity of the fishing grounds, to commission up-to-date fishing and transport vessels, etc.

At the same time, the market analysts have seen certain improvements. More specifically, on the market of ready-to-eat fish products there are a lot of national private labels and the product quality is usually affordable. The market both of processed and freshfrozen fish has been growing and the product range has become considerably better. Kolikov thinks that the Russian population has been consuming more fish in general and the structure of consumed fish products has been enlarged. Nowadays retail shops offer a good range of frozen, chilled, canned and marinated fish and snacks, though the latter product categories are preferred mostly by young people. The segment of ready-to-eat fish products has started to develop with currently not yet strong demand forecasted to grow in a steady fashion.

Salmon caviar has been enjoying a strong demand on the Russian market. Sales of imported Atlantic salmon, trout, etc. (mostly from Norway and Chile) have also been on the rise.

Fish is rich in natural protein without any harmful cholesterol (or with its smallest content). Modern food technologies which have been actively used in meat processing with not always positive results for human health have not been widely practiced in the fish processing sector. Fish is not only a healthy product, but it is also perceived by the consumers as healthy and that is a very important instrument to boost sales. Besides, fish prices are slightly lower than meat prices. Those are good preconditions for stable development of the market segment, Kolikov said.

Moreprodukt

Artem Belikov, deputy logistics director of Moreprodukt Company, thinks as quoted by the report, that at the present moment the Russian fish market has become fairly stable. Garage-style salting units have practically vanished and each province has now got only several large fish factories meeting both national and international standards.

Large retail chains have also been playing a great role on the domestic market as they command producers as to fish quality, prices and design. In this connection, products in shatterpacks have been pressing bulk products from their first place on the retail market.

According to Artem Belikov, the most promising segments of the Russian market are marinated fish, shellfish/mollusks/seaweeds and snacks as well as delicatessen fish and caviar/roe. The above range is produced practically by every fish processing plant based in the Central Federal District of Russia and that can be attributed not only to the companies' wish to fill in all the niches on the retail market, but rather to their willingness to protect their business from seasonal fluctuations of the demand for fish products.

Medium-size and small processing plants have been facing a number of problems with the two main challenges as follows: shortage of raw fish stocks harvested by national fleets and inability to forecast inflation for associated goods such as packaging, spices, etc. Formation of fish prices is dependent not only on conditions of suppliers' contracts with the retail chains ruling that the product prices can be increased no more than two times a year, but also on inflation rates for coming six months and it is practically impossible to draw up a true forecast for those rates.

The situation on the market of Russian raw fish for the processing sector should be described as non-satisfactory as the supply to a great extent depends on the period of the year. The range of offered raw fish is limited only to herring, pink salmon and squid and the fish quality is not very high with all premium-class raw exported for processing beyond Russia.

In the coming years influence of large retail chains on the Russian fish market is expected to grow further. Moreover, the retail chains are keen to boost sales under own private labels.

It is difficult to forecast what will happen on the market when Russia joins the WTO and the Russian retailers will start offering cheap imported products. Probably, in the coming five years the fish range available on the Russian market will not change greatly and the annual growth of the sales volume will amount to 10-15%, Artem Belikov surmised.