Russia's seafood market gearing up to make another big leap: MARKET

According to Federal Statistic Service, the circulation of retail trade in Russia in 2006 amounted to 8 627.5 billion rubles, that is 13 % more then in 2005. On the average, the share of foodstuffs was 45 % and nonfoods contributed 65 %. According to the estimates of Norge-FISH analysts, in 2006average retail sales of fish products in Russia were about 300 billion rubles.

According to ‘MOSINFORM', the commodity circulation in Moscow in 2006 can exceed 1 800 billion rubles (according to the estimates of Norge-FISH analysts, about 65 billion rubles have been contributed by market circulation of fish products). According to the results of 10 months, in 2006 the volume of commodity circulation in Moscow hit 1 452 billion rubles marking a growth of 6.9 % in comparison with the same period of the previous year. During the 10 months the level of real incomes of Moscowers increased by 10% to become the reason of the increase of the commodity circulation. It is also noteworthy that in 2005 Moscow citizens spent about 48% of cash assets on food, including high quality food rich in calories and vitamins and the results of the 10 months of 2006 raised this share by 1.5 - 2%.

Moscow contributes 22% of the circulation of Russia's retail trade including all markets and all types of shops. About 4% of the circulation of retail trade is in St. Petersburg. So the two largest cities account for more then a fourth part of the entire retail trade of the country.  Its general volume in 2006 reached $317 billion increasing during the year by 28%, says the analyst of the investment company ‘PROSPECT' O.Samarets. So the circulation of retail trade in Russia reached almost one third of GNP. For comparison, in China the retail circulation contributes 40% of the gross domestic product.

A fifth part of the entire retail in Russia is generated by its markets - wholesale food markets and clothing markets, this part during the last year or two decreasing slightly, says Natalya Zagvozdina, the analyst of the investment company ‘RENAISSANCE-CAPITAL'. According to her, another 15% of the nation's retail comes from small kiosks and pavilions, which will normally be subdivided by experts into a separate group.  In other words, the share of markets and kiosks amounts to 35% of the entire retail. Its largest segment - 45% - is contributed by independent shops near the house which don't belong to any of the existing chains while holding a share of 20 % of the Russian retail market.

During the period from 2004 to 2006 the increase of wholesale and retail trade was driven by a number of objective and human factors:

• Increase of the segment of frozen products in the food market structure from 12 % in 2000 to 20% in 2005. For comparison, in the USA the segment of frozen products makes up 71% of the food market. That is why the potential of development of the Russian market of frozen foods is very high.
• Increase of the number of permanent consumers of fresh-frozen foods to 110-120 million people (60% of the population in Russia).
• Fast rise in Moscow and the surrounding region of domestic and European retail chains and distributorships, the retail foods trade growing at a rate of more than 20% year-on-year on the average.
• Increase of average wages in Russia by 26 % or from 8299 rubles in 2005 to 10405 rubles in 2006.
• Qualitative and quantitative twofold increase of the consumer basket.
• Purchasing power based on the average per capita cash income has reached 120 kg of round fish (without delicatessen).

On the retail market in Russia (especially in the central part of the country) during the last few years a trend has been emerging to increasingly consume  fish products in processed forms such as fillets, smoked, salted, marinated and canned fish. With the increase of wellbeing and improvement of the consumer basket, there has been a rise of production and consumption of chilled and freshfrozen products in excess of 30% per a year (in 2000 it was only 15% per a year) but the greatest boost is forecasted especially in the consumption of value-added products.  The average weight of various items in retail sales for cold and hot smoked fish is estimated at 13%, dried or dry cured fish at 3%, beer snacks at 6%, lightly salted fish at 9%.

Within the retail sales the fresh and chilled fish occupies 4% while freshfrozen fish and shellfish/mollusks hold around 29% of which crabs and shrimps account for 20%.

The canned fish market accounts for up to 20% of the retails sales. This segment is special in the sense that some of the products are manufactured by foreign canneries also from Russian-caught fish under respective contracts with Russian companies.

Now all supermarkets will normally have an in-house processing division and that is why salads, minced fish and preparations occupy about 8-10% in the sales.

AVERAGE SALES STRUCTURE OF A Moscow-based supermarket chain (Area 500-700 SQUARE METRES., AVERAGE CHEQUE 5-10 $):

As for the rating in the sales structure (in kilos), shrimps occupy 37.5%, herring 12.7%, squid - 6.6%, salmon - 6.4%, crabs - 5.8%, trout - 4.5%, mackerel- 2.9%, redfish- 2%, sturgeon - 2%, pink salmon- 1.6%.

The average margins and share in the total sales ( mark-up in % /share in the total sales volume (kilos) in %) in supermarket chains have been calculated at 33% on 100% volume of which shellfish/mollusks called in Russia sea products (shrimps, squid, mussels and crabs) have a ratio of 30-40% / 20-25%.  The margins/volume share for Clupeidae (herring, Baltic herring, sprats and anchovy) have been found to amount to 25-30% / 14-15%, for sturgeons (sturgeon, beluga, stellate sturgeon) 30-35% / 2-3%, for salmonids ( North Atlantic salmon, trout, chum salmon, etc.) -25-30% / 20-25%, for Coregonus whitefishes (omul, muksun, white-fish)- 20-25% / 1-2%, Cyprinidae (roach, bream, tench, carp, silver carp)- 20% / 5-10%, for Gadidae (cod, Alaska pollock, Wachna cod, hake, haddock, blue whiting , saithe)- 20-25% / 10-15%, Percidae ( horse mackerel, scad, perch, pike perch, mackerel) -20%/12-15%, for flatfishes (halibut, flounder) and for Scombridae ( mackerel, tunas)  - 30%/3-5%.

The general feeling is that overall results of 2006 have been good for Russia. The rate of economy growth has not decelerated while the inflation decreased from 10.9% in 2005 to 9%.

In 2006 the prices on meat and poultry grew by 5.9% versus 18.6% in 2005 while fish and shellfish/mollusks appreciated by 7.8% (in 2005 the increase was 12.7%).

In the turnover structure of the retail chains the share of fish production averages at about 15% and in Russia's retail sales of food it ranges from 12% to 15%. 

The retailers prefer to buy fresh frozen fish due to lower costs of storing. Besides, to keep a stock of live fish will require special and rather expensive equipment.

As to product forms, the retailers will prefer to purchase whole round fish, fillets and HGT fish.

In 2006, according to Moscow department of food stocks, the wholesale turnover of foods in Moscow reached 10 million metric tons per year displaying a growth of 5% as compared with 2005. According to expert estimates, the share of fish production in the above total figure amounts to at least 3-5% or 300 000-500 000 metric tons. The Russian wholesalers have found out that the retail outlets have the greatest demand for herring with 27%, Alaska pollock with 26%, mackerel with 18% and salmon/ trout with 15% followed by halibut, flounder, pink salmon, haddock and cod.

In 2006 the capacity of the Russian seafood market increased by 12-15% on the average while Moscow's seafood market capacity surged by 53% year-on-year. According to Moscow statistics bureau the consumption of seafood by Moscovites grew from 110230 tonnes to 167900 tonnes, the absolute rise hitting 57 700 tons of fish products.

The fastest rate of consumption growth is observed in shellfish/mollusks, fish fillets, smoked and dry-cured fish. At the same time the average per capita consumption of fish and fish products by Russians is twice lower than the volume of consumed meat products while, on the whole, exceeding the consumption of poultry, pork and beef. (For reader's reference: in 2006 Moscovites consumed 802 000 tonnes of meat products marking a growth of 1.25 times in comparison with 2005).

In the retail sales structure fresh frozen fish prevails with 35% of the sales. In 2006 also popular with Russian consumers were shellfish/mollusks, salted herring, chilled salmon/trout occupying 16%, 15% and 9% correspondingly. In the end of the most popular fish production list the fish fillets follow with 11% of consumption. The least consumed items include smoked loins, dried/dry cured fish and caviar.

In the Russian fish market live fish occupies 10%, chilled fish 15% and fresh frozen 75%. Live fish is regarded the most valuable, but due to the peculiarities of storing and maintenance it could be seen on sale mainly at supermarkets.

The chilled fish also has high value. The gutted fish packed in boxes with ice can be stored up to 10-12 days. Mainly such fish comes as domestic product or is delivered to Russia from Norway, Finland, Denmark and France. Actually such fish does not have high rates of sales with the main customers including restaurants and sushi-bars (HoReCa). Nevertheless, Norge-Fish analysts expect a growth of chilled fish consumers because this product preserves much more useful biological substances than the frozen one and this could be an important factor at a moment of growing health awareness.

There are also economic reasons to project such growth. Right now on the Russian fish market the prices on chilled salmon are higher than on the frozen one. This is caused by the specific conditions of transporting, maintenance and storing. When the situation becomes more stable, the prices will decrease and the sales of chilled fish will rise. Today the prices for chilled and frozen fish are equal only in those companies that are shipping a single fish item from abroad by trucks. The companies that are shipping chilled fish by air naturally have higher prices for the item.

The fresh frozen fish occupies about 75% in the entire fish consumption. The main fish exporters to Russia are Norway, Chile, Mauritania, Great Britain and Iceland with China and Vietnam quickly increasing their supplies.

The structure of consumption and preferences of the population depends strictly on the rate of the household income. Thus, the frozen fish is popular among all Russian consumers, but within them the people with monthly incomes less than 10000-15000 rubles prefer the fish of the medium price range such as cod and Alaska pollock. In the families where incomes are higher, the assortment of consumed fish becomes wider and more expensive fish such as trout and salmon display a rising occurrence in the purchased goods.

Usually the fish products are purchased at the so-called wholesale markets and chain stores that are popular among customers with both low and high incomes.

The comparison of statistic volumes of fish production output and foreign trade figures with estimates of consumption has led Fish-Norge analysts to a conclusion that in some segments of the fish market the statistically available resources are smaller than the market capacity. These segments primarily include such popular items as salted herring, shellfish/mollusks and fish fillets. It is worthwhile mentioning that the above products are very much dependent on import supplies.