On the Street -- Kraft Seeks Growth Through Innovation
August 4/Business Monitor International Ltd. (BMI) -- Like a number of the world's largest food and drink companies, Kraft Foods sees Russia as a crucial long-term growth market. With an emphasis on innovation, it has announced plans to improve and renew its product ranges across the chocolate, biscuit and coffee segments. In BMI's opinion, the global downturn has served to elevate the importance of Russia to global giants like Kraft. A growth slowdown across a number of segments in Western Europe and North America has increased the allure of the high potential Russian market.
Kraft has a strong confectionery business in Russia, and with its planned upgrades in mind, it should be able to take advantage of BMI's forecast that through 2013 confectionery volume sales will increase by 9.3% to reach 2.2 million tons and value sales will increase by 14.3% to reach $5 billion.
Within the chocolate segment, Kraft plans to introduce a range of new products under its established Alpen Gold, Milka and Air brands. According to market research company ACNielsen, Alpen Gold is the most widely consumed chocolate brand in Russia, accounting for one in every six chocolates purchased. The new launches will bolster Kraft's market position and should increase its chances of capitalizing on BMI's forecast that, through 2013, chocolate sales will increase by 14.6% and reach $2.9 billion. Shifting to biscuits, Kraft is smartly trying to leverage the strength of its Alpen Gold brand to increase sales. It plans to transfer its Whimsy and Shokobarokko (produced by its Russian subsidiary Bolshevik) biscuit brands to the Alpen Label.
BMI notes that Russia is one of Kraft's fastest-growing coffee markets. Although tea comfortably surpasses coffee as the country's most widely consumed hot drink (in 2008 tea sales outperformed coffee sales by a ratio of over 1.6:1), the sheer size of the market makes it one of the world's largest coffee markets. Through 2013, coffee value sales are expected to increase by 16.6% and reach $1.9 billion. Looking past BMI's forecast period, there is significant long-term upside in coffee. Consumption has increased on the back of rising incomes and the evolvement of tastes and preferences aided no doubt by the increased advent of coffee shops across Russia's urban hubs in particular. Also note that per capita coffee consumption remains lower than a number of markets across Central and Eastern Europe, which is further evidence of untapped potential.
From the August 17, 2009, Prepared Foods E-dition