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Cocoa driving Russian drinks market

25-Jun-2003

Earlier this week we reported on the state of play in the Russian cocoa market and the likely knock-on effect on the confectionery sector, according to a report from analysts Market Advice.The consultancy also looked at the market for cocoa drinks as part of its analysis, and found that this market too has radically altered over the years.

While production of such drinks began in earnest after the Second World War, the boom period was really the late 1980s, when sales of both imported and domestically produced cocoa powder drinks began to expand.

As with so many food products which were produced under the Soviet era the domestically produced cocoa drinks were often of poor quality and difficult to dissolve in water, and little seems to have changed since then, according to Market Advice.

Krasny Octyabr and Rot Front, the two largest cocoa processors in Russia, are also the largest producers of cocoa powder drinks, but neither company has been able to promote sustained demand for the product and production often includes large breaks during periods of low demand.

Ready-made hot chocolate products, made with cocoa butter, are all but unheard of in Russia, the report suggests, because demand for cocoa drinks as a whole is low and hot chocolate is simply too expensive for most consumers.

A handful of restaurants in Moscow and Saint Petersburg do serve this type of hot chocolate, but their offer is limited to individual orders and there are no significant imports of these products to speak of.

There is more of a market for western-style soluble drinks, with companies such as Nestlé, Kruger and Nutrexpa all beginning to export to Russia in the 1990s. Nestlé dominated the market, accounting for 50-70 per cent of sales, with Kruger and Nutrexpa together accounting for almost all other sales. But Russian manufacturers have now begun to enter this market too, although domestic producers' share of soluble cocoa drinks of this sort is just 8 per cent.

Nestlé-owned Rossiya has been making Nesquick powdered drinks since 1998, and Nestlé has invested more than $16 million in the plant. Nesquick is said to be drunk by 30-35 per cent of Russian consumers, according to market Advice, and volumes this year are expected to increase by 10-15 per cent as the brand continues to grow in popularity, helped by the Russian authorities' decision to allow the brand to be sold in schools.

For more information about Market Advice reports, contact katrin@market-advice.ru .

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