Razguliay cereal products play the quality card

Related tags Flour Wheat Cereal

Russian food group Razguliay has launched a new range of
grain-based products under the Divnitsa brand, the first stage of a
strategy aimed at allowing the agricultural processor to compete
for the first time with value-added imported brands. Angela
Drujinina reports.

The first product to be launched under the Divnitsa brand will be wheat flour, due on the market very soon, but the company is planning to roll out 25-30 different Divnitsa products, including other kinds of flour and flour mixes as well as cereals, millet, rice and flakes.

They will be the first cereal products made the company to be sold directly to consumers, rather than to industrial bakeries or middlemen who package and sell the flour through the retail trade.

The aim is to take a 10-12 per cent share of the local Moscow market for flour and cereals (estimated at around 200,000-250,000 tons a year) within 12 months, and, ultimately, to compete with the premium, foreign brands which dominate the top end of the market.

According to Institute for Agricultural Market Studies (IKAR), there are currently 25 different brands of flour available on the Moscow market. But the researchers said that the premium end of the market, where Divnitsa is positioned, is a tough place to do business, because those consumers who can afford to buy flour at RUR44 per kilogram are also those who tend not to bake, preferring instead to buy ready-to-eat products.

"Russian grain and flour buyers face an ongoing problem: not many producers can offer them products of consistent quality,"​ Nikita Volkov, the marketing manager of Razguliay's grain division, told CEE-foodindustry.com​. "The flour is often packed not by producers but by retailers, and this often means it is not up to the standards demanded by consumers. We guarantee that our cereals, and in particular our flour, are consistently of the highest quality, and go well beyond the quality standards required by the authorities."

According to Volkov, Divnitsa is aiming to offer the best quality:price ratio on the market. "In other words, we want our customers to benefit from a higher quality flour for the same price as lower quality brands produced by other companies."

But ensuring this consistent quality will not come cheaply. The company said that the initial investment in the development and promotion of the Divnitsa brand was $500,000, of which the company had already spent $100,000-150,000 on market research.

Earlier investments included the purchase of new production technology for a number of the company's plants. A new line making cereal-based products for children has been installed at the Poltava bakery, and the company is about to begin producing other breakfast cereals and muesli products at its Bugulminksky plant No.1 and Hercules plants in the Voronezh district, again requirement additional investment.

IKAR estimates the size of the Russian market for packaged cereals at $570 million, while the bulk cereals market is worth $380 million and value-added cereals market (such as ready-to-eat products or muesli) is worth $120 million.

Valentin Pertsia, director of the BrandAid agency, which specialises in brand creation and promotion, said he believed that Razguliay would need to spend substantially more than $500,000 to get Divnitsa onto the market successfully, especially as the company has little experience in the branded goods sector.

Razguliay is predominantly a processor of basic agricultural crops and ingredients, including grains and sugar, where it controls 4.4 per cent and 12.3 per cent of the respective markets.

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