Rostov-on-Don Vegetable Oil Market
Nowadays vegetable oil as a consumer product opens wide research horizons for marketers. Russians quite rapidly switch from animal fats to vegetable oils, and the "queen" of sales is 1-liter PET bottle of refined sunflower seed oil. In "blind" tests respondents most often cannot define oil brand by taste. Manufacturers offer consumers product in almost identical containers and practically of the same taste. Besides, oil brands do not differ in price as significantly as for instance butter brands. Thus, manufacturers can win the competition using mainly brand power and distribution.Rostov region is the largest Russian manufacturer of both oilseeds and oil and in this context research of its oil market is of special interest. This article presents results of research of retail market of vegetable oil of Rostov-on-Don. The survey was executed in 20032004 and in the first half of 2006. It included consumer poll (400 respondents in each wave of research) and also retail audit (150 retail outlets in each research wave).
The majority of respondents buys vegetable oil rather frequently. For instance, in the first half of 2006 82% of pollees purchased this product with the frequency of one to several times a month: 18% of this group made the purchase once a week, 31% 2 times per month, and 33% once a month. As compared to 2004 in the first half of 2006 the scheme of purchase frequency changed. Share of respondents buying this product once a week and 2 times per month increased and share of those buying oil once a month and rarer on the contrary reduced. It should also be mentioned that the group of irregular buyers purchasing vegetable oil from time to time enlarged from 5 to 9%.
Sunflower seed oil remains the most popular kind of vegetable oil, though its popularity is gradually contracting: in December 2003 this oil was purchased by 94% of pollees, in April 2004 by 90%, and in April 2006 already by 87%. Popularity of olive oil on the contrary steadily goes up: in 2003 share of its consumers constituted 4%, in 2004 7%, and in 2006 this index reached 10%.
The majority of pollees 83% buys one bottle of oil at a time. The most popular container size is 1 liter it is also preferred by 83% of respondents. Group of consumers preferring 2 liter and larger containers constituted 7% and 6% of them chooses economical 5-liter bottles.
58% of respondents buys vegetable oil at the price of Rb31 to Rb40 per liter. And at the price of Rb2130 and Rb4150 per liter this product is purchased respectively by 24 and 11% of pollees. Dynamics of spending on vegetable oil evidences that price segmenting of consumers has started. In other words, buyers started to differentiate this product in pricing terms, and consumers are falling into groups of those preferring cheaper or more expensive oil. In this situation manufacturers also can make choice whether to offer low-cost product or produce value-added products and increase brand price.
Vegetable oil of domestic origin is in greatest demand it is chosen by 96% of pollees; 54% of this group prefers federal brands and 42% local. It should be mentioned that federal brands are displacing local operators in consumers mind: in 2003 national brands were preferred by 31% of respondents and in 2006 already by 54%.
During the recent years the most popular brand among Rostov consumers was "Zolotaya Semechka (Golden Seed)" ("Zolotaya Semechka" LLC, Rostov-on-Don, belonging to Holding "Yug Rusi (South of Russia)") in April 2006 this brand was preferred by 29% of respondents. The leader was followed by "Avedov" ("MZhK "Krasnodarsky" (Krasnodar Fat and Oil Plant)" OJSC, Krasnodar) and "Oleina" ("Bunge CIS" LLC, Moscow) each of these brands gathered 12% of answers. The brands "Otmennoe (Delicious)" ("Rabochi (Worker)" CJSC, Rostov-on-Don) and "Zlato (Gold)" ("Labinsky MEZ (Oil Processing Plant)" LLC, Krasnodar region, belonging to GK (Group of Companies) "Rusagro") were chosen respectively by 10 and 8% of pollees.
During the past 3 years positions of such brands as "Zolotaya Semechka", "Otmennoe" and "Zlato" practically didnt change, fluctuations ranged between 2 and 5%. In 2004 indices of these brands lowered a little as compared to 2003, but in 2006 grew again and almost returned to the level of 2003. On the contrary, popularity of the brands "Avedov" and "Oleina" increased significantly. In 2003 "Avedov" was preferred by 7% of respondents, in 2004 by 11%, and in 2006 by 12%. "Oleina" in 2003 was in demand of 8% of pollees, in 2004 this index went down to 5% and in 2006 reached 12%.
In April 2006 sunflower seed oil constituted 72% of retail offer and distribution of it was 100%. During the last 3 years share of this oil kind in retail offer of vegetable oil was steadily reducing: from 81% in 2003 to 77% in 2004 and then to 72% in 2006. Contraction of the share of sunflower seed oil happened on the background of persistent growth of olive oil share from 6% in 2003 to 16% in 2006. Share of corn oil during the review period went from 9% in 2003 down to 8% in 2006. In the first half of 2006 distribution of olive and corn oil came respectively to 49 and 33%. Noteworthy, various oil mixes like sunflower plus olive or sunflower plus colza have rather wide distribution (20%) but small share in retail offer (3%).
As for the type of processing, non-refined oil is far behind its more "pure" competitors: the biggest share of vegetable oil in Rostov-on-Don retail offer belongs to refined-deodorized, refined and deodorized oil respectively 36, 28 and 23 % of retail offer.
The most popular type of container for vegetable oil is PET bottle 89% of retail offer falls on it. Glass bottles and tin cans are used mostly for olive oil share of oil in these container types constituted correspondingly 10 and 1% of retail offer. The most typical container size is 1 and 0.5 liter respectively 75 and 9%.
In Rostov retail products of federal and local manufacturers dominate in April 2006 shares of them constituted correspondingly 46 and 40% of retail offer. Foreign products cover 13% of product range and mainly this is olive oil.
The oil made by "Zolotaya Semechka" (TM "Zolotaya Semechka") was presented best of all in Rostov retail in 2006. Distribution of products of this manufacturer constituted 81% and share in retail offer was 17%. Then go products of "Krasnodarsky MZhK" (TM "Avedov") with distribution and share in retail offer respectively 77% and 20%, "Rabochi" (TM "Otmennoe") 67 and 8%, and also "Donskoy Yantar (Don Amber)" LLC (Rostov-on-Don, TM "Donskoy Yantar") 50 and 8%. "Bunge CIS" (TM "Ideal", "Oleina")*, having increased trade mark portfolio, practically did not increase distribution which came to about 50%. Third in importance group of manufacturers unites "Labinsky MEZ" (TM "Zlato"), "APIK "Efko" OJSC (Moscow, TM "Altero", "Sloboda") and "Valuiski Kombinat Rastitelnykh Masel (Valuisk Oil Processing Facility)" OJSC (Belgorod region, TM "Milora"). Another brand of Valuiski KRM oil "Razdolye (Happy Ground)" is not presented in Rostov retail.
Among suppliers of olive oil we should mention "Agro Sevilla Aceitunas, S.C.A." (Spain, OI "Coopoliva") with distribution 16% and share of retail offer 5%.
During the last three years products of such manufacturers as "Zolotaya Semechka", "Rabochi" and "Efko" demonstrated slow but steady growth of distribution by 23% annually. Better dynamics was displayed by Krasnodarsky MZhK and Valuiski KRM in 2006 as compared to 2003 distribution of these manufacturers increased respectively by 29 and 22%. Share in retail offer of these manufacturers also went up correspondingly 10 and 1% in 2003 and 20 and 4% in 2006. Yet the most impressive progress was observed with indices of "Donskoy Yantar": in 2003 distribution of oil of this producer constituted 26%, in 2004 36%, and in 2006 already 50%.
Such manufacturers as "Labinsky MEZ" ("Rusagro") and PG (Industrial Group) "Heinz-Petrosoyuz" showed negative dynamics. Drop of distribution of "Zlato" was probably determined by change of owner this brand formerly owned by GK "Russkaya Bakaleya (Russian Grocery)" was acquired by "Rusagro" in the middle of 2005. Distribution of "Zlato" went from 62% in 2003 down to 43% in 2006, and share in retail offer respectively from 9 to 4%. Even more impressive drop is observed with indices of "Heinz-Petrosoyuz" distribution reduced from 43% in 2003 to 1% in 2006, and share in retail offer from 10 to 0.06%.
In April 2006 the leaders of retail market of vegetable oil were the brands "Zolotaya Semechka" with distribution 80% and share of retail offer 16%, "Avedov" respectively with 76 and 19%, "Otmennoe" with 67 and 8%, and "Donskoy Yantar" with 50 and 8%. Indices of the leading brands practically coincide with indices of the leading manufacturers during all the review period. This means that manufacturers focus their efforts on promotion of one leading brand.
During the past 3 years price per liter of vegetable oil of Russian and local Rostov manufacturers suffered practically no changes and constituted in 2006 respectively Rb43 and Rb39. In the context of increasing welfare of population and topical trend of healthy way of life foreign manufacturers started to supply to Russia more expensive and purer kinds of olive oil.
* Until 2006 trade mark "Ideal" belonged to "Molinos Rio de la Plata S.A." (Argentina). Besides in 2006 "Bunge CIS" LLC purchased 25% of "APIK "Efko" OJSC (Moscow, TM "Altero", "Sloboda").
The article was published in Russian Food&Drinks Market magazine in July 2006 and can be found in on-line archive: http://www.foodmarket.spb.ru/eng/archive.php?year=2006&number=44&article=441