In Russia, Fazer is active primarily in the bakery business, which accounts for the greater part of the Group’s operations in the country. Fazer runs five production facilities in Russia and also engages in confectionery sales. The company operates in the market under the Fazer and Hlebny Dom umbrella brands.
In 2013, Fazer retained its leading position in the bread market, and developed its presence in the added value segment. The company has large shares in the consolidated St Petersburg and fragmented Moscow markets.
“Russia’s overall bread market is showing only moderate growth. However, consumers are increasingly interested in high quality bread. In addition, the presence of modern retailers is growing, thus introducing a wider selection of bakery products to consumers. These trends are fuelling growth in the market,” explains Christoph Vitzthum, Fazer Group’s President and CEO.
Moscow – a strategic growth market
Increasing Fazer’s presence in Moscow is a vital part of Fazer’s strategy. At 0.5 per cent, the city’s unemployment rate is the lowest in all of Europe. The average per capita income is 127 per cent higher than in the rest of Russia, and inhabitants numbered 12 million in 2013. Moscow’s daily population, which includes commuters, totalled 20 million.
Strong performance despite challenges
Fazer’s bakery business in Russia fared well despite significant challenges during the year. Production volume declined slightly in the industry and volatility in flour prices paired with the need to keep prices low in the traditional and social bread segments threatened the financial stability of Fazer’s production units. The above-mentioned segments account for about 40 per cent of the country’s total bread market.
Expenses increased further as a result of inflation in the costs of utilities run by national monopolies, especially gas suppliers.
The number of private labels in Russia is increasing, especially in the traditional bread and frozen product categories. Nevertheless, demand for value added, fresh baked bread is growing. Sales in the segment grew by 11 per cent compared to 2012. In Moscow, bakery sales through local retailers increased by 32 per cent from 2012 levels.
In 2013, Fazer sold 59 per cent more bake-off products in terms of volume compared to the previous year, amounting to a 67 per cent increase in value.
In confectionery, Fazer’s sales attained double-digit growth from 2012 levels.
Production facilities operated by Fazer in Russia continued to distinguish themselves through manufacturing excellence during the year. Fazer was recertified with new certifications in 2013, namely, ISO 9001 for quality management and ISO 22000 and FSSC 22000, which deal with food safety. The certifications are objective evidence of the organisation's ability to consistently produce safe, high-quality products.
In addition, Fazer received an award of distinction from IQNet, an international certification network, during the year. At the IQNet international forum, Fazer, along with a select number of Russian companies, was recognised for its commitment to quality.
“Alongside Finland and Sweden, Russia is an important centre for product development and R&D know-how for Fazer,” Christoph Vitzthum states.
Enhancements to production operations in 2013 included the installation of a new oven at the Smolenskaya bakery in St Petersburg, which considerably increases production capacity.