Sber predicts rise in candy and cookie production in Russia

Jan 14, 2022

According to SberCIB Investment Research forecasts, confectionery production in Russia will grow by 11%, from 4.04 million metric tons in 2021 to 4.47 million metric tons in 2026. Three-quarters of growth will come from increased exports, with higher domestic consumption making up the remaining quarter.

A rise in income will allow Russians to spend more on sweets, which currently account for less than 6% of spending on food.

Regression analysis shows that the turnover from trade in confectionery products is directly proportional to the income of the population: if income grows 1%, turnover in the segment increases by 0.9%. Sber's Center for Macroeconomic Research predicts that the population's income should grow by over 2% per year until 2026. Domestic consumption of confectionery products will increase by an average of 0.9% per year, reaching saturation in 2026. On average, Russians will consume 26.2 kg of confectionery products per capita per year in 2026, compared to 24.5 kg in 2020. At the same time, they are more likely to purchase expensive products, including chocolate.

China and Persian Gulf states are potential areas for building exports of sweets. The primary export markets for Russian confectioners are currently Kazakhstan (24%), Belarus (14%), and China (12%). Kazakhstan and Belarus are already oversaturated with Russian confectionery products. Russian confectionery products account for 75% of import volume in Kazakhstan and 65% in Belarus, but only 10% in China and less than 5% in Persian Gulf countries. In 2021, export of Russian confectionery products increased by 20% to 815,000 metric tons, totaling USD 1.7 bn, a record in recent history. Analysts believe that exports of confectionery products will grow by an average of 5% per year and will reach 1 million tons in volume terms and USD 2.3 bn in monetary terms by 2026.

Yaroslav Lisovolik, head of SberCIB Investment Research:

“Russia's advantages as an exporter are its well-established logistics of supplies to China and its own ample supply of raw materials: sugar, flour, and oil. The development of a domestic brand of confectionery products that is well-recognized worldwide would improve the position of Russian producers on the international market.”

Import of confectionery products is low compared to production, making up 9% (340,000 metric tons, worth USD 1.1 bn) of the total volume in 2020. In 2014-2015, imports of confectionery products decreased sharply due to a decline in consumption, though they are recovering now and should amount to 388,000 metric tons of products, worth USD 1.3 bn, as of the end of 2021.

Over a ten-year period, gross revenue from the sale of confectionery products in Russia went up by 10% per year on average, going from RUB 277 bn in 2011 to RUB 613 bn in 2020. Analysts expect market volume to grow by almost a quarter by the end of 2021 due to increased production and rising prices for confectionery products.