TBY talks to two executives in the dairy sector on the position of their products in the market, consumption habits, and the future of the industry.
How would you assess the size of your production in the dairy sector?
AIDA SAPARGAZINOVA The milk and dairy products market is one of the most important segments of the country’s food industry and constitutes 16% of the food basket. Milk and dairy products have a huge impact on health and are a historical part of the Kazakhstani diet, thus creating a certain market capacity. At the same time, consumption and production increases about 9% in Kazakhstan every year. The Kazakhstani people prefer domestic dairy products over those imported from Russia. Despite expert forecasts that Kazakhstan’s dairy producers will be unable to withstand the onslaught of cheaper Russian products, domestic products are nevertheless still a priority despite the earlier concerns that the Customs Union could ruin the domestic market. Therefore, the main objective of our company is the stable development of dairy production and the establishment of a continuous supply of products made from natural ingredients. FoodMaster is the market leader in the main categories of dairy products, and we intend to further strengthen its market position through continuous innovations in manufacturing, quality products, and impeccable service.
DAVID MANZINI Consumers in Kazakhstan are consuming 3 kilograms of modern dairy yogurt per year, compared to Europe, where consumers purchase 28 kilograms. There are two explanations for this: one is education and the other is price. Modern yogurt is 1.5-2 times more expensive. The main reason that processed yogurt is more expensive is because of the raw material, milk. The market is scarce and difficult in Kazakhstan. The price of 1 liter of milk is almost the same price as a liter of gasoline. This forces us to have a very expensive finished product to absorb the cost of the raw material. We conducted some tests to identify the elasticity of consumption if the price was reduced. By reducing the price 20%, we discovered that production could be doubled to meet demand. Kazakhstanis want to eat yogurt and more dairy products; the problem is how we can make it affordable. The local constraints are the lack of milk. We have to work on the fat and protein content of the milk. It remains a big challenge to expand the scale of production in Kazakhstan.
What issues need to be addressed to realize Kazakhstan’s full agriculture potential?
Some problems, such as raw material shortages and low quality, result in high production costs and reduced production competitiveness, as well as in reduced opportunities for business development. Raw material shortages are exacerbated by seasonal fluctuations, when in winter there is even less material, and the cost is higher. When material shortages occur, companies are forced to outsource part of their production from other countries. This results in price distortions, and the price of milk in Kazakhstan is higher than member countries of the Customs Union and in Europe. Subsidies are needed for raw milk production, especially with regard to small farms and homesteads, and, certainly, for milk processors.
How do you present yogurt to the market in terms of fitting it into daily eating habits?
DM Each brand should be established with a certain “moment of consumption.” Danactive and Activia are our premiere products. Danactive is designed to boost the immune system in the morning before work or the beginning of activity. We will promote it is a supplement. Activia, on the other hand, is marketed toward women. Women love Activia because it facilitates digestion, thereby reducing weight and bloating. It has enjoyed tremendous success in other countries with both men and women. If you eat and you sit down, you feel the bloating effect. With Activia, digestion is facilitated, thereby removing the bloating feeling. Rastishka yogurt is a product we have promoted as a dessert for children for any meal or snack time. It can cover any moment of consumption. From a brand perspective, we have to work on establishing this. There is a new specific moment of consumption that we are planning to launch in 2012. The life exapectancy of a Kazakhstani is 30% to 40% lower than in Western Europe, and if you observe the physique of men here, you can see that they are overweight, which increases the risk of heart attacks and other cardiac problems. There is a discussion that dairy products extend life expectancy. It is included in our corporate social responsibility program to raise awareness of these issues.
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