‘The number of tenders for construction projects in the agro-industrial sector decreased by 11.5% compared to the same period in 2023, while the number of new investment projects in the food industry increased by 35%,’ adds Astafieva. ‘Only the ready-to-eat food market in Russia will grow by 38.8% and exceed RUB 1 trillion by the end of 2024, according to INFOLine analysts‘ forecast,’ adds Konstantin Derevskov, CEO of Quality Start (an integrator of digital solutions to ensure safety control of food production facilities). - In the first half of 2024, it already totalled RUB 435 billion, which is 29% more than in the same period last year’.

 

According to INFOLine, the volume of lending to the food industry in the first nine months of 2024 increased by 8.7%, to 1,281.4 billion rubles, compared to the same period last year, while in agriculture the figure increased by 4.3%, to 1,142.3 billion rubles, notes Ivan Fedyakov, CEO of the company. Demand for equipment supplies to the food industry has overtaken demand in the agricultural sector over the past year, notes Ekaterina Babayeva, executive director of Interagro.

Businesses are investing in the construction of new food production facilities, and the most popular areas, according to Astafieva, are fruit and vegetable processing (18.9% of all investment projects), oil and fat (14.4%), meat (10.8%), bakery and confectionery (10%), fish processing (8.1%), beverage production (7.9%), dairy products (6.3%) and semi-finished products (6%).

 

There is also noted investor interest in more niche stories, such as innovative production from plant-based ingredients, Derevskov adds. ‘The main trend is to produce cheap protein to feed everyone and balance the necessary energy value,’ he says.

Companies invest in the food industry to diversify their business (59.5% of projects), increase productivity (24.3% of projects) and expand production (16.2% of projects); most companies (66%) invest up to RUB 500 million in the construction of food production facilities, says Astafieva from TenderPro. The food industry in Russia is now experiencing a qualitative leap, says Babaeva of Interagro.
 

‘Based on the company's statistics, we can confidently say that applications for the production of Chips, potato and vegetable chips, and plant milk of various types have increased,’ she lists. Russian society is part of the global trend of changing food consumption patterns, and its basis is a shift in demand from buying fresh meat and vegetables towards semi-finished and ready meals, says Pavel Pavlov, Director of Strategic Development at Soyuzpromptitsa LLC, a leading expert at the Business Communications Laboratory of the National Research University Higher School of Economics.

‘First of all, this trend is strong in large cities,’ he explains. - For example, Moscow's food industry turnover may grow by more than 15% this year, and food clusters accounted for 40% of new investment projects in the Moscow region.’

 

From 2019 to 2024, the sales structure of, for example, the meat category in chain retail has changed significantly, Pavlov continues: the share of chilled semi-finished products decreased in volume by 10%, frozen - by 4%. ‘Growth occurred in the consumption of sausages (by 12%) and baby food (by 11%), which supports the conclusion that the consumption culture is changing towards cheaper and easier to prepare products,’ he believes.

The range of investments in food production projects is huge. ‘For example, butter production brings much higher profits than baking, but the entry threshold into the business is completely different: to buy a franchise bakery costs 2.5 million roubles, but a production line for unrefined sunflower oil to process 100 tonnes of seeds per day can cost 70-100 million roubles plus the cost of renting premises,’ Derevskov from Quality Start gives an example. According to him, provided that the plant is ready to give a stable quality and there are regular customers, for the constant operation of the oil production line, a week's supply of raw materials and deferred payment by the buyer for three to five working days are necessary, which at current prices is about 35 million rubles. The result is an enterprise with an entry threshold of about 150 million roubles (100-120 million roubles of investment and 30-40 million roubles of working capital), a start-up period of seven months to a year, a staff of up to 15 people, bringing in about 7 million roubles of profit every month at current prices.

 

The profitability of food projects is also diverse. In general, Rosstat estimates the index of food production at 12.24%, fruit and vegetable processing and canning - 18.15%, production of oils and fats - 13.27%, ice cream - 19.66%, waffles - 17.57%, sugar - 19.45%, baby and dietary food - 23.58%, pasta - 15.5%, tea and coffee - 16.05%.

An interesting trend in Russia has been own chain brands (CTM), which has caused many processors not to think about sales markets, but simply provide services for the production of this or that food product and already the customer puts his brand on the packaging and sells the product under his own brand, says Babaeva of Interagro. ‘Over the past two years, we have invested heavily in developing our production infrastructure, upgrading equipment and launching new technological lines in canning and making wet and dry pet food,’ says Levchenko. - In total, our investments will amount to about 1.5 billion roubles’.

 

In 2023, the total investment of Cherkizovo Group (ranked 57th in Forbes' ranking of the largest investors) was about 30 billion rubles, and at the end of the first nine months of 2024, capital expenditures totalled 25 billion rubles - 6 billion rubles more than in the same period last year, a representative of the group's press service told Forbes.

For consumers, however, this will result in a limited range of products, as in conditions of high consolidation business sees no point in ‘inventing’ new and better products, as well as a tangible impact on product prices.
 

The desire of large agribusiness players to enter related industries also has other disadvantages. Pavlov states: ‘The experience of large agricultural holdings in developing from scratch deep processing of poultry meat is still ambiguous. - For example, the deep processing plant built by a large federal turkey producer is currently less than half-loaded with orders, despite the fact that there is at least a 25 per cent shortage of turkey meat in the country. Other poultry producers developing their own plants and deep processing facilities are experiencing problems with consistency in product quality and sales.

The food industry, although it is a related industry to agriculture, has its own specifics, he says. Processors work with marketing, recipes and production technologies at a higher level than agricultural producers. The approach of buying existing food businesses by agrarians and integrating them into the existing management system, chosen, for example, by the largest producer of chicken meat, seems to be more effective than building new assets.