With a production capacity of around 80 tonnes (t) per day or 30,000t per year, the company has estimated the facility should meet 30% of the demand for dried sausages in the Russian market. The investment cost of the project was RUB7 billion (€300m).
Elena Trifonova, a spokesperson for Cherkizovo, told GlobalMeatNews that the company hoped to target products from the new plant initially to Russian and CIS customers, with a plan to set up exports to the other countries in the future.
Cherkizovo already leads the dried sausage segment in Russia, and the new project would help to bolster the market, said Trifonova.
“We are expecting overall growth in the market, as dried sausages have become a more affordable product for our customers. Cherkizovo is the leader in dried sausages, as we are selling more than a third of all dried sausages produced [in Russia], and the project in Kashira, will enable us to … increase our market share,” Trifonova commented.
The company anticipated that releasing products at a more affordable price would enable it to drive up consumption of dried sausages in Russia.
Limited demand for meat deli
There are no official estimates on the sales of premium sausages in Russia over the past few years, but in general it is believed that the demand for this kind of product has been shrinking in the country, due to weak purchasing power among consumers.
“The launch of a new processing plant could increase the company’s capitalisation as another modern hi-tech asset in a highly vertically integrated structure, which provides cost savings throughout the production and supply chain. However, its payback period may be much longer than expected, due to huge capital investment and very limited market potential for its products,” Albert Davleyev, president of Russian consulting agency Agrifood Strategies, told GlobalMeatNews.
According to Davleyev, the plant’s core product – dried sausage – is a high-value item with a limited consumer base, as it is sold at prices which are prohibitive for the majority of the Russian population.
“Retail prices for such products sold under Cherkizovo brand vary from RUB1,000/kg to RUB1,500/kg (approximately €15-20/kg), while the average monthly salary in Russia is RUB30,000 and the average pension is RUB15,000. This puts dried and cured sausages into the delicatessen category, which has been shrinking in Russia for the past 10 years – and much more dramatically since the beginning of economic crisis and stagnation in 2014,” Davleyev said.
“This factor has forced many other major meat processors, like Ostankino or ABI Product, to focus on low-cost and cheaper emulsified products – bologna and frankfurters. Even the better-off consumers – middle and upper middle class – are becoming more and more price-sensitive, reducing purchases of delicatessen items or switching to less expensive products,” he added.
Last year Spain's Grupo Fuertes increased its stake in Cherkizovo to 8%, with a $27m investment.