What people love pasta for? For easy cooking, peculiar taste and wide opportunities to variegate it in combination with other products, for diversity of types and sophisticated shapes. Meanwhile manufacturers keep inventing new pasta varieties to please consumers.

Pasta is a product of everyday demand; consumers of this product category in Russia are 94% of population older 18 years. The average per capita consumption of pasta is 7.2kg – 7.8kg annually. 4.2% decline of demand in 2007 was followed by gradual increase, so in 2010 consumption rate reached 7.8kg per person annually despite recession after effects like decrease of effective demand and despite bad crop of grain caused by drought of summer 2010. However, peculiarities of pasta market – first of all low elasticity of demand – provided stability and predictability of production and sales in 2011.

MARKET SIZE AND SEGMENTS
In 2010 Russian pasta market saw 1.8% year-to-year growth in volume. In 2011 the market demonstrated 0.8% year-to-year decline in volume, and, according to "Intesco Research Group's" estimations, can reach 1120.1 thousand tons in volume by the beginning of 2012.

In 2010 domestic products constituted 94.2% of pasta market volume with import providing unimpressive 5.8%. During 2007-2010 share of import on Russian pasta market was declining being driven mainly by growing domestic production. This trend continued in 2011: according to preliminary estimations, import saw 1.2% year-to-year decline of market share down to 4.6% while share of domestic products on Russian pasta market increased to constitute 95.4% in volume.

The group of most important foreign suppliers of pasta to Russia includes Italy, Vietnam, China, Germany, Republic of Korea, Lithuania, Ukraine, Kazakhstan, Brazil and Czechia. Pasta import to Russia is mainly driven by three countries: Italy with 55% of import, Vietnam – 16%, China – 9%.

It is anticipated that import declining trend may reverse since July 2012 as Russia becomes full WTO member: in the context of declining import tariffs and changing consumer preferences share of imported pasta will gradually increase.

Russian pasta market splits into segments according to pasta kinds, groups, grades, package technologies, price and production technologies. Market offers wide diversity of pasta products. Each grade of pasta splits into four shape types: tubular shapes, decorative shapes, long noodles (spaghetti type) and ribbon-cut noodles. Each shape type splits into subtypes according to length, width and diameter. In 2011 the largest pasta category – 27.8% of market volume – was decorative shapes. Vermicelli constituted 23% of total market volume, elbows – 17%, macaroni – 7%, minute pasta – 6%, penne – 5% and noodles – 4%.

In 2010 pasta retail sales increased by 8% in value and reached RUR 88 billion. The average annual growth of pasta sales during 2007-2010 constituted 22% in value. In 2011 performance of pasta market significantly improved in the context of stabilizing demand. In Q1-Q3 2011 pasta sales accounted for RUR 69.7 billion which means 13% period-to-period increase; in absolute terms pasta sales increased by RUR 8.1 billion. Analysis of retail sales' dynamics revealed distinct seasonality during the review period. Maximum demand and sales were observed during Q4 every year. Some decline of sales was quite typical for Q1; it was followed by insignificant increase during Q2 and new decline in Q3. In general this pattern corresponds to annual production dynamics.

PASTA PRODUCTION
Domestic production of pasta in January-November 2011 had little difference from production during the same period a year before. During 2007-2010 Russian pasta production demonstrated relative stability. In 2010 production volume increased insignificantly – by 0.7%. According to preliminary estimations, in 2011 total production volume of pasta in Russia reaches 1083 thousand tons with about 1.9% year-to-year decline.

Pasta is manufactured in every of 8 Federal Districts of Russia. Most important supplying regions in 2011 were Central, Ural, Siberian and Privolzhsky Federal Districts. Central FD provided more than one third of domestic pasta production – 38%. Ural FD had 24% of domestic production volume, Siberian FD – 14.4% and Privolzhsky FD – 12.3%. In general the named three Federal Districts provided about 89% of domestic pasta production in Russia. North Caucasian Federal District provided over 6% of domestic production volume, Northwest FD – 2.6%, Southern FD – 1.8%, Far Eastern FD – 0.8%.

In terms of federal subjects domestic production distributes the following way. According to preliminary estimations, the largest share in domestic pasta production in 2011 – 22.1% of total production volume – was again provided by Chelyabinsk Region. Significant shares were controlled by Altai Territory – 11.1%, and Moscow region – 10%. Moscow and Stavropol Territory provided 5.5% of domestic pasta production volume each, Lipetsk Region – 5.4%.

Currently top three manufacturers of pasta market control one third of total domestic production in volume. The group of leading players of Russian pasta market includes "Makfa" LLC with 17% of domestic production volume, "InfoLink" with 10%, "Soyuzpisheprom" with 9% and "Ekoofis" GK with 6%.

PRICE DYNAMICS
In 2011 manufacturer prices on Russian pasta market demonstrated some growth. In January-October the average manufacturer price for pasta products was RUR 19.3 thousand/ton which was by 16% or RUR 2.6 thousand/ton higher than during the same period a year before.

Comparison of the average manufacturer prices in different segments of pasta market in 2011 revealed that vermicelli was the most expensive pasta category – 21,872 RUR/ton; this was by 23.9% higher than the average manufacturer price for decorative shaped pasta (17,658 RUR/ton) and by 17.9% more expensive than elbows (18,549 RUR/ton). The average manufacturer price for macaroni was 21,496 RUR/ton, by 1.7% cheaper than vermicelli.

The average retail price for pasta increased by 16.34 RUR/kg in four years, from 29.345 RUR/kg in 2007 to 45.69 RUR/kg in 2010. The average retail price for pasta in January-October 2011 showed almost no difference from the average prices registered during the same periods in 2009 and 2010 and constituted during the said periods 45-46 RUR/kg. The average annual increase of retail price constituted 17%. In 2011 the trend of retail price grows continued. During H1 2011 retail prices for pasta were gradually increasing and grew by 1.6 RUR/kg in the period from January to May.

DEMAND AND CONSUMER PREFERENCES
Decline of effective demand for pasta started to slow down since mid 2010. However demand was still shifting to cheaper pasta. Besides, during post recession recovery Russian consumers were still preferring grocery shopping in discounters or other stores offering better prices; the trend of reduced purchase frequency or volume also continued. Pasta as a product of daily demand was affected by these trends insignificantly.

In 2011 pasta consumption frequency in Russia practically didn't change: 40% of population consumed pasta 2-3 times a week, 34% – once a week, 12% – once in 2 weeks. Daily or almost daily consumption of pasta is reported by 7% of Russians, once per month – by 4%, and 1% of Russians ate pasta rarer than once per month.

Most popular pasta type is long noodles (spaghetti, vermicelli) – 76.3% of Russians prefer them. Curled and twisted pasta like egg noodles, spirals and fusilli is preferred by 65% of consumers. Hollow pasta with elbows as the most popular variety is chosen by 35.7% of consumers. Stuffed pasta enjoys popularity of just 1% of Russian consumers.

Most important choice factors applied by Russian consumers to pasta are affordable price and high quality – respectively 44% and 36% of respondents answered so. Personal gustatory preferences are important to 34% of respondents. Manufacturer and advice of friends/relatives are important choice factors for 13% and 8% of consumers respectively. Popular brand attracts 5% of respondents; new brand and country of origin are important choice factors of 1% of respondents each.

EXPORT POSSIBILITIES
Russian export of pasta was declining during in 2009 and 2010 – respectively by 18.2% and 9.3%. In 2010 Russia exported 49.9 thousand tons of pasta. In 2011 export saw 11.7% year-to-year decline in volume, down to 43.6 thousand tons.

Major destination countries of Russian pasta are Ukraine, Kazakhstan, Uzbekistan, Azerbaijan, Latvia, Lithuania, Estonia, USA, Greece and some other countries. More than half of Russian pasta export goes to Ukraine, Kazakhstan and Uzbekistan.

Entrance of Russia to WTO and thus planned gradual reduction of import tariffs on food products will have little impact on demand, production and sales of pasta, unlike other food categories. Consumer preferences for certain pasta types and certain consumption volumes are well-set, meanwhile change of consumer preferences and behavior requires not just a long time, but also significantly better taste of imported products and affordable prices. Application of import quota to pasta and possible increase of offer of imported pasta does not guarantee boom of imported pasta consumption and decline of domestic production. However, acceleration of competition and better export possibilities for Russian manufacturers are expected consequences of Russia's entrance to WTO.

Detailed analysis of Russian pasta market right before Russia's entrance to WTO is presented in "Intesco Research Group's" report "Pasta Market. Current Situation and Future Performance".

Research of the Company "Intesco Research Group"