Page 51 - bneMag bne_December 2020_20201201

bne December 2020 Eastern Europe I 51
same time good for you,” Shifrina told bne IntelliNews in a video interview from her home in Moscow.
The business has grown strongly from the start, as contrary to the Russian sterotype, Russians are very concerned with the quality of their food, putting a premium on “natural” that comes from generations of kitchen gardens at the ubiquitous dacha, where every family took pride in the quality of the tomatoes, potatoes and fruit they grew on their allotment.
The coronacrisis crisis has been a boom for BioFoodLabs, which pushed sales volumes up by 40%-45% month on month over the summer, according to Shifrina.
“People want food that supports the immune system and we can legally put on our packaging that our products are “healthy”, as they contain no sugar or preservatives, but they do contain a lot of vitamins,” says Shifrina.
BioFoodLabs has moved on from just making healthy snack bars and now has 113 stock keeping units (SKUs), as products are called in the fast moving consumer good (FMCG) world. That gives the company some real clout with the supermarket chains.
“If we only had five SKUs then the supermarket would not deal with us directly and would tell us to go via a distributor. But that eats up 15%-30% of your margin,” says Shifrina. “We have from the beginning wanted to work directly with the retailers as a strategic decision.”
This relationship is coming into its own as BioFoodLabs works with all the biggest players in organised retail, probably one of the most advanced and sophisticated parts of the Russian economy, including market leaders X5 Retail Group, which owns a variety
of leading supermarkets, and its rival Magnit. Only these two companies span all of Russia’s 11 time zones and reach most of the 148mn strong population,
a market that is half again bigger than Germany’s, itself the largest consumer market in the EU.
And as bne IntelliNews has reported, Russian retail is going through its
own parallel revolution, driven by digitisation that has also been catalysed by the coronavirus (COVID-19) pandemic. Sales in the food sector
in general have been booming at the biggest companies, not falling, even if the overall retail sector turnover has been contracting.
Normally the supermarket agrees with a company such as BioFoodLabs to offer a proportion of the company’s products at a discount in order to build up the sales volume, as the supermarket is
as interested in boosting sales of the products on its shelves as the producer.
“The supermarkets cancelled all the discounts. The products were selling so well that there was no need to discount it to get people to try it. The demand for healthy food was so high that customers were buying them on the strength of that promise alone,” says Shifrina.
Distribution and Logistics
BioFoodLabs' business has of course been hurt by the lockdown that started in May. Just under a third of its products were sold through cafes and kiosks, most of which were closed for months in the middle of this year, but Shifrina says that the boost in supermarket sales and growing online orders more than offset the sales fall in cafes. Moreover, BioFoodLabs has been tapping the
new retail distribution channel, the
appearance and rapid growth of hard discounters.
BioFoodLabs is already in talks with Fix Price, one of the fastest growing of these hard discounters, that bne IntelliNews recently profiled. As these stores only sell goods that cost less than RUB199 ($2.30) and include staples such as pasta and flour, the Bite snack bars are a perfect addition to the discounter's “impulse buy” model of boosting sales.
But working with the big Russian retail chains is the real “not meat” and potatoes of BioFoodLabs’ business.
“Just Pyaterochka [the discount supermarket chain arms of the X5 retail Group] has 8,000 stores across the whole country and Magnit has another 9,000,” says Shifrina. “Half our product is sold in the two biggest markets of Moscow and St Petersburg and the
rest is sold everywhere else, with the 11 millionki, the cities with over one million population, being the most important.”
The supermarkets make distribution easy. BioFoodLabs’ production facility is based just outside Moscow in the Moscow Oblast and has more than tripled in size from its original 1,000 square metres to 3,000 sqm now, with another 2,000 sqm of storage space. All the company has to do is deliver its finished products to one of the many distribution centres run by the
www.bne.eu