New economic conditions and their effect on consumer demand

Maria Bocharova, the first Vice-President of ECO-Culture holding, gave an interview to Agroinvestor magazine about the peculiarities of fruit and vegetable production in the new economic conditions. Her commentary was published in a review article dedicated to the analysis of the consumer market situation.

The report notes that such factors as lower consumer incomes, rising unemployment, and inflation are leading to an adjustment in demand for foodstuffs. In this regard, many sectors of the agricultural industry are now preparing to change production strategies to meet buyers’ capabilities. First and foremost, the expected income reduction will affect the consumption pattern of expensive products. At the same time, the share of expenditures on food will grow as a whole, yet this will happen due to the increasing consumer basket cost. The stable demand will be enjoyed only by the basic food products, with the share of other segments decreasing to a greater or lesser extent.

According to Maria Bocharova, all sectors of the Russian agribusiness have already witnessed a change in buyer activity. Right now, demand is concentrating on mass-produced products in the affordable price segment. The premium goods, meanwhile, are becoming less sought-after as the population follows a general trend toward more and more frugal spending.

ECO-Culture’s product line mainly features mass, socially important products, such as the round and plum-shaped red tomato. Today, it is still priced at an affordable level. The holding’s Vice-President also notes that ECO-Culture’s tomatoes are, indeed, a mass-consumed product. Surveys show, many families buy it twice a week on average, and this category has not seen a decrease in demand. When it comes to cherry tomatoes, there has been a certain decrease in sales. Still, such commodity positions occupy a relatively small share in the product portfolio of the holding’s greenhouse enterprises. More than that, since premium products are mainly focused on the higher-paying metropolitan markets, the situation with sales of greenhouse-grown vegetables can generally be called relatively stable.

The agricultural holding keeps a close eye on the market situation, with special attention to customer needs. Thus, the new-cycle production program is to be adjusted to meet the changes in consumer preferences.

Asked to comment on the opportunities to reduce production costs in the new economic conditions, Maria Bocharova, the first Vice-President of ECO-Culture, points out that the main expenditures in the greenhouse industry are energy resources and wages. These two are something you can’t save on, so you have to look for other ways to reduce production costs. For example, the company has developed a more cost-effective version of a cardboard box for transporting tomatoes in order to reduce packaging expenses. Unfortunately, the holding’s cost optimization reserves have now been practically exhausted.

What ECO-Culture, along with all the enterprises of the holding, expects is the continuation of comprehensive state support measures for producers, including preferential lending. After all, it is the systemic government efforts that enabled the industry to develop steadily in recent years, providing a significant contribution to the implementation of the Food Security Doctrine of the Russian Federation, as well as the program of accelerated import substitution.

For the full text of the article, please visit the Agroinvestor magazine’s website.