Own sales outlet

Источник: The DairyNews
Is it profitable for farmers to have their own processing? There is no clear answer to this question, despite the serious differences between the businesses of production and processing of agricultural raw materials, we have a lot of examples of successful combination of both in one company. Another area – retail industry – radically differs from them. Is it profitable for a dairy supplier to have its own trade network? The DairyNews tried to find out.
 Access point to the consumer

According to INFOLine, in 2017, the retail trade turnover in Russia showed an increase in physical terms by 1.3% after two years of decline (-4.6% in 2016 and -10% in 2015), amounting to 29813.3 billion rubles. According to official forecasts of the Ministry of economic development, the subsequent growth of retail and trade associations in 2018 in physical terms will be by 2.9%, and in 2019-2020 – by 2.7% and 2.5%, respectively. Thus, even by 2020, according to the expectations of the Russian Government, retail trade turnover will not reach the pre-crisis level.

Analysts say that retail trade turnover in the Food segment in 2017 showed an increase in physical terms by 1.1% to 14435.8 billion rubles. The indicators are significant and is there any place for companies working "from the field to the counter"? There is an opinion that successful experience is only an exception, proving the rule and it can be successful for agricultural producers only in the local market.

Conflicts of trade networks and manufacturers in recent years, including due to the inability to secure access to a wide shelf, gave rise to local networks from food suppliers; dairy companies are not an exception.

Successful experience and NOT very successful

The trade network "Miratorg" is a brand retail chain of the agroindustrial holding "Miratorg", founded in 2010. Today it includes 52 stores, which are located in 7 regions of the country. The company operates in several formats: supermarket, hypermarket and butcher shop. However, the size and success in meat production did not guarantee an excellent implementation of the idea of its own network.

The first outlets of "Miratorg" appeared in 2010, and two years later the holding announced its intention to expand the network to 500 stores, but by the beginning of 2014 there were opened only 90 of them. After that, the company closed at least 50 unprofitable stores in locations with low attendance or high rent. In the middle of 2015 they started the re-conception of the network which resulted in decreasing of the average size of stores by 30-40% and the range was optimized. In 2016, there were reports that the company intends to expand the network in Moscow, in 2018 the holding opened its own online store.

JSC "Ruzskoe moloko" has its own stores in Moscow region and in Moscow. Currently, the company is considering changes in the formats of its own outlets in the capital and sells about 3-5% of its products on its sites.

As reported in the holding, today there are 14 brand outlets / shops "Ruzskoe moloko", 7 of which are located in Ruza district. The company actively supports cooperation with large trade networks and does not abandon its own retail.

In August of this year, it became known that the agricultural holding "Lukoz", one of the largest producers of goat milk in the country, launched a program for the development of franchise stores "Syrnaya Lavka". For five years under a sign it is planned to open about hundred outlets, including in Moscow and Moscow region. Under the sign it is planned to create a network of specialized stores of dairy products and cheese made of cow, goat and sheep milk. The project is being developed by JSC "Sernurskiy cheese plant" from Mari El Republic, a part of the holding "Lukoz".

Eight cheese shops “Syrnaya Lavka” have already been opened in Samara, Kazan, Yoshkar-Ola, Cheboksary, Odintsovo, St. Petersburg and Nizhny Novgorod. Six of them are working on a franchise, specified at JSC "Sernurskiy cheese plant". The volume of investment in the opening of one store is estimated at 700-900 thousand rubles, lump-sum payment - 100 thousand rubles, marketing fee - 10 thousand rubles per month, says the description of the franchise, which was studied by "Kommersant".

Own network of the largest producers of milk "Agrokomplex named after N. Tkachev" is widely developed. The entire corporate network is located in Krasnodar region and exceeds 2 thousand outlets.

In addition, the company cooperates with a number of Federal networks.

In Sverdlovsk region, Talitsky dairy plant announced the opening of its own sales outlets. Currently, the company plans to open 5 brand stores.  The goal, as stressed at the plant, is to increase brand recognition, due to the fact that not the entire range of the enterprise is presented at Federal trade networks.

The Ural city dairy plant is another leader in milk and food in Sverdlovsk region. The company's own network is represented by mobile kiosks.

Market participants agree that the creation of own network is beneficial to local producers to provide maximum access to the consumer. At these sites companies are able not only to sell products, but also to promote them in close connection with the buyer.

Opinions

Anna Boyko, Deputy General Director for communications of JSC "Ruzskoe Moloko"

DN: How is the trade network of the agricultural holding developing today? How many outlets work and what share of sales accounts for your own network?

- The trade network of the agricultural holding is currently in the stage of developing a new strategy. We realized that the shops that work well in Ruza district, work worse in the same format in Moscow. And for Muscovites – a more demanding audience - you need to create something more interesting. For now, we just offer our products at a stable and fairly reasonable price, and our sales outlets always have the entire range (that is not true for chain stores) – so our customers can always find any product at the usual good price. In addition, our stores have a system of discount cards, which gives advantages to regular customers.

Today there are 14 sales outlets / shops "Ruzskoe moloko", 7 of which are located in Ruza district. The share of sales of Ruza dairy products through brand networks is about 3-5%.

DN: How was it decided to develop own trade network?

- We produce a fairly wide range of products – more than 35 items, and often received feedback from consumers who could not find a particular product in the chain and retail stores in Moscow. So it was decided to expand the brand retail from one store at the dairy plant to more.

DN: In your opinion, what problems does a manufacturer face when forming its own sales network?

- Of course, the problem number one is competition. Large chain stores offer a wide range of products and for many people it is more convenient to do shopping in one place.

In specialized shops the range is limited and even at good sales it is practically not possible to pay back the rent in the center of Moscow. Therefore, it is necessary to develop brand retail in accordance with a certain concept and expand the range, thereby attracting a buyer who appreciates it and wants to buy a quality product. People are used to coming to the store and having the opportunity to buy all the products from milk to shampoo, but also vegetables, meat and fish. That's the problem.

Also, you need to attract your consumer, to inform the consumer about the existence of these stores, so that he learned about them and began to visit them regularly. As well as to interest those who never tried or looked for our dairy products.

Of course, there are still problems with logistics – in brand stores products should always be delivered on time and in the best possible way, as well as in the full range – otherwise in the eyes of consumers the store loses its value. There is such a moment that, entering the brand outlet, buyers often want "today's" product, which leads to a return of the products that are not sold on their first day. In general, there are a lot of nuances, and this idea is not as easy as it seems at first glance.

DN: Is it profitable for the manufacturer to have its own sales outlets?

- If you develop a network taking into account modern trends, invest in advertising points - it can be profitable. But this is a separate area, which is not easy to deal with - therefore, in practice, this "profitability" can be questioned.

Yuri Aronov, the founder of a network "Zorka and Milka"

In my opinion, farmers do not need to create their own trade network. First of all, the farmer must be strong in the production of products and not in the sale. These are different business processes. The fact is that the retail market is highly competitive and the presence of such competition obliges any retailer to have certain professional competencies. Not every farmer will be able to integrate deeply and will be less effective than the retailer and will be inferior in the competition.

Retail has quite serious investments and it is not always necessary for the agricultural producer, because at the same time this can affect investments in production.

Not every manufacturer can make the whole range of products of the best taste and quality, we note that some make delicious “ryazhenka” and sour cream, but not cheese but they try to sell this cheese. They have their own retail, but they do not put on the shelf a product of competitors, they put their cheese, which is not very successful. And buyers will turn away from this manufacturer; they will go where they can buy everything they need. Production does not always come from demand; it comes from its own needs. There are products that can be produced for example, due to the resulting whey or cream and it makes manufacturers to expand the range in the area in which they are not professional.

It is worth remembering that retail is an independent unit.

We deal with products from small regional production, which are not represented in large networks. We are against the fact that the same brands are represented in the trade networks. Each region has its own interesting producers.

A lot of interesting manufacturers work in Kaluga and Tver regions. Orientation to local production strongly distinguishes us from large networks which are focused on work through wholesale and distribution centers and on products with a long shelf life.

What we do is anti - globalist work, we don't work with farmers. Knowing the market of Moscow and Moscow region, I can say that farmers today are something like hype. In Moscow their products are sold by LavkaLavka.

I am against farming as it is today. There are examples when a huge Soviet-era plant begins to produce "farm" products, which is nonsense by itself. The way it happens in the Moscow market has also nothing to do with farming. People do not understand food production and do not realize that in order to put the product on the shelf it must be grown in appropriate conditions and processed in accordance with sanitary standards. While today, farmers often do not have a normal processing plant, equipment for delivery, because there is not enough competence, strength and finance.

Ilya Bondarev, Director of the UrGMK-Agro

- Non-stationary trade is organized within the UGMK-Agro. They are mobile kiosks that can be easily moved, our products are distinguished by the logo. Profitability of non-stationary trade is estimated by the expert, but as far as I understand, such format gradually becomes obsolete. By and large, production volumes there are insignificant in spite of the fact that such trade includes more than 30 objects. Retail and network trade prevail in the scale of sales, but non-stationary trade allows us as producers to carry out several important tasks: to establish feedback with the consumer and to test novelties.

Taras Kozhanov, Director of the Association of industrial goat breeding, Head of LLC “Lukoz Saba”

– We practice trading in two formats: "Syrnaya Lavka (cheese shop)" – for the consumer, who chooses the premium segment in terms of income, and buys not only food, but taste sensations. The second format is proprietary shops of CJSC "Sernurskiy cheese plant" of counter type near the house. They are much more simple and affordable.

At the time, we were very annoyed and upset that a wide range of our products cannot be presented in one place – that is how the idea of creating our own sales outlet occurred. We decided to try to develop sales in this format since March last year. It turned out good - even people from other cities come and are interested in franchises. Now we have seven sales outlets.

I cannot say that the creation of own trading network is associated with special problems. As in any business, there are difficulties of a general nature, the formation of online cards, loyalty programs, obtaining an alcohol license. In other words, it means hard work, which is different from work on the farm and at the plant.

Read full article in Russian on © DairyNews.ru  www.dairynews.ru/news/svoya-tochka.html

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