Russia is plagued by sausage problems again. The messages that the prices of this product could skyrocket triggered an enormous controversy, almost like in the USSR. Sausages are almost sacred for each Russian. There are many myths and concerns about them which only intensified in the recessionary market conditions.
The population of Primorsky Krai needs about 3 ths tonnes per month or 36 ths tonnes of sausages a year. In 2017, sausage production in Primorsky Krai was 38.2 ths t, rising by 8% in January — July 2018. In the last six years, 2014 was a record high year, when the domestic production volumes reached 46.5 ths t of sausages, and continued to fall to 42.1 ths t in 2015 and 41.3 in 2016.
The market was changing due to the reduction in household income and devaluation of the rouble. Domestic producers of meat strengthened their positions, and the production plants expanded their product range due to the budget items. Although Russian pork and beef push the imported meat aside, and the large meat processing companies have begun to rely on their own raw material base, the imported meat is still very much needed.
“Russian producers tend to increase their market share, however, the plants continue to buy meat from Brazil, Paraguay and Argentina because the quality of Russian raw meat is far from perfect,” said an anonymous representative of one of the largest meat processing companies in the region. “In the spring, I talked with the suppliers of Russian pork from Krasnodar Krai at “PRODEXPO”. This producer is very serious but frankly speaking, its products are much worse than the Brazilian ones. Russian producers often scrimp on feed, therefore Russian pork is filled with water, and even its taste characteristics are far worse than the taste of the imported meat. If you simply fry two pieces of meat in a frying pan, you will immediately feel the difference. Of course, you can produce sausages like the famous Chuck Wagon sausages, where the taste is formed by flavour additives, however, the quality of meat plays a critical role in production. We worked with 15 Russian suppliers and none of them managed to provide products similar to Argentinean or Paraguayan meat.”
“In order to eliminate their dependence on raw materials, the companies are forced to develop their own farms,” Roman Sankler, CEO of ООО “Ratimir” said. “Our choice is to build a vertically integrated holding company including the full production chain: from fodder growth to the sale of finished products. All large companies in the food industry grow according to this principle, because this way they achieve a higher profitability, reduce risks and get a perfect quality “from field to market”.
Since 2014, the prices of meat for Russian meat processors have been hitting record highs. The profits of companies fell when the exchange rate fluctuations destabilized the market. And neither the suppliers, nor the producers managed to adapt to the new challenges.
“In 2014, the prices of the imported meat skyrocketed due to the appreciation of the dollar. The price of meat rose from 200 to 380 roubles per kilogram, and it took a significant amount of time for the supply and demand to balance. Thus, Russian producers got a significant advantage, but the foreign suppliers quickly came to their senses and decreased the prices to competitive levels. Today we use both Russian and foreign meat. When the rouble’s exchange rate slightly decreased, the prices of poultry which our company buys from Russian producers skyrocketed. Companies use this situation to raise the prices. Russian pork is bad, and chicken meat is simply terrible. Moreover, poultry producers often inject huge amounts of pickle solution into fillets in order to increase the product weight with intramuscular injections,” the anonymous source said.
Meat producers regularly make sharp moves: several large meat processors in Russia, such as “Ostankino”, “Dymov” and “Prodo” announced a sharp increase in raw material purchase prices in August 2018. According to one of the market players, the price of pork shoulder rose by 53% to 267 roubles per 1 kg from January to August 2018. During the same period in 2017, the price had only risen by 17%. Another processor pointed out the fast increase in the prices of pork sides: by 23% until January 2018, while the price of bladed pork shoulder rose by 30%.
According to the meat processing companies, since 2008, the prices of raw meat rose by 69%, and the price of 1 kg of premium cooked sausage increased by 80%. There is a gap of 11%, so the other price components rise faster than the price of raw meat from which it has been produced.
All prices increased: from supplies to electricity. Today companies pay up to 8 roubles per kilowatt. The cost price of sausages rose together with the production and nonproduction costs, while the retailers keep the standard markup of 30–35%.
“The price of sausages increases approximately by 30% in stores. Retail chains like “Remy” use a smaller markup, stores like “Parus” use a higher markup, while in small shops and fairs the prices of sausages can be twice as high as in the manufacturer’s retail outlets,” an anonymous source said.
It is not unreasonable to assume that the demand for sausages has decreased due to the drop in household income. In 2014, when the rouble fell into a deep tailspin, retailers indeed pointed out that trend, but since then, “Doktorskaya” and “Syrokopchionaya” sausages strengthened their positions in the consumer basket, and the demand shifted towards more budget-oriented products.
“Today I can’t say that there is a drop in the sales or loss of quality. There are budget sausages in the market, and, of course, a product with the price of 150 roubles per kg can’t have meat in it, however, there is a stable demand for sausages. Moreover, there are more premium sausages in the market,” said Andrey Solonichenko, CEO of ООО “Shamsa-Market”.
“Krakovskaya”, “Slivochnaya S Syrom”, “Molochnaya”, “Doktorskaya” and “Pyatachok” are one of the bestselling sausages at the moment,” said Natalya Filippova, Stock Manager at “Tihookeanskaya Kompania — TK”. “Sausages remain a traditional product for our buyers and an indication of the family well-being. Despite the growth of the demand for budget products (100 roubles for 400 g), consumers seek delicious sausages not cheaper than 300–350 roubles per kilogram, and the supply in this price range is provided by a local producer who delivers 80% of all our products. The prices increased during the last year, of course, and we expect further rise due to the VAT increase. The raw material and package suppliers have already warned the producers about new prices, and they, in turn, (not all of them) notified us about the increase in prices by 5–7% in 2019.”
At the same time, other sources say that the retailers are currently fighting for the price range of 150–200 roubles per kg, including the producers from Moscow who successfully expand to the market of Primorsky Krai.
Sausage Scary Stories
“It’s not easy to find good sausages produced in Moscow. This is related to the specific nature of price formation in Central Russia, where producers have to pay huge amounts of money in order to be able to sell their products in large supermarkets. Colleagues say that those amounts are often 50% of the sausage cost price. The shelf presence and prompt product rotation cost huge amount of money. We don’t have things like that here. Coming to Primorsky Krai, experienced technologists say: “You have the most meaty formulations here.” Like in the famous song: “I will go to Primorsky Krai because sausages there are made of meat.” I personally never buy Moscow sausages (although there are some local producers who are not trustworthy, and I don’t buy their products as well), but Moscow producers often use hydrocolloids and other substitutes even in the production of premium segment sausages according to GOST (the use of soy protein is already outdated because today its presence is determined by a DNA test, and the producers risk getting involved in a scandal). In fact, GOST can be easily circumvented — producer submits the product for certification which conforms to all necessary requirements, pays the laboratory and after that sells sausages not according to GOST or technical regulations. Everything is easily sold and purchased, as usual,” an anonymous source commented.
“The sausage frauds” are regularly exposed in the news. In September 2018, it was reported that the Certificate of Conformity of a large sausage producer in Primorsky Krai would be terminated due to the composition counterfeit detected in two types of premium sausages. It was about chicken DNA which under no circumstances should be used in meat sausages.
Alexander Feigin, deputy director of ООО “Primorskiy Center of Certification” said: “Poultry doesn’t fall within meat regulations. Therefore, sausages made entirely of poultry are not considered meat sausages. The producer must indicate the product ingredients in the label, and all information about meat substitutes should be available to the consumers. There are meat, meat-containing and vegetable meat products. If the label says “vegetable meat”, it means that the meat content in the sausage may be 5%. The other ingredients are vegetables, flour, soy, various products containing collagen, dry milk. If the sausage doesn’t contain many fats, it is essentially dietic, i.e. it is more beneficial for people with specific health problems than premium sausages produced according to GOST.
People love scary stories, but I regularly visit meat processing plants, and all I can say is that sausages should not be “demonized”. Large producers usually use such raw materials as normal block meat, beef or pork which is usually imported, and sometimes poultry is added. The shape is maintained by using phosphates or other humectants, while brighter colour is achieved by using special colour fixatives. Depending on the technology, producers add, for example, lard or fat emulsion made of pig skin, salt, spices, butter. As you see, there are no scary things like cardboard or paper. If, however, foreign objects are detected in a sausage, they have gotten there accidentally.”
“I believe that consumers at least here, in Primorsky Krai, are fed up with cheap meat and want to buy good meat products,” an anonymous source said. “Of course, some producers focus on the reduction of prices, however, it refers more to Moscow producers. We are not afraid of the competition, although it definitely gets stronger. A powerful Western player will soon come to the sausage market in Primorsky Krai who intends to launch their own plant here. However, I don’t see this foreign producer as a threat because we are an advanced region in sausage production, and this is also noted by our colleagues from Germany and Austria who visit us. We will not back down.”
If the producers decide to cut back expenses, they do it not by using cardboard, experts say. However, retailers talk about a reduction of quality of a number of items and that some suppliers often try to change the production date. On the other hand, just like in the cheese segment, retailers say that there is a strong demand for high quality products, and the premium segment not only doesn’t decrease but even shows growth. It seems that consumers don’t want to eat “bad sausages” in these times of crisis.
Igor Konuhov, farmer: “Since 2014, the farmer products have become more demanded, and the local producers have increased their production not only in the cheese segment. There is a growth of demand for home-made farmer sausages. The production of this kind of sausages is not easy. First of all, you need high quality raw materials because the taste of sausages depends on them, which immediately excludes those companies with several thousands of animals where no one knows what their pigs and bulls are fed with, and where growth hormones are widely used. The only solution is to use the meat of animals grown in your own farm or to buy whole carcasses or half carcasses from trustworthy farmers. High quality sausages contain only soft meat (without any tendons and meat production waste), salt and spices.
On the other hand, you need advanced technologies. I lived in Europe for five years, in Hungary — one of the most sausage making countries in the world. I must say that although European producers are deservedly surrounded with some kind of an aura in the eyes of Russians, Russian sausages are none the worse. If everything is done properly, of course. Europe, however, has its traditions of domestic craft industry passed on from generation to generation for centuries, which we, unfortunately, have to restore. The same situation is with other products, like cheese for example.
One of the formulations that I use in production is pre-Soviet formulations, because in the Soviet era, the sausage industry was customized to the mass demand, and the producers began to produce sausages with poor quality. The equipment costs approximately 100 ths for a cutter (a meat grinding machine) and everything else. The production process is complicated at every stage: if you incorrectly prepared your natural or artificial casing when stuffing sausages, it tears apart, and the product should be stuffed again. There are sausages that need to be boiled. If they are prepared incorrectly, they burst during the boiling process and spread all over the container. The sausage may be too dry. We are facing a lot of challenges, and all mistakes should be ironed out in practice.”
Elena Burakova, assistant professor at the Food Production Institute of the Far-Eastern State Technical Fishery University: “In the Soviet Union, the quality of the raw meat for sausage production was different. The animals were fed differently because there weren’t so many food additives which are used today in cattle breeding.
In USSR, the cooked sausages were made of pork and beef. They also included dry milk, chicken eggs (or egg mixture). The modern producers continue to use these ingredients in their formulations. The modern formulations according to GOST are focused on the raw material base. They allow using compound mixtures of spices. In the Soviet era only single component spices were used, such as salt, sugar, etc.
Moreover, in the Soviet Union, the sausages were not divided into meat sausages and meat-containing products. Meat-containing products with meat ingredients from 5 to 60% inclusive emerged in the era of the new standards.
Regarding the dietology of the cooked sausages which existed back then and exist to this day, let’s discuss it in general terms. Producers, of course, widely use food additives, various spices and flavours in their sausages. The chemical industry doesn’t stand still, it always moves forward. There are many multifunctional additives: phosphates, carrageenans, additives for structure, colour, technological additives for the production of a specific product. Today there are many more different additives in sausages, including the traditional nitrite and phosphate, because it’s impossible to produce sausages without them. Moreover, various raw meat substitutes are used today, such as soy proteins and different emulsions. However, all ingredients must be specified on the label. There is a constant development of the industry, and we are also moving forward. I am not sure that there are people who produce meat products according to the Soviet GOST. Also, I don’t think that the modern consumers, who are used to different additives such as flavours and colouring agents, can’t truly appreciate the taste of Soviet sausages.”