That sausage was meat: why processors ask you to raise product prices

TASS, August 17. The growth of prices for meat products, which requests the government of the national Union of meat processors (NSM), which is inevitable due to the cost of raw materials and rising costs in the industry due to ASF outbreaks and changes in the exchange rate. However, respondents argue TASS market participants, the growth of prices for finished products if you will, is small, and the enterprise of a full cycle and does not need.

Earlier it was reported that NSM asked the Vice-Prime Minister of Russia Alexey Gordeev to recommend retailers to pass on higher prices for the products of processed meat, including sausages and semi-finished products, and with the request to adjust the pricing of raw meat.

Raise the price and produce a quality product

Meat processing companies are forced to raise prices for their products because of the soaring prices of raw materials they already operate virtually without profit, says the General Director GK “T” (one of the largest meat processors in the Rostov region, part of the group Agrokom – approx. TASS) Alexander Remeta.

“We are members of the NSM, the problem, in fact, raised by us and other members of the Union, applies to all the “butchers” due to the fact that about 80% of the cost in the sausage – meat, and the meat key positions rose by more than 50%. We cannot raise prices because we’re all working on the negative margin, and it is deadly for business,” said Remeta.

According to him, in the whole industry we can talk about the price increase of 5-8%. “It is better to raise the price and make a quality product than trying to make it cheaper and make clear that”, – said the Agency interlocutor.

With the rising prices of meat raw materials face and the enterprises, procuring it from farmers. So, according to manufacturer’s premium sausages from the Penza region “House of meat art “sun” Sergei Solntsev, the recent purchase prices have risen about 10%. “Accordingly, we were forced to raise prices on the final product,” – said the source TASS.

However, according to him, consumer demand is not significantly affected. “We operate in the premium segment, where the sausages are from 1200 rubles per kg, and reduction of sales in connection with the increase in meat prices did not notice,” added Solntsev.

The full cycle as a competitive advantage

According to General Director of the Yoshkar-Ola meat processing plant (the largest in the Mari El Republic meat processing plant) Ramil Nigmatzyanov, the increase in meat prices is due to several factors: the outbreaks of ASF, import restrictions, and changes in exchange rates.

“We are in a situation this very much helps that we have our own raw materials and breeding Shojjbulakskoe. As for the other items, such as beef – the situation is very serious. In the structure of production costs cost of raw materials is about 75%. Today, those processors who buy raw materials from local or foreign suppliers, are working at a loss, hoping that will pay for them in the future,” said Nigmatzyanov TASS.

The Director of one of the largest producers of pork and meat products in Siberia – the company “Omsk Bacon” Alexander Kivich also believes that in a situation of a sharp rise in prices for raw materials competitive advantage receive a vertically integrated company.

“We survive for one simple reason that we prepare our own feed, produce wheat, barley, the main feed for our animals. A feed mill that understands that in the integrated scheme should work quite well, and we pass the feed with a margin of 1-2%, not more. Yes, indeed, the efficiency of sausage production in this case we have a slightly lower but still make money,” explained Kivich.

The CEO of the company “Pskovagroinvest” (carries out the full cycle of production from growing crops, fodder production, livestock production to finished products) Irina Tolmacheva and not predicts the growth of prices for finished products.

“For large meat processing plants have their own systems, so they don’t buy [raw material] and use their. In Pskov region the large processors of this approach. We also buy only grain, as the primary raw material, and then produce everything ourselves, so the growth of prices for finished products on the shelf should not be. The final product is already expensive enough for buyers,” – said the Agency interlocutor.

Precipitous growth will not be

However, the increase in prices for meat products in retail chains will not guarantee revenue growth of meat processors, according to the manufacturers. “Processors in any case, this increase will not see. We monitored the market of our products in Moscow and the Moscow region and saw that in some outlets the margin on our products reaches 75% of the wholesale price, so how would the manufacturer do not treat the issue of raising prices, he will not receive this additional benefit. We regulate prices only at the last moment, when the rising cost of raw materials or energy pushing for it,” said TASS, the Vice-President of group of companies “Vladimir standard” Paul Antes.

He also said that the price increase in the commercial networks holding back the competition between them. “The Federal network will never increase prices to look stupid. They compete with each other, and that they ensure that consumers receive products, and any at the normal price,” – said the Ants.

Prerequisites to a precipitous increase in the prices of meat products did not see the producers in the Kaliningrad region – despite the fact that ASF was abolished the number of pigs in the region’s largest pig-breeding farm “pravdinskiy vinoproizvodstvo” (included in “RBPI Group”), which has led to an increase in pork prices in early August.

“We do not expect a global increase of market prices in Kaliningrad, because the market in any case is part of the economy and of the Russian Federation and the European economy,” said Agency Vice-President of the regional Association of mycoplasmatales (unites more than 10 major manufacturers, including Miratorg, “Almak” and “Baltprommyaso”) Margaret Sarapi.

She also drew attention to the special situation of the region surrounded by EU countries. “There are no reasons to expect significant increase in prices – as soon as there on the market are any failures, they are very quickly filled with some alternatives,” she said.

The state is better to intervene

The producers differed in assessing the necessity of state influence on pricing in the meat industry. “In today’s model of economic development of Russia state intervention in tsenoobrazovanie unlikely,” says Sarabi. According to her, currently, pricing is affected by many factors, and regulation of prices by the state “need not”.

Total is the opinion of Remeta of Ledger “T”. “In any case, if the state is involved in this process, it would be at least more manageable,” said he TASS.

Agree with him the head of the group “Evrodon” (the largest Russian producer of turkeys and ducks), Vadim Vaneev.

“Gasregulating against the acts of the retailers now that network, to put it mildly, their lack of control do not see boundaries, it would be quite appropriate. Yeah, we saw what gasregulating in the Soviet Union. But given the situation, it is appropriate to introduce some kind of framework and some requirements from the state”, – he explained his position.