Russians have been bingeing on health food in an effort to build up their immune systems in the hope of protecting themselves from the coronavirus (COVID-19).
That’s how
bne IntelliNews profiled Shifrina three years ago when BioFoodsLab was just getting going and within two years the Russian edition of
Today BioFoodLabs sells over 100 different products through most of the country’s leading supermarkets and is turning over
Shifrina says that BioFoodLabs has many years of strong growth left in it, but eventually her goal is to IPO the company. It is another example of the emergence of a light manufacturing industry in
Food sales in the time of corona
BioFoodLabs began by producing healthy snack bars. The idea came to her in the dining room at
“We were so busy that we had no time to eat, so we used to fill up on snack bars, but we didn't want those filled with sugar. We were looking for something that was quick and easy to eat, but at the same time good for you,” Shifrina told bne IntelliNews in a video interview from her home in
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 boon 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
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
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
The supermarkets make distribution easy. BioFoodLabs’ production facility is based just outside
Alternative meat and milk
Shifrina has been funding all this growth out of retained earnings and apart from a 14% stake she sold in 2017 to create some working capital as a buffer to the inevitable shocks an emerging market like
“The company’s turnover has grown to
Shifrina set up an R&D centre and hired technicians to develop new products in keeping with the company’s philosophy of producing extremely healthy food. The newest addition has been a line of “alternative milks” that confusingly don't contain any milk at all. The company has also started to get into yoghurts and snack bars that contain prebiotics that induce the growth or activity of beneficial micro-organisms and need to be kept on the cold shelves in the supermarket – in other words, the bars are fresh food rather than the dried food that the original snack bars were. The company’s next big thing will be “alternative meats,” which of course don't contain any meat either.
“Access to the cold shelves is a game-changer, as the foot traffic there is ten-times higher than elsewhere in the store,” says Shifrina. “If you think about it, what do you buy when you go to the store? You usually go there to get fresh foods, as you can buy dried foods much less often as you can keep them at home for longer.”
The alternative milk has been especially successful and BioFoodLabs offers a range of goods that include almond milk, walnut milk and coconut milk, which it has developed itself.
Some of inputs of these new products can be sourced in
“Another reason I don't like soya proteins is the pea proteins are much more tasty,” says Shifrina. “If you are making alternative meat then you add some meat aroma from our German partners – they make the best aromas in the world. We let my mother try and she loved it! She says she can’t tell the difference.”
Selling health foods to Russians, who are not famous for their good diets, is actually easier than it may first appear. Despite the dacha tradition, Shifrina says that as the middle class grows people are busier and spend less time growing their own food. During the 1990s half of all potatoes grown in
At the same time, Shifrina says market research shows there is a global trend towards vegetarianism, which is also happening in
“The new young generation don't want to eat meat. They worry about the environment and it is trendy. It’s the biggest trend in the world,” says Shifrina. “A study found that by 2035 half the world’s population will be vegetarian and the same thing is going on here in Russia.”
The taste is important, as people are not abandoning meat and dairy products, but adding alternative foods to their shopping baskets in addition to more traditional products simply because they like them, which come with the added advantage of being better for you. Tetrapak did a survey, which found that 60% of those customers that bought alternative milks also bought traditional milk as well.
“People buy the alternative products because they like them. They want to grow the range of food they buy,” says Shifrina.
The other part of the package is nutrition. Russians do have a bad diet even if they value natural foods and after the age of 45 Russian men have a 55% higher chance of falling prey to diabetes or cardiovascular disease, as they eat too much fat and sugar, says Shifrina. Another study found that 90% of Russian women are not getting enough protein and 85% take in less iron than they should. So BioFoodLabs has added these elements to their products that are popular with women. Likewise, the company is producing a snack bar aimed at children that is gluten- and sugar-free. These have been a big hit with mothers in the Scandinavian countries, where there is no similar product on the market.
Innovations like these, combined with the high quality and pleasant taste, plus the competitive advantages from the devalued ruble, mean that BioFoodLabs is already exporting 10% of its production to other nearby EU countries. Shifrina says the export part of the business is expected to continue growing steadily, but she is still busy building up the product lines and filling out the corners of the Russian market.
“When we launched we conceived of the Bite bars as a premium product, but we have found that they sell just as well in the regions and not just in the richer, urban markets of
BioFoodLabs has ticked a lot of boxes that match the changing Russian eating habits and the new-found interest in living a healthy lifestyle that has been emerging for many years already; gym club membership seems to be de rigueur amongst most young urbanites in
The success and fast growth of BioFoodLabs has already piqued the interest of the multinational food producing giants. Shifrina had calls from and took meetings with the likes of Mars and
“We have a lot of growing left to do. We are nowhere near finished,” says Shifrina. “But eventually I would like to IPO. That is my dream.”
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