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. Last Updated: 07/27/2016

New Zealand Butter Anchors Its Place in Russia

When Muscovites are asked where pure, creamy butter comes from, they are most likely to conjure up images of fat New Zealand cows munching on sweet meadow grass, according to an autumn survey by ACNielsen rating agency.

The results of that poll, which found 46 percent of all respondents regularly used Anchor butter, appear to be the fruit of a massive advertising drive kicked off by the New Zealand Dairy Board when it became the first Western producer to launch a butter brand in Russia in 1994.

And now Muscovites are flocking to Anchor when they think of buying butter.

"I like the taste - it tastes much better than any of the Russian brands," said Anastasia Petrova, a well-dressed housewife with several bricks of Anchor in her shopping cart at Ramstore.

Petrova said she was first swayed over to Anchor four years ago after seeing ads heralding the butter's pureness.

She said she will never go back to her former favorite - Krestyanskoye, the domestically produced butter that is still Russia's top-selling butter.

"They have good advertising proving that Anchor is ecologically pure," said a Russian official with a leading marketing company who asked not to be identified. She said she has also been won over to Anchor.

"Everyone knows New Zealand has a very good environment," she said. "I think it has the best in the world, a perception that may not be true but I believe the ads."

This "manufactured" love affair that Russians now have with New Zealand butter has pushed up the sales of the nation's dairy producer, the New Zealand Dairy Board.

While other Western companies importing goods to Russia have seen their bottom line battered by the nation's economic turmoil, New Zealand dairy products have managed to hold their own.

The 55,000 tons of butter into Russia from June 1998 to June 1999, a drop from 80,000 tons in the 1996-97 year but a figure New Zealand sees as solid since its share accounts for 50 percent of all butter imports.

"Our success is in understanding consumers better than the competition does and providing high- quality products to satisfy consumers' needs," said Igor Makarov, who manages the New Zealand Dairy Board's Anchor and Doyarushka butter brands in Russia.

Independent research by COMCON seems to confirm that Anchor is solidifying its hold on the market. A survey of about 18,000 people across Russia in the first quarter of this year found that 84 percent of the respondents used butter, and 10 percent of them bought Anchor. A similar survey in the third quarter of 1999 found that while only 67.5 percent of the respondents were using butter due to seasonal fluctuations, 13 percent were now using Anchor.

"It is the best brand among foreign brands because of its high quality, its positioning and its high level of fat," said Maria Vakatova, public relations director at COMCON.

In contrast to Western consumers - trained by years of diet fads to avoid high fat content - Russians tend to prefer high fat dairy products because of their creamier taste.

"With the intensive advertising campaign it has maintained in all media ... it has managed to keep a stable level of loyal consumers that is now increasing," Vakatova said.

To take full advantage of its strengthening position as the leading butter importer to Russia, the New Zealand Dairy Board this month launched two business units in the former Soviet Union to streamline sales. Newly set up New Zealand Milk CIS will promote Anchor and other consumer brands, and NZMP CIS will sell dairy ingredients to Russian producers.

"Thanks to the Board's restructuring, New Zealand Milk CIS will be able to strengthen its position in the Russian food market," New Zealand Milk CIS director Scott Morris said.

The former Soviet Union is the second largest market for dairy products after Britain, according to New Zealand Milk CIS.

So the New Zealand Dairy Board asked ACNielsen to conduct surveys this year on how Russians perceive Anchor, and the results appear to confirm that Anchor is the butter import king. An autumn 1999 study found that 46 percent of Muscovites regularly used Anchor, compared to 35 percent in 1998. Russia-wide, 43 percent said they had tried Anchor, up from 37 percent. In Moscow, the figure had risen from 73 percent to 77 percent.

Moreover, a survey by the same agency in the summer of 1999 found that the Moscow market share for New Zealand butters was 31 percent, meaning that every third pack of butter sold was produced by New Zealand Milk.

Sparked in part by dwindling domestic supplies, butter and margarine imports swelled more than 100 percent a year from 1990 up to the August 1998 crisis, according to Troika Dialog research. Imports accounted for 70 percent of all butter and margarine sales, and margarine accounted for more than 50 percent of that figure, Troika Dialog said.

Then the economic turmoil slashed butter and margarine imports by 43 percent and sparked a market contraction of 14 percent over the first 10 months of 1999, according to a Gesselshaft fur Konsumforschung survey of 14 Russian cities. Domestic sales rose 8 percent as local producers moved in to fill the void, the survey found.

The Economics Ministry predicts Russia will produce 250,000 tons of butter this year, a figure that it expects to grow to 260,000 tons in 2000, 270,000 tons in 2001 and 285,000 tons in 2002.

Over the first nine months of 1999, butter imports totaled 41,100 tons, down from 77,100 tons year-on-year, Interfax quoted the State Statistics Agency as saying last week.

However, industry insiders said the figures were drastically skewed. Over the past few years many butter importers have underinvoiced shipments to avoid paying a hefty 20 percent tariff, they said.

One industry player, who asked not to be identified, estimated that for every 100 tons of declared butter, another 400 tons enters the country marked as a different product.

"For the first half of 1999, imports of butter are anywhere between 18,000 metric tons - according to customs declarations - and 42,000 metric tons, an estimate taking into consideration obvious fraud," the source said. "This figure does not include butter which is coming from Belarus and butter that was not declared at all."

Belarussian butter does not need to be declared because of a customs union with Russia.

Butter from New Zealand is not the cheapest in Russia - Anchor sells for about 21 rubles for 250 grams compared with 12 to 19 rubles for Russian brands of the same size. But the dairy producer is confident that Russians want quality when it comes to putting spread on their bread.

"New Zealand goods are currently relatively expensive, though if you compare the production cost of pure butter in Russia, you will be amazed how expensive real Russian butter is," Makarov said. "The [wholesale] purchase price for 1 liter of milk is now around 4 rubles, and you need 20 liters of milk to make 1 kilogram of butter. You are looking at 80 rubles per kilogram of raw material alone without processing, packaging wholesale and retail margins."

"Support of the dairy industry and the high quality of milk products are matters of state importance for New Zealand," the producer said in a statement. "New Zealand Milk delivers to Russia the best New Zealand has - milk products."