The foodtech market is one of the fastest growing in Russia; and yet, not so long ago, we had no idea of this segment. We can see how consumption patterns are changing in big cities now. People are increasingly concerned about saving time and minimizing visits to regular stores. On the other hand, eating healthy is another emerging trend in the Russian food market and it is gaining popularity. Almost all federal retail chains have departments for healthy lifestyle foods. In particular, there is growing demand for fresh farm products, so farm product aggregators and delivery services are entering the market.
The online food market in Russia is still quite modest, with most of its potential yet to be tapped. In 2018, food accounted for less than 2% of all e-commerce; but a few years earlier, its share had been two-thirds smaller than that. This suggests that consumer interest in ordering food delivery is growing fast, and this trend will definitely continue; much of the segment’s potential remains untapped. The market is warming up, and large players start showing interest in foodtech. For example, X5 retail has made its Perekrestok.Online the leader in online grocery retail and launched express delivery from Pyaterochka. Yandex has launched the Yandex.Lavka project. Large strategic players are entering this market with far-reaching plans and handsome budgets.
When we created Esh Derevenskoe in 2015, projects such as LavkaLavka, Season Market, and Fresh were already on the market. Nevertheless, the online farm foods niche was far less developed than others. We are not a classic marketplace. Our core value is supplier verification.
We visit each supplier with a check list and audit them, examine and select the products. We also provide logistics – both from the farm to our hub and from the hub to the client – and take care of marketing and advertising. Our main job as an aggregator is to ensure transparency of cooperation between small producers and their customers.
The service works as follows: after setting up an account, suppliers outline the products and their quantity, thus forming the available range of products each week. When the limit is reached, the product is temporarily removed from the market. On the day of the delivery, products arrive in our processing center where they are sorted, packed and delivered to customers.
Orders are delivered within 24 hours, which allows us to work with the ‘fresh’ category, while the share of goods in storage does not exceed 25%. We work with more than 150 farmers and local producers from the Tver, Yaroslavl, Lipetsk and Moscow regions and the Krasnodar Territory. The assortment includes some 1.5K stock keeping units: dairy, meat, vegetables, fruit, groceries and drinks.
The main customers of the target audience of online aggregators of small producers are young moms. As a rule, they study the content of the food, for they want to know what they will be giving to their children. So they are interested in quality products with a known origin and without artificial ingredients. The prime cost of such foods is higher, but they are ready to pay for a better quality.
Another segment of the target audience are women aged over 40. They remember the taste of real farm foods that takes them back to their childhood. They want their children and grandchildren to try it too.
The third segment are people with allergies to various food additives. They carefully monitor their diet and the quality of food. They are picky, but usually make standing customers.
All over the world, online aggregators for small producers and farmers focus on the creation of an ecosystem, a community of like-minded people who are united by the farm2fork philosophy. A loyal audience is then formed around this concept of transparency and direct delivery from the producer to the customer.
Efforts are taken to implement projects based on similar models all across the globe, such as Farmstead, GrubMarket, OurHarvest and GreenBean in the United States, Farmdrop in England, and YourGrocer in Australia. They all cooperate mostly with small local farms and farmers and work directly with them, without distributors involved.
Small co-ops are very popular in Europe and the United States; upon joining such associations, a supplier receives subsidies as well as legal and accounting support. In Russia, every venture has to survive on its own.
For instance, due to restaurants, fairs and farmers’ small shops temporary closed amid the current COVID-19 pandemic, farmers currently have to seek new customers. If we had more aggregators similar to ours, farmers would sell their products more promptly. Russia needs to establish an ecosystem of small manufacturers and farmers.
In Europe, consistent efforts have been made to develop such system, with the culture of farming passed down for generations; people there boast a vast experience and have a more efficient channel of distribution, as well as a quality control system and a system to maintain a dialog with state and commercial agencies. As regards IT technology, Russia’s market is advancing dynamically.
I am generally optimistic about the market. According to Russia’s Federal Service for State Statistics (Rosstat), in 2018, the amount of products manufactured by peasant holdings and farms in the country totaled RUR 0.6 tln ($8.6 bln). This is a vast market, with sales being one of the current major issues. A growing number of venues and locations for small producers to sell their products will improve the overall situation for all players.
The market itself will definitely grow, while suppliers will develop and improve their services. Several years ago, there was hardly half of the current number of players in the foodtech market, which we now see advance. Agricultural technologies are becoming increasingly available, with a growing number of network platforms for exchanging experience. In the near term, we will observe more technologies used daily by an average small manufacturer, while new capable players will enter the market of online aggregators.
By Ilya Yelpanov, founder of the Esh Derevenskoe online store