Accessibility links

Breaking News

Russia: Cherkizovsky Group Targets Hot-Dog Market

Moscow, 6 May 1998 (RFE/RL) -- If America's sausage manufacturers don't hurry, the Russian hot-dog market -- Europe's largest -- will shortly slip out of their reach. That's the assessment of meat industry analysts, commenting on the move by Russia's largest meat works, Cherkizovsky Meat Plant Ltd. of Moscow, to start its own Russian-brand, hot-dog production line next month.

Musheg Mamikonyan, Cherkizovsky's Chief Executive and Chairman of the Board, tells RFE/RL that Cherkizovsky has just finished installing a $3 million hot-dog production line manufactured by Cozzini Incorporated of Chicago. He is planning to produce 60 tons of hot-dogs per day, with five different meat varieties. Chicken-based hot-dogs will be produced by an affiliated company, the Biryulyovsky Meat Plant, which is also located in Moscow.

Mamikonyan's disclosure puts an end to speculation in meat trade circles that the Cherkizovsky group was planning to join Denmark's Steff-Houlberg company to produce the Steff-branded, hot-dogs which have dominated the Moscow market, since their introduction five years ago. The Cherkizovsky move also threatens major American exporters of sausages and smallgoods to the Russian market, at the same time as it creates fresh demand for supplies of American ground beef to fill the Russian-brand sausages.

Mamikonyan is one of the leaders of a coalition of meat plants, consumer organizations, and the Moscow city government, which, last week, launched a high-profile campaign to halt illegal imports of processed meat products from Europe. A sizable share of these imports actually originates from the U.S., but is routed through Eastern European and Baltic gateways. These products are avoiding customs duties and selling at dumping prices, Mamikonyan and his colleagues allege. They are being backed by some U.S. meat traders, who believe their business will gain, if plants like Cherkizovsky and Biryulyovsky import raw meat supplies legally, and recapture market share for their sausages from the imported brands.

The Cherkizovsky group, according to Mamikonyan, currently holds a ten percent share of the Russian market in processed meats, with annual turnover of around $450 million. Privatized and controlled by the Babaev family, the group buys not less than 10,000 tons of meat per month. It is currently ranked the 16th largest company in Russia.

The Steff-Houlberg group of Denmark is bigger, with annual turnover of around $800 million worldwide. The Steff-Russia subsidiary, which pioneered the marketing of pork-filled hot-dogs, currently sells more than ten-million hot-dogs per year in Moscow, with a sales volume of more than $21 million, according to Sergei Shikharev, the managing director of Steff-Russia.

In 1993, Shikharev went to Copenhagen with the simple message for Steff-Houlberg: "American hot-dogs are beef sausages. We found Russians prefer the Danish pork sausage." By late last year, he and other Steff-Houlberg officials conceded, if they were to grow beyond Moscow, they would have to cut prices, and substitute domestic Russian production for imports.

The competitive move by Mamikonyan's group will intensify the pressure on Steff-Houlberg. It will also be the first major test in the Russian food sector of whether a domestic company can recapture market share from imported brands.

If the hot-dog ambition is successful, Mamikonyan explains that his group will target the lucrative American poultry import trade next. "A new corporate holding is being planned," he said, "and this will produce poultry meat in very large volumes."

According to Bob Walker, the Director of the U.S. Agricultural Trade Office in Moscow, last year U.S. poultry exports to Russia reached a record high of $876 million; this is the largest single item of trade between the two countries.

Several Russian poultry importers say they doubt the Russian poultry industry is capable of recapturing market share from American imports in the near future.

Andrei Koraev, an executive with Soyuzkontrakt, a major Moscow-based meat importer, said he is signing fewer contracts for imported red meat - and, more for imported chicken. "National poultry production is in crisis, and the signs of improved efficiency are weak," he said. "Domestic output is 600,000 tons; imports of poultry from the U.S. were one-million tons in 1997. This balance will repeat itself this year," he said.