About what requirements are imposed on the quality and packaging of potatoes today, how much small-caliber tubers are in demand by buyers, and what is the advantage of the system of agricultural contracts the readers of the "Potato System" magazine told Pavel Rozhkov, head of the agricultural contracting department of the retail chain "Magnit".
- Did your company have any difficulties with the purchase of domestically produced vegetables and potatoes over the past two years (lack of production volumes, quality problems)?
"Magnit" has a complex of established reliable supply channels for vegetables and fruits, including its own enterprises. Plus, we are one of the largest logistics operators in Russia with a fleet of almost 4,5 thousand trucks. This allows us to provide buyers with fresh quality products all year round and to minimize the impact of market conditions, weather conditions and other difficulties. Thus, the network is implementing a package of projects to support farmers. Since 2016, we have been developing cooperation with agricultural producers under the scheme of long-term futures contracts, or, in other words, agricultural contracts. Our goal is to establish direct supplies of vegetables and fruits, exclude intermediaries, control the entire chain from crop rotation to shipment, and thereby provide consumers with high quality products at affordable prices. I would like to note that we are interested in expanding the range and are always open to cooperation with new manufacturers.
However, the past two years (2020 and 2021) have been challenging. Firstly, the geography of the partners of the agricultural contract is very extensive, ranging from the republics of the North Caucasus and ending with the subjects of the Ural and Siberian federal districts (Tyumen, Kurgan and Novosibirsk regions). Accordingly, the purchase was influenced by weather conditions in a number of regions. In Stavropol, at the end of last summer and at the beginning of autumn, there was a drought, which eventually resulted in significant mechanical damage during the harvesting and preparation of potatoes, a similar problem was in the Tambov region. In the Dmitrovsky District of the Moscow Region, farmers were able to experience almost the entire possible set of natural disasters, ranging from flooding, drought and ending with being blown out by the winds. All these episodes had a particularly noticeable effect on the potato. However, in the end, we managed to keep the required amount of domestic potatoes on the shelves.
In addition, in February-March of this year, federal chains faced the difficulties of prematurely "washing out the residues" of domestic onions from producers. We were forced to promptly “connect” imports so that our customers would not feel a shortage of products.
But in general, we do not observe significant problems with the supply of vegetables now.
- Have the intranet requirements for the quality of vegetables and potatoes produced in Russia been revised over the past two seasons? And if so, how?
The category "Fruits and Vegetables" in our network is traffic-generating. As for potatoes, it is included in the TOP-10 purchases. We place high demands on vegetables and fruits. At the same time, we always try to help our partners to competently organize the production, packaging and delivery of products so that the consumer is satisfied.
All product requirements are transparent and publicly available. I will not list the set of conditions, as it will take a lot of time. Of course, we try to respond to the situation in the industry as much as possible, because each new season is specific. We work with manufacturers, our category management, the quality management system department and, if necessary, adjust the conditions. For example, if in one of the regions the weather affected the harvest, then we meet halfway and soften the requirements without prejudice to buyers.
- Is it possible to say that the quality of Russian vegetables and potatoes in general has become higher / lower in recent years?
The quality of products in the category "Fruits and Vegetables" on the shelves of our network is getting better, and this is the result of the coordinated work of the network and producers. In the stores themselves, since last year, we have launched the “Quality Assistant” project, the duties of a dedicated employee include daily monitoring of the state of the outlet and goods in order to provide visitors with the best service. It's no secret that sales in the Fruits and Vegetables category are one of the main indicators of customer loyalty. By offering quality products on the shelf, we can count on repeated repeated visits by consumers to our outlets during the week. We analyzed that if a visitor is satisfied with this product, then, as a rule, he comes to the store up to three times a week.
In this regard, we, together with our partners, carry out regular activities to improve the characteristics of the supplied goods.
In agriculture, the success and competitiveness of manufactured products largely depend on the optimization of processes, improvement of production infrastructure, continuous development of personnel and, of course, high-quality seed material, therefore our partners are constantly improving in these areas, including through targeted advance payments, provided by the annual contracts with our network.
For the convenience of customers and better communication with them, in 2019 our company launched its own brand "Magnet Freshness", under which more than 100 positions are now produced in the categories of vegetables and fruits, and since 2020 - dairy and meat products. Not only the chain's own enterprises operate under this brand, but also co-branded projects. We carry out joint quality control, there is an option for the delivery of products by our transport to cover large territories in a complex geography. The motto of this brand: "From garden to shelf at the speed of freshness"! By the way, the brand was highly noted and received the “Breakthrough of the Year” diploma at the Pivate Label Awards - the most significant event in the field of private labels.
An increase in the quality level is also evidenced by the fact that in 2020 we increased the volume of purchases from local producers by 5,4%, including potatoes. I would like to note that the priority throughout the year for us is vegetables and fruits grown in Russia, but unfortunately, the volume of products on our market is still limited. One of the main reasons for this is the lack of a sufficient number of modern storage facilities, which means that this is a good growth point for farmers. As an example, we can single out apple producers in the republics of the North Caucasus, in particular in Kabardino-Balkaria. In recent years, the pace of construction of new refrigeration units has been encouraging.
- Are on-chain requirements for product packaging changing? Are there any restrictions on the use of non-environmentally friendly (non-recyclable) materials?
Last year, Magnit adopted the Strategy for Sustainable Development until 2025, which covered all areas of the company's activities. The document contains a separate priority area "Green procurement". Now we continue to develop tools for responsible selection of partners, develop joint projects for the production of eco-goods and the use of eco-packaging. So, in large-format stores, the position of potatoes in a craft paper bag has been introduced, and the introduction of carrots and onions in a craft paper bag is being developed.
Also in 2020, Magnit's own production facility managed to reduce the total consumption of packaging materials by 9,5% by optimizing the parameters of individual packaging, and in stores we switched to using bags containing 30% recycled plastic.
- In the current conditions, is your company more interested in purchasing small-sized washed potatoes (premium level) or "dirty" potatoes of the "economy" class? In general, how has the assortment of potatoes in the chain's stores been changing in recent years? Is it getting wider? Should there always be several commodity items on the shelf (say, domestic and imported potatoes, red and white, for cooking and for frying, in packaging and in bulk)?
If three years ago in "Magnet" the buyer met only bulk unwashed potatoes on the shelf, now the assortment has expanded significantly and there are positions for various needs. We see a positive customer response and continue to develop the category. In stores, depending on the cluster (area of the point, the number of inhabitants of the settlement, customer preferences, etc.), different types of potatoes are presented: small caliber or "baby", large; washed, unwashed; premium; various packaging.
Of course, the main demand is for large caliber products that are easier to prepare. We even ran a test with a focus group of buyers, which showed that small potatoes are not a mass product. However, this position covers certain needs and is therefore represented on the network.
In addition, we differentiated packaging: in addition to gross potatoes (by weight), there is packaging in nets of 2,5 kg, premium items are packed in an extrusion mesh and supplemented with a tape, differ in colors (for example, red - for frying, white - for cooking, the larger one is for grilling).
We pay great attention to this category and even launched our own packaging workshop based on one of our distribution centers.
- Tell us more about agricultural contracts. What advantages do you see from such cooperation with producers of vegetables and potatoes?
As I already mentioned, the way of working according to the agricultural contract scheme in our company celebrated its first anniversary this year, for the first time we offered these conditions for cooperation to Russian farmers back in 2016. We are very pleased with this project, with each new season the company is multiplying in the volume of deliveries of domestic products to the network.
We work with more than 60 suppliers, they ship various vegetables (potatoes, cabbage, carrots, onions, beets) and fruits (apples, melons - watermelons), in a complex - more than 50 items. In 2020, under agricultural contracts, the company purchased about 300 thousand tons of vegetables and fruits. Speaking specifically about potatoes, it is a volume-forming category in this project, which accounts for about 50% of supplies.
The main advantages of an agricultural contract are, first of all, stability and confidence in the future for producers and the network, expressed in guaranteed sales and supplies throughout the season. Equally important is the stable quality of the supplied products, which is achieved through a set of measures, constant communication between representatives of the network and employees of production sites, regular visits of our agronomists to enterprises throughout the season - from the moment of preparation for sowing and ending with harvesting and storage. We also organize a surveyor (insurance) quality check at the manufacturer's site, which in turn minimizes the likelihood of product returns, thereby reducing potential costs for both the agricultural manufacturer and the network.
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