Modeling Consumption Trends of Bread and Bakery Products in the Russian Federation: Key Determinants

Abstract

The paper analyzes the dynamics of key determinants of bakery products market in the Russian Federation in the first decade of the 21st century. It is stated that price, among other things, has been the most significant factor determining the volume of bread and bakery consumption which is subject to the law of demand, i.e. it decreases with the increase in its relative price (in regard to the average food prices), with demand being inelastic. This characteristic was revealed in the market analysis both at the national level and a large bread-baking complex level. The dynamics of change in consumer income does not seem to be a significant factor in the regression equation: demand for bread and bakery products is close to an absolutely inelastic one by income. Income differentiation between various groups of consumers determines the differences in consumer preferences for a wide range of products. At the same time, following the calculation results of the panel data regression model for a large bread-baking complex, it has been shown that the degree of influence of the change in price of bread on sales volumes does not differ qualitatively for separate types of products; therefore, income differentiation does not lead to considerable variations in demand for bread at every price change. The dynamics of bread price is defined by the dynamics of flour price, at the same time, the price of raw materials is more volatile, with bread price in regard to the price of flour being rather inelastic.