"Country Study Russia" - Free and Hanseatic City of Hamburg Ministry of Economy, Transport and Innovation
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1
„Country Study Russia“
Free and Hanseatic City of Hamburg
Ministry of Economy, Transport and
Innovation
Part-financed by the European Union
(European Regional Development Fund)Overview
2
• This study provides macroeconomic and microeconomic analysis of the russian
overall market and specialized topics of the food market.
• The main focus is
- delivering base-line information for site visits in Moscow / St.Petersburg
- offering easy-to-use information for small and medium companies to prepare
the development of international strategies in the food markets
• The data sources should be only “free-of-cost” and secondary data based
• A update should be possible on a yearly base.
Part-financed by the European Union
(European Regional Development Fund)Geography
3
Part-financed by the European Union
(European Regional Development Fund)Geography
4
Capital (and largest city) Moscow
Official language(s) Russian official throughout the country; 27 others co-official in various regions
Ethnic groups (2002) 79.8% Russians,
3.8% Tatars,
2.0% Ukrainians,
1.2% Bashkirs,
1.1% Chuvashes,
12.1% others and unspecified[1]
Demonym Russian
Government Federal semi-presidential republic
- President Dmitry Medvedev
- Prime Minister Vladimir Putin (Independent, but leader of UR)
- Chairman of the Federation Council Alexander Torshin (acting)
- Chairman of the State Duma Boris Gryzlov (UR)
Legislature Federal Assembly
- Upper House Federation Council
- Lower House State Duma
Area
- Total 17,075,400 km2 (1st)
- Water (%) 13[2] (including swamps)
Population
- 2010 census 142,905,200[3]
- Density 8.3/km2 (217th)
Part-financed by the European Union
(European Regional Development Fund)Objectives
5
Data sources of the following analysis are:
• International Monetary Fund, Balance of Payments Statistics Yearbook and data files, and World Bank
and OECD GDP estimates.
• United Nations, World Urbanization Prospects.
• World Bank, Enterprise Surveys (http://www.enterprisesurveys.org/).
• World Bank, Doing Business project (http://www.doingbusiness.org/).
• World Intellectual Property Organization (WIPO), World Intellectual Property Indicators and
www.wipo.int/econ_stat. The International Bureau of WIPO assumes no responsibility with respect to
the transformation of these data.
• International Telecommunication Union, World Telecommunication/ICT Development Report and
database, and World Bank estimates.
• World Bank and Turku School of Economics, Logistic Performance Index Surveys. Data are available online
at : http://www.worldbank.org/lpi. Summary results are published in Arvis and others' Connecting to
Compete: Trade Logistics in the Global Economy, The Logistics Performance Index and Its Indicators
report.
• World Bank national accounts data, and OECD National Accounts data files.
• United Nations Educational, Scientific, and Cultural Organization (UNESCO) Institute for Statistics.
• Company Information
• GfK Panels, and Roper studies
• http://www.foodmarket.spb.ru
Part-financed by the European Union
(European Regional Development Fund)Macroeconomy
6
Macroeconomic Analysis
Part-financed by the European Union
(European Regional Development Fund)Methodology-Macro
7
Specific country macro economy Status quo information
• economy data set • last year period
-GDP
-price index/purchasing power
-growth rates 5 to 10 years in the past data
-labour cost
-inflation trend analysis
-exchange rates • trend extrapolation
-state balance • integrating the official state economic prognosis
• business performance data set (correction factor)
- innovation index
- sourcing
- telecommunication
- regulatory affairs
• socio-demographic data set Forecast information
- population, education, urbanisation • 2015 scenario
- media use • 2020 scenario
• globalisation data set • 2030 Scenario
• market barriers
Part-financed by the European Union
(European Regional Development Fund)8
Macroeconomic Environment
Part-financed by the European Union
(European Regional Development Fund)GDP
9
• Reference Denmark: 2009 GDPpc 55992 $
GDP (current US$)
1,8E+12
1,6E+12
1,4E+12
1,2E+12
1E+12
8E+11 GDP (current US$)
6E+11
4E+11
2E+11
0 GDP per capita (current US$)
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
14000
12000
10000
• The GDP analysis shows an 8000
exponential growth. 6000
GDP per capita
(current US$)
• The decent in 2009 is an effect of the 4000
financial crisis of the world economy 2000
0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Part-financed by the European Union
(European Regional Development Fund)GDP
10
• Reference Denmark: 2009 1-3 %
GDP growth (annual %)
12
10
8
6
4
2
GDP growth (annual %)
0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
-2
-4
-6
-8
-10
• The annual GDP growth seems to be stable at an average value of 6-8 %
• The decent in 2009 is again the result of the financial crisis
• A mean of 4-6 % during the next years can be expected
Part-financed by the European Union
(European Regional Development Fund)Inflation
11
Inflation, GDP deflator (annual %)
160
140
120
100
80
Inflation, GDP deflator (annual %)
60
40
20
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
• The Inflation seems to be stable at an average value of 18-20 %
• The decent in 2009 is again the result of the financial crisis and expected
central bank influence
• A mean of 5-10 % during the next years can be expected
Part-financed by the European Union
(European Regional Development Fund)Consumption
12
Household final consumption expenditure (annual % growth)
20
15
10
Household final consumption expenditure
5
(annual % growth)
0
199519961997199819992000200120022003200420052006200720082009
-5
-10
• The annual growth of household final consumption seems to be stable at
an average value of 10-15%
• The decent in 2009 is again the result of the financial crisis
• A mean of 15-20 % during the next years can be expected
Part-financed by the European Union
(European Regional Development Fund)Economical structure
13
70
60
• The share of service (60%) is slow
50
increasing
Agriculture, value added
(% of GDP) • This is already quiet close to
40
Manufacturing, value typical developed countries (70-
added (% of GDP)
80%)
30 Industry, value added (% of
GDP)
• This might be an indicator for a
Services, etc., value added nearly “finished” development
20 (% of GDP) • Due to the fact, that service and
industry is concentrated in the
10
urban westerly regions, the
situation in these areas are “ahead”
0
in the development
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Part-financed by the European Union
(European Regional Development Fund)Employment
14
Unemployment
Unemployment 1997 with primary
education (% of
Unemployment total
with tertiary unemployment)
education (% of 21%
total
unemployment)
39%
Unemployment
with secondary
education (% of
total Unemployment
unemployment) Unemployment Unemployment 2007 with primary
41% with tertiary education (% of
education (% of total
total unemployment)
• Due to the change in the unemployment) 14%
32%
economical structure (see slide 12)
the unemployment in the segment
“tertiary education” is relatively
decreasing Unemployment
with secondary
• This is an indicator for the on education (% of
going structural developement total
unemployment)
54%
Part-financed by the European Union
(European Regional Development Fund)Executive summary
15
The overall economic development shows a typical picture of an emerging developing economy. The overall level of the Growth
Domestic Product (GDP) is close to 12000 $ per capita, in average 25 to 30 % of the level of a developed (high income) economy.
The annual change of the GDP was on a level of 8 % stable for many years, the negative sore in 2009 is an effect of the global
financial crisis and not a national effect. Out of a business point of view, it can be estimated, that the development will go on at
the historical level of 8 to 10 % in the next years. This means, Russia will remain an attractive growing market on a way closing
the gap to Europe in the future. One mayor advantage of the country is the availability of various natural resources.
Especially for consumer products (food) the development of the household final consumption expenditure is relevant. During
the last ten years there was an increasing stabile development from 7 % to 15 % (the negative value in 2009 is an effect of the
global financial crisis). The increase and the higher value than the GDP-growth is an indicator for a “catching up” in consuming
by the households. This is a special point of attractiveness for developing, producing and retailing certain consuming goods.
The economical structure shows, that the change from a primary to a tertiary dominated economy is continuing. The share of
services has already reached 65 % and is quite close to typical shares in “developed” countries (70 %-80 %). This is an indicator
that the structural gap to Europe is closing step by step.
The structural economic change is also visible in the structure of unemployment. The unemployment shares of persons with a
tertiary education is relatively decreasing (share 1997 39 % to 2007 32 %). The Russian economy creates demand in high educated
people. The level of industry and service becomes higher and gives a structural stability into the economic development.
Conclusion:
The overall economical parameter of Russia shows a stable and attractive environment for business, especially for business in
the field of consumer good. The primary reasons for this are availability of natural resources, structural economic development,
stabile economic growth (not “hyper emerging”).
Part-financed by the European Union
(European Regional Development Fund)16
Trade
Part-financed by the European Union
(European Regional Development Fund)Import
17
Merchandise imports (current US$)
3,5E+11
3E+11
2,5E+11
2E+11
Merchandise imports (current US$)
1,5E+11
1E+11
5E+10
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
• The decrease in 2009 is an effect of the financial crisis, the growth is expected to go on
Part-financed by the European Union
(European Regional Development Fund)Import - structure
18
Merchandise imports from high- • Reference Denmark: 2009 high income 89%
income economies (% of total 2009 developing 2,8%
merchandise imports)
70
60
50
40 Merchandise imports Merchandise imports from
from high-income
30
economies (% of total
developing economies in Europe &
20
10
merchandise imports) Central Asia (% of total merchandise
0
imports)
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
40
35
30
• The share of import from high-income
25
countries is slow increasing Merchandise imports
20 from developing
• They are the most important trade economies in Europe &
15
partners Central Asia (% of total
10 merchandise imports)
• the role of developing countries (out
5
of the region) is going down
0 1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Part-financed by the European Union
(European Regional Development Fund)Import - structure
19
2005
1%
1%
0%
Merchandise imports from high-income
4% economies (% of total merchandise imports)
Merchandise imports from developing
economies outside region (% of total
merchandise imports)
19%
Merchandise imports from developing
economies in East Asia & Pacific (% of total
merchandise imports)
Merchandise imports from developing
economies in Europe & Central Asia (% of
total merchandise imports)
Merchandise imports from developing
54% economies in Latin America & the Caribbean
8% (% of total merchandise imports)
Merchandise imports from developing
economies in Middle East & North Africa (%
of total merchandise imports)
Merchandise imports from developing
economies in South Asia (% of total
13%
merchandise imports)
Merchandise imports from developing
economies in Sub-Saharan Africa (% of total
merchandise imports)
Part-financed by the European Union
(European Regional Development Fund)Import - structure
20
2009
1%
0% 0%
Merchandise imports from high-income
4% economies (% of total merchandise imports)
11% Merchandise imports from developing
economies outside region (% of total
merchandise imports)
Merchandise imports from developing
economies in East Asia & Pacific (% of total
merchandise imports)
Merchandise imports from developing
14% economies in Europe & Central Asia (% of total
merchandise imports)
51% Merchandise imports from developing
economies in Latin America & the Caribbean
(% of total merchandise imports)
Merchandise imports from developing
economies in Middle East & North Africa (% of
total merchandise imports)
Merchandise imports from developing
economies in South Asia (% of total
19% merchandise imports)
Merchandise imports from developing
economies in Sub-Saharan Africa (% of total
merchandise imports)
Part-financed by the European Union
(European Regional Development Fund)Taxes
21
Taxes on goods and services (% of • Reference Denmark: Tax g&s 36,5 %
revenue)
35
30
25
20
Taxes on goods and
15 services (% of revenue)
10
5
0
2002 2003 2004 2005 2006 2007 2008
Taxes on international trade (% of
revenue)
35
• The decreasing of taxes on goods and
30
services and the increasing of taxes on
25
international trade seems to be an 20
effect of adapting to normal 15
Taxes on international
trade (% of revenue)
international business. 10
5
0
2002 2003 2004 2005 2006 2007 2008
Part-financed by the European Union
(European Regional Development Fund)Executive summary
22
Due to the macroeconomic situation the merchandise imports are growing exponential. This is conform to the
overall development.
The shares of merchandise imports out of certain areas of the world show an interesting change. The imports from
high-income economies are slow and continuing increasing (60 % to 65 % over the last 10 years), on the other side,
the merchandise imports from developing economies in Europe and Central Asia (neighbourhood) das decreasing
more than 50 % during the last 10 years.
This might be an indicator for on going “west” orientation, adaption and globalisation of live styles and a less
important role of the former union partners.
The tax levels for taxes an goods and services are on a value of nearly 15 % of revenue, taxes on international trade
are on a value of nearly 25 % of revenue. This are indicators for an international convergence to the typical rates.
There is no indicator, that government tries to influence the international trade in a critical matter.
Conclusion:
The trading parameters are indicating an attractive business environment especially for European companies. The
Russian trade is open and follows principles of globalisation.
Part-financed by the European Union
(European Regional Development Fund)23
Demography - Population
Part-financed by the European Union
(European Regional Development Fund)Population
24
• Reference Denmark: 2009 Growth 0,64%
Population, total
160000000
140000000
120000000
100000000
80000000
Population, total
60000000
40000000
20000000
0 Population growth (annual %)
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
-0,1
-0,2
Population growth
-0,3
(annual %)
-0,4
-0,5
-0,6
Part-financed by the European Union
(European Regional Development Fund)Population – structural change
25
80 • Reference Denmark: 2009 0-14 18%
15-64 65%
65+ 16%
70
60
50
Population ages 0-14 (% of total)
40
Population ages 15-64 (% of total)
Population ages 65 and above (% of total)
30
20
10
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
• The population is shifting from young to old (equal situation as in high developed countries)
Part-financed by the European Union
(European Regional Development Fund)Population
26
0,2
0,1
• The people are shifting from urban to
0 rural living
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
-0,1 • This is untypical for the status of
Rural population
-0,2 growth (annual %) development.
-0,3 Urban population • Industry and service is primary
growth (annual %)
-0,4
growing in urban regions
-0,5
-0,6 120000000
-0,7
100000000
80000000
60000000 Rural population
Urban population
40000000
20000000
0
1995 1997 1999 2001 2003 2005 2007 2009
Part-financed by the European Union
(European Regional Development Fund)Executive summary
27
The population growth rate is negative with a light trend to zero. This is typical for developed countries
und normally not typical for emerging economies. This is an indicator for a developed social structure (may
be out of the socialistic history).
Special is the situation comparing rural and urban regions. The growth in the urban region show a negative
development from 2000 to 2008.
This may be an result of “unorganised business development”. This effect seems to be stabilised now. The
growth rate in the urban Region is equal to the situation in Europe. This is an indicator for a comparable
situation of the social development as in Europe.
Conclusion:
The growth rates are similar to developed economic situations, this is not normal in an emerging economy
but an interesting aspect for business. The social environment corresponds with a “European” situation.
Market-segmentation and core strategies can be transferred from home countries. An ethnocentric
approach (business model for international business)will be possible.
Part-financed by the European Union
(European Regional Development Fund)28
Education and Income
Health
Part-financed by the European Union
(European Regional Development Fund)Education
29
100
90
80
70
60
50 School enrollment, secondary (% gross)
School enrollment, tertiary (% gross)
40
30
20
10
0
2003 2004 2005 2006 2007 2008
• There is a shift to higher education (due to the developing economy)
Part-financed by the European Union
(European Regional Development Fund)Income Share
30
Income share Income share
held by lowest Income Share 1999 held by second
20% 20%
6% 11%
Income share
held by third
20%
16%
Income share
held by highest
20% Income share
44% held by fourth
20%
23% Income share Income share
held by lowest Income Share 2007 held by second
20% 20%
5% 10%
Income share
held by third
• There is an evident and clear shift to 20%
higher (highest) income 14%
• Only the top 20% are increasing
Income share
• There is a “rich” sub-culture held by highest
developing (with 50 % of all Income) 20%
50% Income share
held by fourth
20%
21%
Part-financed by the European Union
(European Regional Development Fund)31 Part-financed by the European Union (European Regional Development Fund)
Health expenditure
32
Out-of-pocket health expenditure (%
of private expenditure on health) • Health is coming more and more into
84
the focus
• Also in the private priorities, health
83
play an important role
82
Out-of-pocket health
81 expenditure (% of
• Reference Denmark: 2009 HEpc 6272 $
private expenditure on
80 health)
79
78
2003 2004 2005 2006 2007
Health expenditure per capita
6 (current US$)
600
5
500
4 Health expenditure,
private (% of GDP) 400
3 Health expenditure, Health expenditure
300
public (% of GDP) per capita (current
2 200 US$)
Health expenditure,
total (% of GDP) 100
1
0
0 2003 2004 2005 2006 2007
2003 2004 2005 2006 2007
Part-financed by the European Union
(European Regional Development Fund)Life expectancy
33
80
75
70
Life expectancy at birth, female (years)
65
Life expectancy at birth, total (years)
Life expectancy at birth, male (years)
60
55
50
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Part-financed by the European Union
(European Regional Development Fund)Executive summary
34
The Russian society is increasing their capabilities for successful development by shifting in education. The
enrollment into tertiary schools is increasing. In the result the interlectual properties of the nation are secured.
A special focus has to be on the income situation. In Russia the GINI-Index is high. This show, that there is an
unequal distribution.
The high-income group is big and more increasing. The situation of the unequal distribution the progressing.
The “high-income – luxury demand” segment of the consumer is growing. Out of an social-economic point of
view this development is a risk of disbalance in society.
An indicator for a change and development are the increasing expenditures for heath and out-of-pocket health
expenditures. It might be a growing interest for healthy living.
Conclusion:
The most relevant results out of this topic are:
- The segment of “high-income” is still growing and an interesting business target group for trade.
- Health and healthy living is an upcoming / on going trend.
Part-financed by the European Union
(European Regional Development Fund)35
Business Performance
Part-financed by the European Union
(European Regional Development Fund)Logistics performance indicators
36
1 = poor 5= high 2006 2009
Efficiency of customs clearance process 1,94 2,15 3,58
Quality of trade and transport-related infrastructure 2,23 2,38 3,99
Ease of arranging competitively priced shipments 2,48 2,72 3,46
Competence and quality of logistics services 2,46 2,51 3,83
Overall 2,37 2,61 3,85
Frequency with which shipments reach consignee within scheduled or
expected time 2,94 3,23 4,38
Ability to track and trace consignments 2,17 2,6 3,94
Part-financed by the European Union
(European Regional Development Fund)Business performance indicators
37
2005 2009
Average time to clear exports through customs (days) 0 5
Cost to export (US$ per container) 0 14,3
Documents to export (number) 0 0
Lead time to export (days) 7,52 4,58
Firms using banks to finance investment (% of firms) 1750 1850
Informal payments to public officials (% of firms) 8 8
Losses due to theft, robbery, vandalism, and arson (% sales) 36 36
Time required to obtain an operating license (days) 15,41 30,62
Firms with female participation in ownership (% of firms) 61,98 29,44
Firms formally registered when operations started (% of firms) 0,51 0,78
ISO certification ownership (% of firms) 57,4
Value lost due to electrical outages (% of sales) 27,03 33,05
Firms offering formal training (% of firms) 94,68
Management time dealing with officials (% of management time) 10,57 11,69
Cost to import (US$ per container) 1,86 1,22
Documents to import (number) 36,95 52,17
Lead time to import (days) 6,13 19,93
Time to resolve insolvency (years) 1750 1850
Part-financed by the European Union
(European Regional Development Fund)Business performance indicators
38
2005 2009
Documents to import (number) 13 13
Lead time to import (days) 36 36
Time to resolve insolvency (years) 3,8 3,8
Strength of legal rights index (0=weak to 10=strong) 3 3
Time required to enforce a contract (days) 281 281
Rigidity of employment index (0=less rigid to 100=more rigid) 38
Procedures to enforce a contract (number) 37 37
Time required to register property (days) 52 43
Procedures to register property (number) 6 6
Cost of business start-up procedures (% of GNI per capita) 8,8 2,7
Time required to start a business (days) 35 30
Start-up procedures to register a business (number) 10 9
Time to prepare and pay taxes (hours) 448 320
Average number of times firms spent in meetings with tax officials 1,46 1,57
Tax payments (number) 15 11
Total tax rate (% of profit) 51,2 48,3
Time required to build a warehouse (days) 671 653
Procedures to build a warehouse (number) 64 63
Part-financed by the European Union
(European Regional Development Fund)Business performance indicators
39
70000
• The trademark application
are an indicator for the
60000
business development
• Residential as non-residential
50000 applications are increasing
40000 Trademark applications, Madrid
Trademark applications, direct nonresident
Trademark applications, direct resident
30000
Trademark applications, total
20000
10000
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Part-financed by the European Union
(European Regional Development Fund)Summary - macroeconomy
40
• The macroeconomic analysis show the indicators of a typical “late” developing
country
• The effects of the financial crisis 2009 had the expected results (decrease in GDP etc.)
• The gap the high developed countries (for example Denmark) is still ca. 50 %
• In comparison to other countries in the region, Russia seems to have an economic
leadership function.
• Clear economic engine is the westerly region (areas Moscow and St. Petersburg etc.)
• The international trade relationships have an increasing orientation in the direction of
the “high-income” countries.
• The countries in the region (euro-asia) have still an importance, but it seems to shift
• The population is decreasing (like in Europe) the urbanisation is stabile.
• The income structure shows a shift to 20% very high earning people. This is an
indicator for a marked segmentation into “first – business – ecomomy”
• It is an estimated guess, that the sales-attractiveness is primary in the west urban
regions.
Part-financed by the European Union
(European Regional Development Fund)Business environment
41
The macroeconomic overview indicates the following business opportunities:
• The economical growth is stable and will go on. Market volumes will increase
• The fundamental reasons for the development are education and a good availability of natural resources.
• The economic structure (primary, secondary and tertiary) is in a late development phase (comparable to Europe)
• Threre seems to be a market segment of high-income people, still growing and with high purchasing power
• High education and health orientation are indicators for high social development and offer opportunities for nearly
standardised product and business transfer
• Taxes and business performance for international business are acceptable open for trade.
The strategic options for international business out of Europe are
- Ethnocentric (primary for small companies), export-strategy
- Regiocentric (possible for midsize companies), i. e. joint-venture
Part-financed by the European Union
(European Regional Development Fund)42
Mayor macroeconomic Trends
Part-financed by the European Union
(European Regional Development Fund)Economic scenario
43
12
10
8
6
4
2
0
-2
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2020
-4
-6
-8
-10
GDP growth (annual %)
• The major economic indicator for the further development is the GDP
• The trend analysis estimates an ongoing development until 2020 between 6-8 %
• The “quantitative” reasons are -still a gap to high income countries
-good ongoing development of capability indicators
(education, health,..)
Part-financed by the European Union
(European Regional Development Fund)Trade scenario 44
80
70
60
50
40
30
20
10
0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
-10
-20
Merchandise imports from high-income economies (% of total merchandise imports)
Merchandise imports from developing economies in Europe & Central Asia (% of total merchandise
imports)
• The import structure is an possible indicator for the international economic orientation
• The trend analysis estimates an ongoing development until 2020
•The “quantitative” reasons are -still a gap to high income countries
- convergence of the demand cluster (globalisation)
Part-financed by the European Union
(European Regional Development Fund)Trade scenario 45 Part-financed by the European Union (European Regional Development Fund)
46
Micro economical Analysis
Part-financed by the European Union
(European Regional Development Fund)Methodology - Micro
47
Market segmentation food Specific segmentation Cluster analysis
• consumer market • socio-economic segm. • consumer based
-structure • consume-behavioural • product based
-preferences segmentation
-development
• retail structure Retail structure Secondary research
-companies • overview • trade fair
-fragmentation • procedures • existing studies
-globalisation
-supply chain structure Food industry Secondary research
• food industry • situation • trade fair
-agricultural situation • products • Chamber of
-food processing industry Commerce
-types of products Market communication
-industrial cluster Secondary research
• media use
• market communication • media mirror
• communication channels
-specific media structure • media use
Part-financed by the European Union
(European Regional Development Fund)Food Products ex.
48
Part-financed by the European Union
(European Regional Development Fund)Food Products ex.
49
Part-financed by the European Union
(European Regional Development Fund)Primary research – Exhibitions - Moscow
50
Part-financed by the European Union
(European Regional Development Fund)Primary research – Exhibitions – St. Peterburg
51
The product overview (Source: Publications from Hypermarkets/Supermarkets and Chains) shows an comparable spectrum as it
is equal to Europe. Branding and types of food are similar developed.
The results, only using secondary, free available information, has its natural barriers. A possible frame for “low cost” field research
are the listed trade fairs and exhibitions. Information out of this will enhance the quality of information for specific products.
Part-financed by the European Union
(European Regional Development Fund)52
Retail Structure
Part-financed by the European Union
(European Regional Development Fund)Retail – Overview of retail companies
53
1 $ = 27,08 rubles
Part-financed by the European Union
(European Regional Development Fund)Retail – Case “X5-Retail Group”
54
Regional distribution
According to the regional
Development, the presence
of the big retail
Companies are primary in
the western regions. It is
slowly moving east.
Part-financed by the European Union
(European Regional Development Fund)Retail – Case “X5-Retail Group”
55
Part-financed by the European Union
(European Regional Development Fund)Retail – Case “X5-Retail Group”
56
Part-financed by the European Union
(European Regional Development Fund)Retail – Case “X5-Retail Group”
57
Part-financed by the European Union
(European Regional Development Fund)Shopping for food – retail structure
58
In comparison to selected European
countries, there is still less use of Mall
and 80
Center for food shopping. There is
much space for additional
development
70 for this type of shopping
facility
60
50
Retail Mall
40 Retail Center
Retail Street fairs
30 Retail Kiosks
20
10
0
Global Russia Poland Czech Germany France Italy Spain
Republic Primary data: GFK
Part-financed by the European Union
(European Regional Development Fund)Retail Structure – Retail companies (Food) in Moscow and St. Petersburg
59
Source: GfK RUS FMCG Shopping Monitor, 2007
Part-financed by the European Union
(European Regional Development Fund)Retail Structure
60
Moskow
2005 2006 2007
Hypermark. 16 25 26 The development of
Supermak. 24 23 26 trade structures indicate
Discount 27 22 21
Open
a change to big and mega
market 15 12 9 structures.
This trends seems to slow
St. Petersburg
down, but looking at the
2005 2006 2007
Hypermark. 23 39 40
status (Slide 58) there is
Supermak. 15 12 9 still place for growth.
Discount 43 35 34
Open
market 4 4 3
Primary data: GFK
Part-financed by the European Union
(European Regional Development Fund)Executive summary
61
The retail structure for food products (and consumer goods) is in a change. Specially in the urban regions (Moscow
and
St. Petersburg) is marked by developing Hyper- and Supermarket structures. There is still a gap to to situation in
Europe, looking on the eastern European situation there is still a place for 100 % growth in the next years.
The retail market is dominates by a few big chains (5 in St. Petersburg and 10 in Moscow). This may be a risk for
business, if it is nor easily possible to become listed with the own products, difficulties in the market entrance can
be expected. On the other hand, a successful listing might be a guarantee for a positive development.
It is strongly recommended to have a deeper view into the retail facilities during the planned site visits.
The street fair are still playing an important role, especially Moscow, astonishing not in St. Petersburg. They are
primary used for buying fresh staff, such as fruits and meat. Never the less, the importance is going down
continuously.
Conclusion:
The retail structure is developed to a similar system like in Europe. There is still place for growth. The offered
products have to develop in a way, that they meet the logistical needs in da retail facility like a Hypermarket.
Experiences out of home countries cam be transferred.
Part-financed by the European Union
(European Regional Development Fund)62
Product structure
Consumer behaviour
Part-financed by the European Union
(European Regional Development Fund)Development of the demand – preferences (2009)
63
Growth of sales volume
Bread and bakery
Eggs This overview gives a first
Flour
Animal oil
impression about the
Vegetables development in certain
Groats
Alcoholic drinks/spirits/beer
food categories.
Rich cheese There is an estimated over
Potatoes proportional development
Vegetable oil relation to 2007
Macaroni
in processed food. The
Whole milk products reasons behind this are:
Fish products - Change in preferences
Meat and chicken
Fruits and berries - Fitting with retail
Cooked meats / sausages demand
Confectionary
Sugar
80 90 100 110 120 130
Primary data: GFK
Part-financed by the European Union
(European Regional Development Fund)Development of the demand – preferences (2008/2008)
64
Fast moving consumer goods Measuring the consumer
25
preferences the result is
20 as expected.
15
10 -Chilled food, Packaged
5 Annual Change grocery and Frozen foods
0 are the trend.
- The favorite retail
FMCG - Trade channels structure is discounters,
35 Hyper- and Supermarkets.
30
25
20
15
10
5 Annual Change
0
-5
-10
Primary data: GFK
Part-financed by the European Union
(European Regional Development Fund)Intention – reality – A framework for data interpretation of behaviour
65
Source: “An Appetite of change 2012” Deloitte & Touch
Part-financed by the European Union
(European Regional Development Fund)Choosing the point of sale
66
Looking at the criteria for
choosing a certain
shopping facility it is
interesting that:
- A national focus
(tradition and domestic
products) seems to play
an important role
- Branded products are
important, bit not in a
prior range
- Clear are overall
aspects like freshness
and product range
This indicates the possible
necessity for
“nationalizing” products
Source: GfK RUS FMCG Shopping Monitor, 2007
Part-financed by the European Union
(European Regional Development Fund)Shopping frequency
67
70
60
50 Frequency of shopping for groceries
Daily
40 Frequency of shopping for groceries
Weekly
Frequency of shopping for groceries
30 Monthly
Frequency of shopping for groceries less
than monthly
20
Frequency of shopping for groceries
Rest
10
0
Global Russia Poland Czech Germany France Italy Spain
Republic
It is remarkable, that the frequency of food shopping is still daily based, is an
evident difference to other european regions. It can be expected, that this might
change due to new processed food products and continuing globalisation. Primary data: GFK
Part-financed by the European Union
(European Regional Development Fund)Decision making
68
Consumer Decision Making
50
45
40
35
30
Myself
25 Adults
20 Family
Rest
15
10
5
0
Global Russia Poland Czech Germany France Italy Spain
Republic
The decision making is significant higher done by the adults in a family or the
family at all. This indicates, that products should address this structure more.
Primary data: GFK
Part-financed by the European Union
(European Regional Development Fund)Decision making – Social structure in Russia
69
Age Distribution
60
50
40
Myself
30 Adults
Family
20 Rest
10
0
Male Female 20 - 29 30 - 39 40 - 49 50 - 59 60+
In addition to slide 68, the “team” and “family” approach is focussed in the
younger segments. It cam be estimated, that this will be a stable situation over the
next decade.
Primary data: GFK
Part-financed by the European Union
(European Regional Development Fund)Executive summary
70
First analysis on consumer behaviour show some relevant and remarkable aspects.
The Russian consumer has still a medium preference for tradition and national aspects. It is not valid to talk
about a globalized behaviour and demand.
Decisions are made primary in the family, including the children. This guides to an more “family driven marketing
approach”. This trend is especially prominent in the younger generation 20-40 years of age.
There seems to be an increasing demand for “functional food”, “healthy food” and a little bit less also for
“food al self expression” the gap to a globalized development is still high biz evident.
Never the less a local/regional/national adaption seems to be helpful.
Part-financed by the European Union
(European Regional Development Fund)71
Media and Communication
Part-financed by the European Union
(European Regional Development Fund)Information structure – Media mix for food assigned advertisement
72
Information Structure
50
45
40
35
30
Information Structure TV
25 Information Structure Print Magazine
20 Information Structure News Paper
Information Structure web site (ind.)
15
10
5
0
Global Russia Poland Czech Germany France Italy Spain
Republic
The media mix, gaining information about food and food offers is primary driven by television,
newspapers and printed magazines are the second choice.
Primary data: GFK
Part-financed by the European Union
(European Regional Development Fund)Use of communications tools
73
Mobile cellular subscriptions Telephone lines (per 100
(per 100 people) people)
160 35
140 30
120 25
100
20
80
15
60
40 10
20 5
0 0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
• Reference Denmark: 2009
Fixed broadband Internet -mobile sub.
-Tel.Lines
135/100
37/100
Internet users (per 100
subscribers (per 100 people) -Intern. Sub.
-Int.Users
37/100
86/100
people)
7 35
6 30
5 25
4 20
3 15
2 10
1 5
0 0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Part-financed by the European Union
(European Regional Development Fund)Use of communications tools
74
Daily newspapers (per 1,000 people)
120
100
80
60
40
20
0
2000 2001 2002 2003 2004
• The use of mobile communication has already reached “westerly” level
• The number of internet users is strongly increasing. It has already reached nearly 50 % of an
European level
• It could be expected, that the media use (advertisement) will adopt itself to a European level
within 5 years.
Part-financed by the European Union
(European Regional Development Fund)75
Micro Scenario Food
Part-financed by the European Union
(European Regional Development Fund)Food Prognosis
76
• 2011 per capita food consumption (local currency) = +9.97%;
forecast compound annual growth to 2015 = +10.1%
• 2011 beer volume sales = +1.90%;
forecast compound annual growth to 2015 = +3.90%
• 2011 mass grocery retail sales (local currency) = +17.58%;
forecast compound annual growth to 2015 = +20.90%
Part-financed by the European Union
(European Regional Development Fund)Estimated scenarios
77
Braking forces
• Medium traditional orientation
• Market power of big retail organisations
• Disparity in the income and social structure
Scenario 2015 Scenario 2030
Functional food The expected growth rates are The adaption to a globalised
over proportional from the food market has finished. The
beginning (> 10%). There will development of the named
Healthy food be a consumer focussing to this food trends follow the general
kind of food staff. “Self European development.
expression” is relatively Expected growth rates are 5 %
Food as self expression underperforming, still the to 10 %. Fresh food will be a
family has a higher importance local business, procceded food
(10 %) an international bussiness.
Driving forces
• Change in preferences and behaviour
• Development of European equalized retail structures
• Excellent economic situation in the high income segment
• Family responsibility and healthy orientation
• Positive general macro and micro economic development
Part-financed by the European Union
(European Regional Development Fund)Ready-To-Cook/Serve Frozen Food Research of the Company “Vetra-Marketing”
78
In 2010 the capacity of RTC/RTS frozen food market was $ 3.5-3.9 billion in value and 1.8-1.825 million tons in volume. In 2010 the market of RTC/RTS
frozen food saw about 3% increase in volume.
Permanent increase of prices for raw meat stimulates manufacturers of RTC/RTS frozen food pay more attention to multi-compound food like pizza,
lasagna, ready meals with side dishes, pies, pasta with meat, frozen pastry.
Another possibility for manufacturers of RTC/RTS frozen food to restrain price growth with sustained product quality is switching to less expensive raw
poultry. Poultry production demonstrates impressive growth over recent 5-7 years; during the 1-3 years Russia can turn from net importer into net
exporter of poultry. Moreover, poultry prices has been demonstrating steady decline trend over recent 2-3 years.
Besides financial aspects wider application of poultry in RTC/RTS frozen food production contributes to health and wellness trend.
According to consumer poll of 1000 Muscovites, POS choice of RTC/RTS frozen food is mainly driven by such factors as “trust to brand/manufacturer”
and “personal consumption experience” – 66% and 61% of respondents respectively. Price is the only choice factor for 56% of Muscovites.
During 2009 the largest retailers opened more than 1100 convenience stores in Russia – major increase of outlets was observed in Q3 and Q4. As a
result, consumer flow in super/hypermarkets got shallower in favor of discounters and convenience stores. Both demand and offer on RTC/RTS frozen
food market shifted to the categories traditional for Russia – pelmeni, cutlets/meat pies, pancakes, etc. Today the market starts to recover. Consumer
flow in super/hypermarkets is getting stronger – and these formats usually offer wider choice of high-price RTC/RTS frozen food. Manufacturers extend
their product lines with high-price and premium offerings; currently this trend is most obvious in the categories of pelmeni, pancakes, pizza,
cutlets/meat pies and RTS second courses. Meanwhile mainstream advertising is getting increasingly accented on natural ingredients of RTC/RTS frozen
food and its high quality which finally will stimulate consumers switch to products made from natural raw materials. Formerly accent on “naturalness”
was more typical for premium products. Over recent 12-18 months healthy food – free from additives and preservatives – has been getting increasingly
popular in positioning of standard price products. Manufacturers are trying to persuade consumers that they control the whole production chain from
production of raw materials to final product thus providing guarantee of high quality.
Part-financed by the European Union
(European Regional Development Fund)Consumer Foodservice in Russia Research of the Company “Euromonitor International”
79
Euromonitor International‘s research shows that in 2010 Russian consumer foodservice
market reached $ 12 billion, with 8% up on the previous year.
THE FUTURE LOOKS FAIRLY BRIGHT With Russia being the most populated county in the
Eastern European region, the number of eating-out establishments in Poland, for instance,
accounts for 96 thousand which is nearly two times higher than in Russia (54 thousand in
2010). The Western European countries, like Spain and Italy outperform Russia by almost
six times with 305 and 312 thousand outlets in each country respectively. Thus, Russian
foodservice market is far from saturation. The market is expected to demonstrate further
confident growth meeting new players. Both local and international players will be getting
more active in the overall market through various franchising and joint ventures scheme.
The Russian consumer foodservice market is predicted to reach $ 14.4 billion by the end
of 2015.
Part-financed by the European Union
(European Regional Development Fund)Review of Russian Market of Cereal Grains Research of the Company Global Reach Consulting (GRC) 80 Russian market of cereal grains is dominated by domestic products. Share of import declines on annual basis – in 2006 it accounted for a little more than 30% of total consumption volume while in 2009 this index already constituted 19%. Noteworthy, more than 98% of import both in volume and value is provided by rice. Major supplier of rice to Russia is Vietnam with 39% in total import volume of cereal grains. Part-financed by the European Union (European Regional Development Fund)
Market of Chilled Ready Meals Independent Experts Research 81 FORECAST FOR THE RUSSIAN MARKET The retail market in Russia is in need of bringing into line with the rest of Europe. “Wal-Mart” have already invested in three sites in Moscow, this will force the competitors, mainly “Tesco” to play their hand, as the potential growth is pronominal. If they invest into Russia and are able to manage the bureaucracy, then the ready meal market will mature within 5 years. For instance, a standard “Tesco” store format will have a minimum of two gondolas dedicated to the sale of ready meals, this is approximately 200 SKUs, each SKU would carry on average 10 packs of the product. The packs would be on average 500g, this would be about 1 ton of product every day. So if the retail had 56 stores, and re stocked daily that would be the plant's total capacity, daily 7 days per week. Obviously this is in the ideal world, in real terms I would see that the chilled sector within Russia become 20% of the 70% convenience sector over the next 5 years, raising to 30% in the next 10. Part-financed by the European Union (European Regional Development Fund)
Review of Saint Petersburg Pelmeni Market Research of the Company “TOY-Opinion” 82 FUTURE PERFORMANCE Key trends of Russian market of frozen ready-to-cook meals will maintain in short-term prospective. As global economy recovers, innovative product categories will be introduced and existing categories will start extending and improving – especially ready meals, ready-to-cook and warm-it meals. Development of the said categories has a certain technological challenge – production here requires complicated high-capacity machinery and equipment. As soon as this type of equipment can be afforded by Russian food-processing plants, development of ready meals industry will get quite vibrant. Respectively, consumers will be faster switching from traditional pelmeni and meat pies to ready meals. Thus, pelmeni segment will stagnate for some time and then will be set to gradual decline of volume. Besides, until the crisis is completely over development of expensive and premium pelmeni will be “frozen”, but as soon as economic climate improves they would certainly flourish. Certain consolidation trends are observed on pelmeni market: further expansion of retail chains to regional markets will support positions of federal brands making local trademarks weaker. Part-financed by the European Union (European Regional Development Fund)
83
SWOT
Part-financed by the European Union
(European Regional Development Fund)Opportunities – Threads
84
• A stable and continuing economic growth • Sometimes unclear political situation
an development
• Still restrictions in logistics and business
• An increasing westerly orientation of performance
demand and trade
• Only a few, but big retailers, strong retailing
• Competitive established retail structures market force
• Known communication structures • The possibly powerfull position of potential
joint-venture partners
• Easy available market information
• Concentration of economical development
in defined areas (urban regions)
Overall:
• Less challenges in international product
A highly attractive market
politics, standardisation possible
• Russia is an excellent hub for on going
internationalisation in the region
Part-financed by the European Union
(European Regional Development Fund)You can also read
