Russian Food & Drinks Market. May 2012 osec.ch
Russian Food & Drinks Market.
2
Title.
Russian Food & Drinks Market
Language.
English
Number of pages.
86 pages
Author.
Direct INFO International Ltd. Alexandra Belova & Evgeny Ivanov
| Russian Food & Drinks Market
Contents. 1.
Acknowledgment. .....................................4
7.
Distribution. ............................................ 55 Distribution channels. ....................................... 55 Mark-ups and Admission fees. .......................... 57 Some tips on Partner selection. ........................ 58 Recommendations. ........................................... 59
2.
Introduction. ..............................................5
3.
Legal Regulations. ....................................6
7.1 7.2 7.3 7.4
3.1 3.2
Commercial Law. ................................................ 6 Regulations. ........................................................ 8
8.
Logistics. ................................................ 60
8.1 8.2 8.3
Transport. ......................................................... 60 Customs. .......................................................... 62 Storing. ............................................................. 63
9.
Marketing and Promotion. ..................... 65
9.1 9.2
Practical Guideline. ........................................... 65 Trade Shows..................................................... 66
10.
Export Checklist. .................................... 67
10.1
Entering the Russian market. ........................... 67
11.
Conclusions and Recommendations. .... 69
4.
Market overview. .....................................19
4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9
Market value dynamics. .................................... 19 Domestic Production. ........................................ 20 Key players. ...................................................... 21 Import/Export. ................................................... 22 Prices. ............................................................... 23 Forecast/Potential. ............................................ 24 Industry and Consumer Trends. ........................ 25 Private Label. .................................................... 26 Opportunities and challenges. ........................... 28
5.
Key market segments. ............................30
5.1 5.2 5.3 5.4 5.5 5.6 5.7
Dairy products. .................................................. 30 Confectionery products. .................................... 34 Alcoholic Beverages.......................................... 37 Non-alcoholic Beverages. ................................. 41 Organic and Natural Food. ................................ 44 Functional Food. ............................................... 47 Ready to cook products. ................................... 48
Annexe: Important Addresses. ........................ 70 11.1 11.2 11.3 11.4 11.5
Trade shows. .................................................... 70 Official Bodies. .................................................. 71 Trade Unions. ................................................... 72 Retail Chains. ................................................... 74 Food & Drinks Industry magazines. .................. 77
Annexe II. Tables. ............................................ 78 6.
Consumers..............................................50
6.1 6.2
Private sector. ................................................... 50 HoReCa. ........................................................... 54
Annexe III. Map................................................ 80 Annexe IV. Trade statistics 2011. .................... 81
4. Market overview. The food sector is one of the most strategically important industries of the Russian Federation, producing around 18% of the total industrial output value of the country. The food and processing industry is represented by 30 branches of government and around 43 thousand enterprises.
4.1 Market value dynamics. According to Rosstat, about 47% of the value of retail sales in Russia is related to food production7; this percentage is trending downwards as standard of living increases and as income can be directed at other market segments. The economic crisis had an adverse effect on the Russian food and drinks market – in 2009 retail sales dropped by 2.5% compared to 2008 (Table 4.1.1, Figure 4.1.1). However in 2010 the dynamics changed positive and by the end of the year sales volumes increased by 5.1%. In 2011 Russia’s total value of retail sales of food and drinks was estimated at 9.1 trillion RUB (273.5 bln.CHF), it grew by 3.1% over the previous year. The share of processed food of total food and drinks market value is estimated at 66-70%. Table 4.1.1 Retail sales of Food & Drinks in 2009-2011 2009 2010 2011 (est.) Retail sales, bln.RUB 7062,4 7996,7 9136,6 Growth rate, % 97,5 105,1 103,1 Source: Rosstat, Direct INFO estimations bln.RUB
%
10000
105,1 97,5
103,1
120
According to the latest available data8 in Russia the average per capita expenditure on food and drinks is around 4000 RUB monthly (120.2CHF). There are two cities in the country where this index exceeds the average one by 30%, namely: Moscow and St-Petersburg. In these two cities the retail sales comprise over 20% of the Russia’s total retail sales value (Figure 4.1.2). On the whole it should be pointed out that presently the growth rates of retail sales in regions outrun the growth indices of sales in Moscow and St. Petersburg. Accordingly it is predicted that Russian regions will be experiencing a significant growth of retail sales volumes at a faster rate than the two key metropolitan cities. Far-Eastern FD Siberian FD 4% 11%
Ural FD 10% Moscow 17% Volga FD 18% NorthCaucasian FD 5%
80
Retail sales, bln.roubles
60
Grow th rate, %
6000
Fruit and vegetables 7,7%
Dairy products 6,8%
Alcoholic beverages and beer 16,2%
4000 40 2000
Southern FD 9%
7996,7
Meat products (inl.canned meat) 9,2%
9136,6
0
0 2009
2010
2011
Meat and poultry 8,1%
Source: Rosstat, Direct INFO estimations Figure 4.1.1 Retail sales in Russia in 2009-2011
Confectionery 6,4% Bread and bakery products 4,9% Fish and seafood 4,1% Processed fats and oils Sugar 6,2% 1,9% Pasta Flour and grit 1,1% 2,1%
20 7062,4
North-Western FD 5% St-Petersburg 4%
Source: Rosstat, Direct INFO estimations Figure 4.1.2 Retail sales split by Federal Districts in 2011, % Within retail sales: approximately 17.3% falls on the meat and meat products sectory, and 16.2% - on alcoholic beverages and beer. Fruits and vegetables, dairy and confectionery products have 7.7%, 6.8% and 6.4% of the total retail sales value respectively (Figure 4.1.3).
100
8000
Central FD 17%
Others 25,2%
Source: Rosstat, Direct INFO estimations 7
Information as of November 2011
8
Information as of 2Q 2011
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7. Distribution. The distribution industry in Russia encompasses retail, distribution, logistics, catering and community services and involves the process of delivering goods and services. In foodstuffs, the distribution system is an important factor influencing competitiveness. Well-organized distribution channels have significantly developed over the last few years in Russia, particularly in the major population centers, such as Moscow and St. Petersburg, and they are expanding to the regions. Nevertheless, there are still many small distributors and companies that appear and disappear in rapid succession. As the distribution system started to develop much later than in Western countries, the level of professionalism is still considered lower. Furthermore, distributors and importers have to struggle against bureaucratic hurdles that are unknown in Western countries.
7.1 Distribution channels. The figure below presents a general simplified classification of the distribution solutions that food producers currently use in Russia. In each specific case, the distribution of product flows and number of intermediaries on the way from producer to final consumer depends on many factors, such as: location of producer, facilities, product (category, price segment), target market (audience, geographical location), etc. The distribution system of import food products in Russia generally consists of three distribution levels and five kinds of distribution channels. Producer / Importer 7-15%
15-36%
58-68% Distributor
Major wholesaler 17-20%
Key accounts
41-48%
Minor wholesaler
Retail
Retail / Regional chains
Customer
Source: Direct INFO Figure 7.1.1 Distribution Channels of Food and Drinks in Russia37
37
Level 1 of distribution There are two key ways to work in the country for foreign manufacturers: to produce within the country or to import the goods. The latter may be organized by own subsidiary or by some company specialized in importing goods into the country, i.e. an importer, that provide all the services concerning delivery of the goods (customs clearance, warehousing, inventory management, etc.). Importers usually carry a wide range of products and brands and have exclusive distribution agreements with their suppliers. Consequently, on importing on the first level, products are distributed by importers or other representatives who then dispatch them to direct clients, namely: major wholesale companies; distributors; key accounts. Importers also may act both as distributors and wholesalers. Major wholesale companies account in average for 7-15% of total sales of importers, distributors - for 57-68%, key accounts directly order 17-36%. Currently the most popular model of distributing goods is using a network of local distributors. Level 2 of distribution The second level of distribution includes major wholesale companies, distributors and key accounts. The food wholesalers in Russia are usually specialized. They are increasingly under pressure from the retailers and, in some cases, from the producers, therefore, their number is decreasing. As an example of a wholesaler, Arivera can be pointed at (the company imports part of the products itself, i.e. acts as an importer). Arivera carries a wide range of organic products imported from European manufacturers like Alce Nero (Italy), EOS BIO (Germany), Simon Levelt (Holland) and others. The main sales channels for Arivera are premium level retail chains in Moscow, St. Petersburg, the Urals, Siberia, the Far East and South Regions of Russia. Along with wholesale activities Arivera has an Internet shop and provides home delivery. Cooperation with distributing companies is often more convenient than direct contract with retail chains both for foreign manufacturers and for importers as distributors offer a number of options like logistics terminals, shipment, package. In general, distributors are not typically involved with the direct promotion of products. Rather, this is still the foreign company’s or importer’s responsibility. Some Russian distributors have established networks in the Russian regions, which can offer foreign partners greater market penetration.
The main difference between wholesaler and distributor is that the former sells from stock, does not have sales force and usually is not engaged in promotion activities.
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