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Strategy Briefing

Russia: Growth Market for the Future

Jan 2009

Price: US$2,600

About this Report

About this Report

The last of the four BRIC economies to be the subject of a special strategy briefing, Russia continues to thrive and has become a consumer power to be reckoned with. With Russian elites already overtaking Europeans in terms of conspicuous consumption, the consumer potential – and with it the scope of Western brands – is boundless once wealth trickles down to the bulk of consumers. This report looks in depth at the key drivers and operator response across all Russian consumer and market sectors.

What this report includes

  • Top-level strategic analysis of how major consumer trends will influence global markets
  • Consumer insight
  • Impact across all relevant consumer markets
  • Unique graphics and case studies
  • Key market snapshots
  • Accompanying presentation to synthesise main findings
     

Why buy this report

  • Identify factors driving change now and in the future
  • Understand motivation
  • Forward-looking outlook
  • Briefings and presentation should provoke lively discussion at senior level
  • Take a step back from micro trends
  • Get up to date estimates and comment

Delivery format

PDF/Word
Downloadable from MyPages

Table of Contents

Table of Contents

EXECUTIVE SUMMARY

Demand Factors

Socioeconomic factors

Demographic factors

Consumer-led factors

  • Summary 1 Opportunities and Challenges Affecting Demand for Consumer Products and Services

Consumer Market Trends

  • Chart 1 Key Consumer Markets in Russia 2002/2007

Outlook

Factors affecting future demand

Sector forecasts

  • Chart 2 Forecast Growth in Key Consumer Markets in Russia 2007/2012

INTRODUCTION

Overview

Consumer spending spurs economic growth

... with a little help from the oil industry

Challenges persist

  • Summary 2 Russia: Key Facts

The Importance of Russia's Natural Resources

Petro-dollars form basis of growth

Moving away from the "petro-state" image

Political Background

The power of the President

A decade of reforms

The emergence of the oligarch

Government pledges to eradicate corruption

Relations with the West deteriorate

THE ECONOMIC PICTURE

Economic Overview

GDP growth

  • Table 1 Russia: Economic Indicators 2002-2007

Inflation

  • Chart 3 Inflation, Real Money Supply Growth and Real Private Sector Credit Growth: January 2001-January 2008

Problems with Infrastructure

The Business Environment

Russian businesses fail to adapt to market economy

WTO membership pending

Onerous regulations deter would-be investors

New laws encourage investment

Multinationals continue to arrive in droves

  • Chart 4 FDI Inflows into Russia 2002-2007

Regional Inequalities

Growth concentrated in Moscow

Economic migration

Magadan, Chukotka, Kamchatka to benefit from investment

Comparison with Other BRIC Markets

BRICs to catch up with G6 by 2041

Effects of the credit crunch

  • Summary 3 Comparison of BRIC Market Economic Indicators

MARKET DRIVERS AND CONSTRAINTS

Growing Prosperity

Higher disposable incomes

The growing elite

Emergence of middle class

Poverty remains rife

  • Table 2 Russia: Households by Annual Income Band 2002-2007

Ownership of luxury durables

  • Table 3 Russia: Ownership of Selected "Luxury" Durables by Income Decile/Quintile (% households) 2006

Changing Spending Patterns

Spending freed up through market reforms

Food and drink still accounts for largest share of budget

Service sectors benefit most from rise in spending

  • Table 4 Russia: Consumer Expenditure by Sector 2002-2007

Demographic Factors

Declining population

Birth rate low but rising

Gender gap and life expectancy

Ageing demographic

Population by ethnicity

Immigration versus emigration

  • Table 5 Russia: Key Demographic Data 2002-2007

Changing Household Structures

  • Chart 6 Russia: Households by Type 2002/2007

Improving Educational Standards

Well-educated workforce

Ambitious youth battle for university places

Russia to change to European model of higher education

Urbanisation Trends

Slowdown in urbanisation

  • Table 6 Russia: Population by Rural/Urban Split 2002-2007

Development of major cities

  • Chart 7 Major Cities 1980, 2000 and 2020

Consumer Borrowing

Banking sector develops

  • Chart 8 Personal and Total Loans Growth Rate, and Personal Loans as a Share of Total Loans Q1 2004-Q3 2007

Credit on the increase

  • Table 7 Russia: Number of Credit Cards and Transactions 2003-2008

Changing Eating Habits

Busy lifestyles fuel convenience trend

Modern retail instils confidence in fresh foods

Rising incomes lead to higher meat consumption

Russians enjoy eating out more

Attitudes Towards Health and Beauty

Unhealthy lifestyles lead to low life expectancy

Beauty is a priority for Russian women

Attitudes Towards the Environment

Pollution reaches record levels

"Green" associated with luxury rather than conscience

Shopping Trends

Shopping malls become leisure destinations

Quality is a priority

Internet shopping takes off

A Culture of Luxury

Flamboyancy re-emerges with new-found wealth

Survey of the rich

  • Table 8 Attitudes of Affluent Consumers Towards Luxury Brands 2007

Potential growth segments

Illegal Trade

Counterfeit goods are rife

Smuggling gradually eases off

Contraband cigarettes threaten retail market

  • Table 9 Values of Counterfeit and Pirated Goods in Russia 2008

The Influence of Media and Advertising

Media trends

Growth in adspend

  • Chart 9 Adspend 2003-2008

Modern Communications

Internet becomes widespread

Mobile phone usership reaches saturation

  • Chart 10 Possession of PCs and Growth of Internet Users 2003-2008

CONSUMER MARKET TRENDS

Packaged Food

Market trends

  • Table 10 Russia: Sales of Packaged Food and Hot Drinks by Sector 2002/2007

Company developments

Soft Drinks

Market trends

  • Table 11 Russia: Sales of Soft Drinks by Sector 2002/2007

Company trends

Alcoholic Drinks

Market trends

  • Table 12 Russia: Sales of Alcoholic Drinks by Sector 2002/2007

Company trends

Cosmetics and Toiletries

Market trends

  • Table 13 Russia: Sales of Cosmetics and Toiletries by Sector 2002/2007

Company trends

Other FMCGs

Market trends

  • Table 14 Russia: Sales of Other FMCGs by Market 2002/2007

Company trends

Consumer Durables

Market trends

  • Table 15 Russia: Sales of Selected Durable Goods by Market 2002/2007

Company trends

Automotives

Consumer Foodservice and Tourism

Market trends

  • Table 16 Russia: Sales of Consumer Foodservice and Tourism 2002/2007

Company trends

RETAIL DEVELOPMENTS

Store-based Retailing

Retail trends

  • Table 17 Russia: Retailers' Sales by Type of Outlet 2002/2007

Company trends

Non-store Retailing

Retail trends

  • Table 18 Russia: Non-store Based Sales by Type 2002-2007

Company trends

OUTLOOK

Political and Economic Prospects

The effects of global recession

Inflationary pressure set to ease

The impact of the Russian-Georgian conflict

General increase in wealth

  • Table 19 Russia: Forecast Economic Indicators 2008-2012

Trends to Watch

Consumers remain optimistic

Status culture to fuel growth of luxury goods

Service is key to good business

Focus to shift to the regions

Illegal trade will remain rife

Higher incomes means more cars

Food safety to take priority over environmental consciousness

Health trend will offer new opportunities

Shopping facilities to expand

Eating out to become more popular

Domestic and international tourism set to increase

Retailing Outlook

Retail trade will continue to consolidate

Modern grocery formats will continue to develop fastest

Internet retailing to grow at expense of direct selling

Vending to benefit from search for convenience

Consumer Market Forecasts

Packaged food

  • Table 20 Russia: Forecast Sales of Packaged Food by Sector 2007/2012

Soft drinks

  • Table 21 Russia: Forecast Sales of Soft Drinks by Sector 2007/2012

Alcoholic drinks

  • Table 22 Russia: Forecast Sales of Alcoholic Drinks by Sector 2007/2012

Cosmetics and toiletries

  • Table 23 Russia: Forecast Sales of Cosmetics and Toiletries by Sector 2007/2012

Other FMCGs

  • Table 24 Russia: Forecast Sales of Other FMCGs by Sector 2007/2012

Durable goods

  • Table 25 Russia: Forecast Sales of Selected Durable Goods by Sector 2007/2012

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