The economic slowdown significantly devaluated the Russian rouble during 2014-2015, and decline in disposable incomes significantly affected institutional channels in Russia by reducing the profit margin of institutions due to growing costs and making them more careful in their spending. In addition, government support and investment flows to institutional channels declined, which also hampered development.
Despite the difficult economic conditions in 2016, some services were not dependent on affordability and therefore remained popular. This was mainly due to the accelerating healthcare trend and increasing number of consumers who are concerned about their health. Personal services are very popular with consumers and are therefore attractive to investors.
In Russia, both contract cleaning and contract foodservice are fragmented. Although there are a large number of small and medium sized companies in each region, leading companies such as Sodexo, OMC, and Chisty Svet operate at country level. In addition to the large number of players, the ongoing economic slowdown resulted in the declining demand for such services among clients, which led to increasing competition, especially in the large Russian cities. In addition, the lack of entry barriers allows the industry to be open to new entrants. The intensifying competition among service providers resulted in declining prices as clients started searching for reasonable prices while still demanding high quality. Small, weak companies were therefore more likely to cease trading in Russia.
The private sector grew constantly during the review period, and the importance of private institutions was significant. In 2016, there was a continuous movement away from public ownership of the institutional channels. This was especially seen in finance, insurance, and business services as well as construction, hospitals, personal services, and sport arenas and stadiums.
Institutional channels is expected to see a recovery after the slowdown in 2016. As the Russian economy is expected to grow slowly but constantly and move out of recession, the institutional channels will have a more positive outlook. In addition, private institutions will continue to grow more strongly and support the overall growth of institutional channels. In addition, the increasing attractiveness of different institutional channels will see more investment over the forecast period.
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