The Impact of Coronavirus on FMCG and Service Sectors in Russia

June 2020

The Coronavirus (COVID-19) pandemic has heavily impacted many sectors of the economy. Increasing product prices, intensifying unemployment and weakening disposable income have encouraged conscious consumption. Consumers’ interest is centred around personal health and home due to lockdown restrictions. Limitations on out-of-home entertainment and physical retail and services have made consumers rely on e-commerce and digital services.

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Key findings

Economic downturn signals challenging future

COVID-19 pandemic heavily hit in Q1 2020 but it was not the only challenge Russia has experienced. Local currency devaluation due to the oil price war between Saudi Arabia and Russia after the failed OPEC deal at the beginning of March, has worsened the situation. Consumer prices are expected to increase due to raw material costs and foreign trade disruption as well as growing unemployment rates which will weaken consumers’ disposable income. Consequently, many sectors of the economy are suffering from decreasing purchasing power.

COVID-19 lifestyle is changing consumption habits

The pandemic has heavily focused the attention of consumers around personal health and home due to lockdown restrictions. Personal health and wellbeing importance was already in the spotlight pre-COVID-19, thus, with current threats, this trend is expected to evolve. Stay-at-home and self-isolation policies are foreseen to have an irreversible impact on how consumers view their living spaces in the long term. Out-of-home entertainment and services are the ones losing the most from the trend shift, while the products and services aimed to make the living space more convenient are benefiting from COVID-19’s impact.

E-commerce benefiting from crisis

With various restrictions on physical retail and services as well as challenges, connected with leaving the home space, many consumers rely on e-commerce as the main means of goods’ consumption. An outperforming demand has encouraged business to respond accordingly and diversify. Many are setting up new logistical solutions, foodservice players are compensating by delivering groceries and other service providers are tapping into home delivery.

Introduction

Scope
Key findings
Challenging economic environment worsened by pandemic
GDP growth in Russia will turn negative under each C19 scenario

Alcoholic Drinks

Negative outlook as the government is pushing for more restrictions
Downtrading and lost occasions
Potential growth for e-commerce channel

Apparel And Footwear

Apparel and footwear market severely hit by COVID-19
Retailers seek new solutions

Beauty and Personal Care

COVID-19 pandemic to accelerate growth of hand care products
E-commerce and large-format grocery stores will benefit

Consumer Appliances and Electronics

Short-term demand prior to facing another drop
Technological advancements contributing to growth in crisis

Consumer Foodservice

Pandemic forces Russian consumer foodservice in to desperate situation
Foodservice delivery growth will not compensate losses

Consumer Health

Consumer health in Russia remains stable
V itamins and dietary supplements likely to see sales boost

Home Care and Tissue and Hygiene

Surface care to lead growth in 2020
Retail tissue benefiting from panic buying in 2020 due to COVID-19

Non-Alcoholic Drinks

Retail capitali s es on lost horeca and B2B sales , e-commerce on the rise
Hot drinks to see growing demand in 2020
Bottled water is of growing demand for home consumption

Packaged Food

Revitalising traditions: rushing for baking and cooking ingredients
Old habits revive easily: trading down for economic options
Time, place and occasion: bringing online shopping up to date

Retailing

Short-term grocery increase versus significant decline of non-grocery
Current situation is true disruptor for e-commerce in Russia

Travel

Domestic tourism starts recovery first
Airlines suffer one of the biggest hits from COVID-19

Video Games

Video games: a driving force of affordable hometainment
E-sports arrive in time to compensate for traditional sports

Conclusion

What changes to expect in 2020 and beyond?
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