Food and beverage to Russia

(Last updated: 29 Apr 2012)

Trends and opportunities

The market

Russia is one of the most attractive world markets for food and beverage with its 140 million population with European tastes. Russia’s resource-rich economy has emerged from the global financial crisis in a relatively strong position.

Strong economic growth in Russia in the last decade led to growing prosperity and higher levels of disposable income, increasing consumer purchasing power in the food and beverage area. The EIU has estimated annual growth in the food sector at 40 per cent overall in recent years, with premium food and wines demonstrating the highest growth. The economic success of the past decade has given Russian consumers a taste for world-class products and their desire to consume remains strong.

The global financial crisis has not prevented some of the leading market operators from expanding their businesses. Though enormous income disparities remain, a sizeable middle-class is being formed, and according to official statistics approximately one-third of consumers could be identified as ‘middle-class’ (Source: Business Monitor International). Both premium and discount ends of the food market will see the strongest growth over the long-term, according to BMI.

Demand for quality products is expected to continue growing in line with rising incomes, changing tastes and greater awareness of healthy lifestyle choices among Russian consumers. The key trend that is evident is the willingness of Russian consumers to purchase value-added, branded or premium products. Westernisation of life in Russia is leading to increased consumption of organic and healthy products.

Opportunities

The major opportunities in the Russian food and beverage include:

• Value-added food products (organic, healthy, etc)
• Counter-seasonal fruit
• Entry level and (in longer term) premium wine products
• Opportunities for meat exporters
• Investment in local production or value adding

Issues and challenges

The key issues for exporters and investors include:

• Strict food and beverage standards and regulations
• Complicated and costly certification and customs procedures
• High cost of market entry and necessity to share promotion and marketing costs
• Deferred payment terms are generally sought
• Intense competition from other international suppliers

Competitive environment

To make food products more competitive in the market, international manufacturers are increasingly investing in production facilities on the territory of Russia. Foreign investment in this sector is welcomed and is playing an increasingly important role in the development of the Russia’s agriculture and food industry. Local food manufacturing is developing rapidly.

Marketing your products and services

Market entry

Different types of food and beverage products obviously require different market entry strategies. It is important for Australian exporters addressing this market to become familiar with local business practices in Russia. Market research and identification of suitable partners will improve your chances of success. Austrade can assist you in evaluating the market, identifying partners and developing a market entry strategy.

Good market research and strong local partners are two factors that can help you develop a successful marketing strategy to maximise sales of your food and beverage products in Russia.