Russia - don't be put off!

With food retail sales rising by 25.5% in 2006 to $141 billion, the Russian market offers a tremendous opportunity for British producers. However, would-be exporters to Russia should tread carefully: opaque legislation, widespread corruption and the dominance of state sector giants make this a difficult market to enter.

FFB’s Russian Trade Development Visit, taking place over four days in Moscow on 17-20 September, is designed to introduce British food and drink producers to this high-potential market and help them identify strategies to enter or grow their presence in Russia.

The bear awakens

Russian Gross Domestic Product (GDP) is predicted to grow at a robust 6.5% in 2007. Recent political instability, such as the arrest of Russia's richest businessman Mikhail Khodorkovsky on fraud and corruption charges, deteriorating relationships between the Russian and British Governments, plus an increased number of company acquisitions by President Putin's government, have not deterred Western investors. Auchan and the Metro Group are already present in Russia, and more foreign hypermarket operators are expected to enter the market in the near future. Top importers into Russia include Germany (15.3%), Ukraine (8.8%), China (6.9%), Japan (5.7%), Kazakhstan (5%), United States (4.6%), Italy (4.6%) and France (4.4%).

Middle class appetites growing

The reason for this growing international interest in the country is the continuing strong growth of the Russian middle class, with its appetite for quality, comfort and safety. The middle class have considerable disposable income which they are increasingly keen to spend on Western brands. Whatever disturbances are occurring in higher diplomatic circles, these consumers' incomes continue to grow, presenting a great opportunity to British food and drink producers.

Target: Moscow

Moscow is the best – some might say the only – place to enter the Russian market.
It has the most affluent inhabitants, contributing one-third of Russia’s GDP, despite having only one-tenth of Russia’s population. It also has the most adventurous consumers: Muscovians are the most likely Russians to break with the traditional diet and try new products. Like most large Russian cities such as St. Petersburg, Yekaterinburg, Nizhiny Novgorod, Moscow is witnessing dramatic growth in its retail sector.

Opportunities in Halal, dairy and beer

Halal - With the rise in the Bird flu outbreaks, interest in Halal products among non-Muslim Russians is growing, as Halal food is seen as a safer option. Recent sales figures of Halal food products have risen sharply as a result.
Moscow offers the greatest opportunity for UK Halal exports, as there is only one Halal meat factory in the city. Such factories are more common in Russian republics with a Muslim majority. Some Halal products are imported already from other countries including European states such as the Netherlands.

Dairy – Competition for a piece of the market is growing following investments from both foreign firms and the star of the homegrown scene, Wimm-Bill-Dann. Russia's potential as an emerging market for dairy remains large.

Beer – Russia continues to be an important emerging market for international brewers, despite recent concerns that the country's rapid rise in beer sales was starting to slow.

FFB’s Russia Trade Development Visit & World Food Exhibition

FFB’s Trade Development Visit will take place in Moscow on 17-20 September. Participants will be introduced to the Russian market through store visits and a market briefing, and will have the opportunity to participate in organised meetings with buyers and distributors. There will also be the chance to network with key market players at an evening reception at the British Embassy. The visit is timed to coincide with the World Food Exhibition in Moscow, so delegates will be able to visit the exhibition, which is the largest food show in Russia.

To register your interest, or to discuss whether the Russian market is right for you, contact your client development account manager or Ruth O’Connor, Development Markets Executive, on ro’connor@foodfrombritain.co.uk.

04 July 2007