Hot Summer Helps Retail Sales in Russia

Hot Summer Helps Retail Sales in Russia

Hot Summer Helps Retail Sales in Russia

A relief from the heat came in the form of increased consumption of soft drinks in Russia, which increased 24% since last year. Despite experiencing low levels of consumer confidence since last year, the market is now one step away from changing to positive dynamics as signs of recovery are beginning.

Dwight Watson, Managing Director, Nielsen Russia

Unlike its booming and optimistic BRIC neighbors, Russia has been experiencing the lowest level of consumer confidence. The deepest decline was registered in April 2009 that affected the consumer packaged goods (CPG) market. The drop in sales reached its lowest point in Q4 2009, when the total CPG retail volume decreased by almost 10%.

According to preliminary data, the Russian CPG market is one step away from changing to positive dynamics. For the first time in the past year and a half, the non-food sector reported positive growth in July 2010. The food-sector is still behind, but due to stable growth of basic products, and the jump of sales in seasonal products, the recovery process is speeding up.

Thirst Quenchers

One major contributor to this growth can be attributed to the hot summer weather and the increase in soft drink consumption compared to last year. The National Urban Retail sales volume of carbonated sweet drinks (CSD), ice tea, juices, and Kvass grew by 24% in total, compared to July 2009. And the results were even 8% higher than in pre-crisis July 2008.

The fastest sales dynamics is observed in comparatively young segments such as Kvass (fermented non-alcoholic beverage made from stale dark sourdough rye bread)—where growth was also fueled by consumers’ excitement about the innovative launches. This traditional national drink became an absolute champion with 89% volume growth. Carbonated sweet drinks—the largest segment of the market—grew by 19% in volume and mineral / drinking water rose by 33% in 19 major Russian Cities.

Soft Drinks Dynamics in Russia

Return to Growth

Although other tracked CPG market categories did not report such high growth, the negative trend is bottoming out and we anticipate a return to volume growth. However, recent price increases taken in September are concerning, which could contribute negatively to consumers who need to continue tightening their spending belts. Manufacturers and retailers must address consumer’s need for value in order to drive category sales and market share and ensure success moving into 2011.

Nielsen’s latest Russian Market Tracker Pulse report on consumer packaged goods sales in Russia for the first half of 2010 details the market performance trends throughout 2009–2010. The quarterly tracker is based on Nielsen’s Retail Measurement data across categories from major segments such as packed food and beverages, personal care, home care, cigarettes, pet food—audited by Nielsen on the National Russia geography and contains Nielsen’s fast-moving consumer goods (FMCG) index, food and non-food indices, which contain information on nominal and volume sales dynamics and average price change.