Ilona Lepp, Business Development Director, North-Eastern Europe
Like many markets across the globe, Russia is easing its way out of the global recession, and its economy is exhibiting signs of recovery. In fact, with a large and expanding middle class, a youthful population, and vast natural resources, most observers agree that Russia is poised to experience strong economic growth in the years ahead.
Having weathered a long economic storm, Fast Moving Consumer Goods (FMCG) brands are operating in a different economic environment. Throughout the recession and its aftermath, manufacturers and retailers were particularly pressured to reach consumers effectively. The most successful tactic was the tried and true power of distribution. Despite change, the physical environment of Russia remains the same as ever: geographically, Russia is a huge country with a logistically challenging terrain. It has battled a fragmented retail environment and difficult distribution chain for years. Historical wins in the retail market have belonged to companies who invested in and implemented efficient distribution strategies. This was and remains the surefire way to reach Russian consumers in retail outlets beyond the major urban centers of Moscow and St. Petersburg.
FMCG brands and marketers have long known that Moscow and St. Petersburg offered major sales opportunities; currently, the two big cities provide over 20 percent of the country’s FMCG sales volume. To win in the new economy, brands in Russia must reach the millions of consumers in the smaller cities and towns that represent untapped demand. Certain retail outlets have recently expanded in these areas, creating shelf space and sales opportunities for brands that are able to make the requisite distribution investments.
In particular, specialist retail outlets made big gains throughout Russia in 2010, creating new distribution opportunities for even the country’s leading brands.
As the Russian recovery increases in scope and speed, FMCG brands and marketers who act now to position themselves for growth in the outer regions and in the new retail outlets are most likely to see the biggest gains.