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Russian Market Overview
October, 2009
Contents
What Russia is today
Food and drinks market
Apparel and shoes market
Cosmetics and perfume market
Accessories for cars market
Our contacts
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What Russia Is Today
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What Russia is Today (1)

Fast-moving economy:
 Today Russia, along with China and India, is one of the most fast-moving economies of the
world.
 Experts assume that over next few decades fast-moving economies will provide most of the
global economic growth.
 GDP:
 2008 GDP is 1 334 billion Euro which is the 7th biggest GDP in the world.
 GDP per capita is 11 250 Euro.

Population:
 Over 141 million people. The 7th biggest country in the world in terms of population.
 For the last 15 years there had been population decline in Russia but in August 2009 for
the first time in 15 years there was natural population growth by 1000 people.
 Over 70% of the population lives in the cities.
 Economically active population:
 75 million people, almost 95% of them are involved in employment.
Sources: http://www.skolkovo.ru/content/view/350/398/lang,en/
http://ru.wikipedia.org/wiki/%D0%A0%D0%A4
http://news.yandex.ru/yandsearch?cl4url=www.interfax.ru%2Fsociety%2Fnews.asp%3Fid%3D102662&country=Russia
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What Russia is Today (2)

Territory:
 1/9 of the Earth land. The biggest country of the world.

Location:
 Europe and Asia.
 Bordering on 18 countries among which are Norway, Finland, China, North Korea, Japan and
the USA (sea border).
 Trip to Moscow from Tokyo:
 10,5 hour flight from Tokyo.
 Russia is the gateway to CIS - related countries (former part of the USSR territory):
 Ukraine, Belarus, Kazahstan, Azerbaijan etc.
Sources: http://www.skolkovo.ru/content/view/350/398/lang,en/
http://ru.wikipedia.org/wiki/%D0%A0%D0%A4
http://news.yandex.ru/yandsearch?cl4url=www.interfax.ru%2Fsociety%2Fnews.asp%3Fid%3D102662&country=Russia
http://www.polets.ru/cgi-bin/sh.pl?Mode=Custom&Lang=&Source=Custom&CityFromFT=%CD%FC%FE%C9%EE%F0%EA&CityToFT=%CC%EE%F1%EA%E2%E0&Day=12&Month=10&Time=00&Period=0&Sort=w
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What Russia is Today (3)

Big cities of Russia:
 Moscow – capital city with the population of over 10 Mln people.
 St. Petersburg – second biggest city with the population of
over 4,5 Mln people.
 Besides Moscow and St. Petersburg there are 9 cities in Russia
with the population over 1 Mln people:
Moscow
 Chelyabinsk (the Urals region)
 Kazan (capital of Tatarstan)
 Nizhny Novgorod (Center of Russia)
 Novosibirsk (Siberia)
 Omsk (Siberia)
 Rostov-on-Don (south of Russia)
St. Petersburg
 Samara (Center of Russia)
 Ufa (center of Russia)
 Yekaterinburg (the Urals region)
Kazan
Nizhny Novgorod
Sources: http://www.labor.ru/pressarh.php?id=563
http://ru.wikipedia.org/wiki/%D0%9D%D0%B0%D1%81%D0%B5%D0%BB%D0%B5%D0%BD%D0%B8%D0%B5_%D0%A1%
D0%B0%D0%BD%D0%BA%D1%82%D0%9F%D0%B5%D1%82%D0%B5%D1%80%D0%B1%D1%83%D1%80%D0%B3%D0%B0
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What Russia is Today (4)

Level of income and savings:
 According to federal law, monthly minimum subsistence level in Russia is about 120 Euro.
 At the same time in 2008 average monthly income per person in Russia was about 500 Euro
(approximately 18000 Euro per family per year).
 And in Moscow average monthly income per person in 2008 was above 1000 Euro (about
40000 Euro per family per year).
Sources: http://ru.wikipedia.org/wiki/%D0%A0%D0%A4
http://nalog.consultant.ru/online/?req=doc;base=NBU;n=33936
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What Russia is Today:
Attributes of Social and Economic Classes (SEC) (1)

Experts have different points of view on classifying people in Russia and of using different criteria to
classify people.

Certain experts say that the approach specified below (using combination of education level and
income level) is a “western” one and not 100% relevant for Russia.



For example, in Europe normally the higher the education level is the higher the income level is.
In Russia it is NOT always so, university professor can belong to A class by education (he/ she
has got PhD degree etc.) but to C1 or even C2 class by income level.
So at the moment in Russia we continue to use combination of education level and income level
BUT the main criterion is still income level.
While identifying SEC class (especially B class and higher than B) in Russia we normally include
lifestyle questions:
 Number of times per year the person/ his family go abroad, to what countries they go (in case of
B class and higher it should be Western Europe or something exotic, not just Turkey and Egypt
which is affordable for C1 and C2), fitness centers, educational establishments, HoReCa
(restaurant, café, night clubs) they use etc.
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What Russia is Today:
Attributes of Social and Economic Classes (SEC) (2)
Education of the
main earner of the
family
Education of
respondent
Occupation
of respondent
– IF she IS
NOT
housewife
Occupation of
the main earner
of the family –
RELEVANT in
case respondent
is HOUSEWIFE
E
College or
secondary OR
unfinished
secondary
College or
secondary OR
unfinished
secondary
Worker (E.g. unskilled worker),
may be unemployed
D
Lower than
average
College or
secondary
College or
secondary
Worker,
specialist
Worker, specialist
C2
Average
College, higher
also accepted
College, higher
also accepted
Specialist,
qualified
worker
Specialist,
qualified worker
C1
Higher than
average
Higher
Higher
Specialist,
senior level
manager (E.g.
head of
department,
team)
Specialist, senior
level manager
(E.g. head of
department, team)
Income by selfidentification scale
Monthly
income per
family in US
Dollars *
Av. family – 3
members
We can hardly make ends
meet, sometimes we do
not have enough money
for basic things like food
and clothes
Less than 500
We have enough money
for food and clothes but
buying durables (fridge or
washing machine) is a
problem
We have enough money
for food, clothes and
durables but cannot afford
a car
We have enough money
for food, clothes and
durables but cannot afford
a car OR
We have enough money
for food, clothes, durables,
car but cannot afford
apartment
500 - 1000
1001 - 2200
2201 - 5000
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* PLEASE note that in case of regional cities the income will be closer to bottom of scale AND in case of Moscow
– the capital city – income will be closer to high end of scale.
What Russia is Today:
Attributes of Social and Economic Classes (SEC) (3)
Education of the
main earner of
the family
Education of
respondent
Occupation
of
respondent
– IF she IS
NOT
housewife
B
Higher – the
majority, however
theoretically could
be college
At the same time
part of B class can
have MBA
Higher,
theoretically
could be
college
Most
probably
senior level
manager BUT
can be
housewife
Occupation of
the main earner
of the family –
RELEVANT in
case respondent
is HOUSEWIFE
Senior level or top
managers, can
work for big
multinational
companies OR
own a small or
medium-sized
business
A
Higher – the
majority, however
theoretically could
be college
At the same time
part of A class can
have MBA
Higher,
however
theoretically
could be
college
It does NOT
matter, can
be housewife
Top manager,
owner of
companies
Income by self-identification
scale
Monthly
income per
family in US
Dollars *
Av. family –
3 members
We can afford anything, including
buying new car, house, apartment
5001 - 20000
We can afford anything, including
buying new house, apartment in
Russia or abroad.
A class consumers have houses,
apartments at certain (prestigious)
areas of Moscow.
Representatives of A class/ their
families can live abroad, own
property abroad
PLEASE note that by foreign
property here we mean expensive
houses, apartments in Western
Europe or USA and NOT a small
house in Bulgaria which even C1
class can afford now.
Over 20000
* PLEASE note that in case of regional cities the income will be closer to bottom of scale AND in case of Moscow –10
the
capital city – income will be closer to high end of scale.
What Russia is Today:
Attributes of Social and Economic Classes (SEC) (4)

Rough estimations of share of various SECs:




A + B – about 7-10%
 NB! Please note that the share of very rich people is less than 1%.
C1 – 10-15%
C2 + D – about 60%
E - about 15%.
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Food and Drinks Market in Russia
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Food and Drinks Market in Russia
General Tendencies (1)

Before recession food and drinks market in Russia was rapidly growing:
 Retail trade growth – by 13% in value terms in 2008.
 Experts assumed that the main reasons for market growth were as follows:
 Personal income increase that was typical for the Russian market before crisis;
 Relatively low consumption level (as compared to European and American markets)
which ensured possibilities for consumption growth.
 Growth of supermarket/ hypermarket retail channels of medium/ average and above average
segments.

Impact of recession on food and drinks market:
 Growth of consumer interest towards “discounter” retail chains (low segment).
 Decrease of sales of ready-made food in high segment chains (previously office clerks/ middle
level managers could easily afford buying ready-made food for lunch in Azbuka Vkusa chain,
today this segment of our customers tried to reduce their expenses and do not visit Azbuka
Vkusa that often).
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Food and Drinks Market in Russia
General Tendencies (2)

The following tendencies in consumption were typical for the Russian food and drinks market:





Increase of interest towards instant food/ semi-prepared products.
Increase of interest towards healthy food (E.g. growth of “bio segment” of diary products: dairy
products containing vitamins, minerals).
 NB! Both consumers and experts (E.g. doctors) believe that many products available at
supermarkets, especially fruit and vegetables are not healthy enough: their ripening is
boosted by chemicals, they do not contain vitamins any more.
Growing interest towards “eco” products: grown in the ecologically clean areas, without
chemicals: E.g. there are small farms in Moscow region which specialize in growing such
products and provide part of consumers with them.
 NB! Only consumers with above average income can afford it.
Growing fruit and vegetables at “dachas” (summer cottages) for one’s family is also popular
with Russians (mostly consumers with below average and average income).
Considerable growth of baby food category. Reason for this is baby boom which was in
Russia in the last few years.
Growth of Internet sales.
Sources: http://researchandmarkets.ru/lists/4540/news.html
http://www.rb.ru/biz/markets/show/68/
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Apparel and Shoes Market in Russia
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Apparel Market
General Tendencies of the Russian Market (1)








In 2007 the apparel market volume in Russia was 40 billion US Dollars.
Before recession it was constantly growing by 15-20% per year.
However, due to recession, in 2008, according to expert estimations, it was about the same level –
40-41 billion US Dollars.
The main players at the Russian apparel market are international companies which first paid more
attention to Moscow and St. Petersburg and are now expanding to other regions of Russia.
At the moment international apparel players have a bigger share at the Russian market as
compared to the local players.
Overall, there are about 120 international apparel retail chains in Russia.
The annual turnover of each of these chains is about 80-100 million US Dollars.
The following leading international brands in mass market/ average segment are active at the
Russian market:
 Benneton
 Zara
 Mango
 Finn Flare
 Hugo Boss etc.
Sources: http://www.4p.ru/main/research/33794/
http://marketing.rbc.ua/publication/26.02.2009/2879
http://bd.restko.ru/market/1955
http://china.marketcenter.ru/content/doc-2-9469.html
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Apparel Market
General Tendencies of the Russian Market (2)




In general experts note that the share of Russian brands at the apparel market has been recently
increasing.
Popular Russian apparel brands are as follows:
 Sela
 Gloria Jeans
 OGGI
 Kira Plastinina
 Tvoe
However, even local retail chains manufacture most part of their products (80%) in China and not in
Russia.
One of the segments where Russian manufacturers were successfully developing in the past few
years is suit for men (of average price).
Sources: http://www.4p.ru/main/research/33794/
http://marketing.rbc.ua/publication/26.02.2009/2879
http://bd.restko.ru/market/1955 h
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Apparel Market
General Tendencies of the Russian Market (3)

Recession time in Russia had effected Russian apparel market both in a negative and in a
positive way:
 Negative impact:
 Drop of sales, consumer purchase activity.
 During recession period more than 30% of consumers in Russia gave up buying apparel in
the first quarter of 2009 and 15% bought a cheaper brand.
 Positive impact:
 Rental rates for shops went down which gives advantages to new players at the market.
 In 2009 the following international brands have entered the Russian market:
 H&M
 Kika
 River Island
 One Step
 New Look
 IKKS
 GAP
 Palmers
“We have a tough policy related to rental rates. Before recession rental rates in Moscow were
higher than in New-York, Paris or Tokyo. Now the rates have gone down” (H&M management).
 Example of average annual rental rates for shops per square meter in US Dollars:
1800 in May 2008 Vs. 1100 in May 2009.
Sources: http://www.advertology.ru/article71135.htm
Article “Start-up with a discount”/ “Sekret Firmy”, # 6 (287) June 2009
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Shoes Market
General Tendencies of the Russian Market




According to statistics, in Russia consumer buys 1,8-2 pair of shoes per year on average, which is
similar to China (about 2 pair of shoes per year) and less than in Europe (3,8-4,5 per year per capita)
and the USA (6,5 per year per capita).
The range of various price segments is from less than 30 US Dollars per a pair of shoes (low
segment) to more than 250 US Dollars per a pair of shoes (high segment).
 NB! In case of high segment the price can exceed 1000 US Dollars per a pair of shoes.
The Russian market is occupied by international brands, the share of Russian brands is quite small.
 Most of imported shoes come from China.
The following tendencies are typical for the Russian market:
 Italian shoes are traditionally perceived as shoes of high quality but only people with average,
above average income can afford them.
 In Winter most Russians wear boots with fur (natural or artificial) inside.
 Due to a lot of mud and water (melted snow) on the streets in early Spring, late Autumn and
Winter time quite often the leather of boots, shoes leather is damaged by these negative
factors.
 In Winter in Moscow special chemicals are used by municipal authorities to melt snow and
ice in order to make roads, streets less slippery, these chemicals also damage leather of
shoes, boots.
Sources: http://www.restko.ru/market/213
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Cosmetics and Perfume Market
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Cosmetics and Perfume Market in Russia:
General Tendencies (1)




For the recent 5-7 years annual growth of Russian cosmetics and perfume market was 10-15%.
In 2007 the volume of the Russian cosmetics and perfume market was 8,6 billion US Dollars.
In 2008 the volume of the Russian cosmetics and perfume market was 9,3 billion US Dollars.
According to Cosmetics and Perfume Association of Russia, potential volume of the Russian
market is 18 billion US Dollars, so at the moment the market is far from being full.

In value terms 75% of the Russian cosmetics and perfume market is occupied by international
companies.

The leading international players in Russia are as follows:
 Procter & Gamble, L`Oreal, Beiersdorf, Colgate-Palmolive, Unilever, Schwarzkopf &
Henkel, Gillette, Estee Lauder, Oriflame, Avon.

The leading Russian players are as follows:
 Kalina, Nevskaya Kosmetika, Svoboda, Novaya Zarya (low and average price segment).
Sources: http://www.park.ru/rubric.parkru?d=18&m=5&y=2008&rc=116&r=467
http://www.marketcenter.ru/DataBase/Marketing_Research/view.asp?lc=2&id=304
http://www.e-xecutive.ru/community/articles/1081490/
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Cosmetics and Perfume Market in Russia:
General Tendencies (2)

There are following cosmetics sales channels in Russia:









Retail chains specializing in cosmetics and perfume:
 L’Etoile (average segment), Douglas Rivoli (higher segment), Rive Gauche (average
segment), Ile de Beaute (average, average to higher segment).
Supermarkets (any chain where consumers make their regular purchases).
Direct sales/ marketing (buying cosmetics from the company representative).
Open markets (kiosks, small pavilions at big open space specializing in various categories,
including cosmetics).
 NB! This sales channel is more popular with consumers of below average income.
Pharmacies.
 According to expert estimations, this channel is becoming more popular.
Branded cosmetics retail chain – only Yves Rocher.
Buying cosmetics in the Internet.
Buying cosmetics by catalogue by post – very small share.
Other channels (small kiosks, cosmetics departments in
big stores selling different categories of products).
Sources: http://www.park.ru/rubric.parkru?d=18&m=5&y=2008&rc=116&r=467
http://www.marketcenter.ru/DataBase/Marketing_Research/view.asp?lc=2&id=304
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Cosmetics and Perfume Market in Russia:
General Tendencies (3)

Perfume:
 The share of international companies at the Russian perfume market is 97%.
 Leading international players at the Russian perfume market are as follows:
 Procter & Gamble, L'Oreal и Estee Lauder, LVMH.
 About 80% of perfume sold in Russia is imported.
 Leading exporting countries are as follows:
 Germany, France, Poland.
 NB! According to expert estimations, the share of Japan as perfume exporter to
Russia is growing.
Sources: http://marketing.rbc.ua/publication/23.09.2008/2340
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Cosmetics and Perfume Market in Russia:
General Tendencies (4)

Impact of recession:
 According to experts estimations, the decrease at the Russian cosmetics and perfume market
in 2009 (as compared to 2008) could be 5-10% in natural terms.
 However, in value terms there might be an increase at the market since prices of cosmetics
have grown.
 The reason for prices growth is US Dollar and Euro rate growth which effects prices of
imported products.
 Decrease in premium segments.

Recession made retail chains delay their plans of aggressive development:
 Before recession many retail chains specializing in cosmetics and perfume announced
opening of a big number of new outlets in the chain in the next few years.
 However in 2009 they had to delay their projects due to the fact that now it is much more
difficult to get bank loans for such development.
Sources: http://retail.bl.by/articles/detail129972/
http://www.e-xecutive.ru/community/articles/1081490/
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Accessories for Cars Market
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Accessories for Cars Market In Russia:
General Tendencies (1)

In general accessories for cars market is linked to car/ automotive market.


In 2008 car market volume in Russia was 69 billion US Dollars.
As compared to 2007 volume in value terms the market grew by 29% and in natural terms the market
grew by 14%.
Experts explain the difference in growth rates by the following factors:
 Part of Russian consumers switched to more expensive cars.
 Prices for cars went up.


In first half of 2008 the market was growing while in the second half of 2008 there was a decrease at
the market. But at the very end of 2008, in December, there was market growth again.
 Experts explain this burst of consumer activity at the end of the year by the fact that part of
consumers had enough money to buy a new car without taking bank loan, so they were eager
to buy a new car at the end of 2008 before increase of customs tariffs and hence prices in
January.
Sources: http://www.avto.ru/review/post_13858.html
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Accessories for Cars Market In Russia:
General Tendencies (2)

International players at the Russian car market in 2008 experienced sales growth while Russian
manufacturers experienced downturn in sales:
 Honda sales grew by 131%
 PSA Peugeot Citroen - by 67%
 Volkswagen Group - by 62%
 Mazda – by 45%
 Suzuki – by 34%
 Hyundai – by 30%
 GM Group – by 30%
 Toyota Group – by 29%
 Sales of cars of Russian brands went down by 9%.

Car manufacturers continue to consider Russia, along with other BRIC countries as the market with
big prospects:
 E.g. Toyota together with its subsidiary company Daihatsu is working on a new car model
which costs less than 10000 US Dollars specially for markets of Brazil, Russia, India and
China. The model of the new car will be adapted to specific needs of each of the four markets
and will be launched in early 2010s.
Sources: http://www.avto.ru/review/post_13858.html
http://bfm.ru/articles/2009/10/16/toyota-razrabatyvaet-mashinu-dlja-rossii-deshevle-10-tysjach.html
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Our Contacts
Head office Russia:
119049 Moscow, Kaluzhskaya square 1
Tel: +7 495 926 72 00
 Marina Ponedelkova
marina.ponedelkova@marketprofile.ru
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