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RETAIL RUSSIA Conference
Presented by:
With assistance from:
> TOPICS:
• Why Russia?
• Market Entry Strategy
• Practical Advice - Russia
Copyright © 2003 MarketOption, Inc.
Why Russia?
> Solid Market Fundamentals
GDP Growth: 6.9% so far this
year; 6.0% forecast for this and
next year
Inflation effectively contained
at 15%
> Rapidly Improving External Factors
Relative political stability:
market economy rating
Moody’s and S&P Upgrades:
Investment Grade
Overall positive change toward
Russia business environment
Copyright © 2003 MarketOption, Inc.
Why Russia?
Consumer Sentiment: RECORD HIGH due to higher
employment and rising incomes
According to AT Kearney, a consulting firm, and its
Foreign Direct Investment (FDI) Confidence Index
from Global Business Policy Council:
> Russia joins 25 top FDI destinations
> “Russia recorded the biggest positive
investment sentiment shift in the entire index,
as investor confidence grew 19 percent”
Copyright © 2003 MarketOption, Inc.
Why Russia?
Planned new market entry by region and its share of
first-time investment
Russia in the 3rd place in the world
Copyright © 2003 MarketOption, Inc.
Retail Overview
Consumption growth: 1-2% more than GDP
Disposable income growth: over 30% in 2003
As a result:
Consumption remains one of the main
growth engines
Trade & retail benefit greatly: 8%
growth of retail turnover
However:
Regional market saturation
Competition is intensifying
Copyright © 2003 MarketOption, Inc.
Retail Overview
Russia was ranked first in the Global Retail Development
Index for the World Emerging Markets in 2003
Main reasons:
Largest European
food market
Increasing
spending
12 cities with
population of 1
million or more
Country
RANK
Russia
1
China
3
India
5
Ukraine
20
Poland
28
* Source: AT Kearney
Copyright © 2003 MarketOption, Inc.
Retail Overview
Case Study: Juice Segment Competitiveness
1998
Market Share: Over 50%
4%
Key Strategies: production, market share, product line
development
2003
Market Share:
34%
29%
Key Strategies: brand & segment management,
regional and international expansion, customer loyalty
Copyright © 2003 MarketOption, Inc.
Market Entry Strategy
Key to success: market entry strategy
Market Entry Strategy – a must
Others Experience:
Q:
A:
How many companies have been able to grow
their revenues and profits by more than GDP
growth plus inflation during a five year period?
1 out of 6 (less than 20%)
Q:
Average margin earned overseas compared to
home market?
A:
8%
* Source: Bain & Company
Copyright © 2003 MarketOption, Inc.
Market Entry Strategy
Company Positioning – growth & profits
Profitable and stable core business at home
Keys to success:
Partners
Markets
Middle Class
Execution
Copyright © 2003 MarketOption, Inc.
Practical Advice - Russia
Key to success: partners
Develop close partnerships: business & personal
Ensure your partners value the relationship
Trust & manage
Key to success: know the market
Distribution channels and main players
Be competitive
Pricing
> Resource: BISNIS at www.bisnis.doc.gov
Copyright © 2003 MarketOption, Inc.
Practical Advice - Russia
Key to success: focus on middle class
Real income growth: 10% this year; double by
2008
Consumption model becomes more western
Spending:
> More than 50% on food products
> Food vs. Non-food – almost double the
rate of growth (4.5% vs. 8%)
Key to success: strategy execution
Flexibility: adjust & adopt
Copyright © 2003 MarketOption, Inc.