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Russia Food and Drink Report Q2 2010
Business Monitor International, March 2010, Pages: 107
The Mexico Food and Drink Report provides industry professionals and strategists, corporate analysts, food and drink associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Mexico's food and drink industry.
The updated Food & Drink Business Environment Ratings (BER) table for the emerging Europe region, Russia retains top spot for Q210, despite a still-challenging economic environment. Russia’s sheer size, as well as the relatively fragmented nature of its food and beverages segments (notably vodka), represent some of the major draws. While currently problematic, infrastructure in more remote areas is expected to improve, which will further boost the market’s overall attractiveness. However, rewards are clearly not without risks, with the country still needing to addresses the widespread corruption and cumbersome bureaucracy, which will continue to hamper – but not exactly prevent, foreign direct investment (FDI) in the country.
More recently, in a challenge to the mass grocery retail (MGR) industry in the country, the Russian parliament finally approved a long-discussed draft retail bill, which includes a provision that prevents grocery chains with a market share of over 25% in any city district from opening new stores in the same area. The bill also gives the government power to fix upper price limits on 'socially significant' goods such as food staples if the price rises by more than 30% in a month.
Nevertheless, and despite numerous challenges, as in previous quarters, foreign companies remained interested in Russia. For example, leading French cheese producer Lactalis was in negotiations to acquire Russia's Efremovski. The acquisition would allow Lactalis to enter the hard cheese segment, which accounts for 65% of the total cheese market in the country. Present in Russia since 2002, Lactalis currently operates one plant within the processed cheese segment, but has yet to invest non-organically in Russia, where per capita cheese consumption (at around 10kg) lags behind Western European levels and thus indicates further growth potential.
In the beverages sector, Polish spirits producer Central European Distribution Corporation (CEDC) recently begun the process of buying the remaining 37.8% stake it did not already own in leading local vodka producer Russian Alcohol Group (RAG). The deal is expected to pave the way for CEDC to consolidate its strong position in one of the most promising regional vodka markets – despite the challenges posed by recently introduced minimum prices. The set prices – in addition to the massive hike in beer taxes, both of which are targeting high levels of alcoholism in the country – will stimulate the growth of the soft drinks market. To this end, US behemoth Coca-Cola has recently moved to purchase Russia's fourth largest fruit juice company Nidan, with the aim of overtaking leading soft drinks firms, compatriot PepsiCo and its local asset Lebedyansky.
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