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Functional Beverage Market in Russia

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  • 98 Pages
  • October 2021
  • Region: Russia
  • Policy2050
  • ID: 5514958

Consumer Perceptions and Habits Still Vary Significantly by Region.

This approximately 24,000-word report aims to shed light on an important market, with over 200 aggregated quantitative insights about the Russian non-alcoholic beverage market as well as relevant consumer behaviors, commercial developments, and public policies.

While the report is mostly focused on beverages positioned as being “functional,” much of the material would also be useful for any consumer goods company attempting to introduce or more effectively market a healthy food or product within Russia.

A large amount of the information within this report is appearing in the English language for the first time. This report references and translates Russian information sources, including audio and video, that otherwise would not be easily accessed by Western executives.

A quarter of Russians surveyed by the Levada Center (a Russian sociological research organization) indicated that they tried to boost their immunity against COVID-19 by taking vitamins and supplements. Russians consider many natural ingredients to be immunity-boosting, sometimes attributing a level of medicinal benefits to traditional ingredients that has not been confirmed by scientific research.

Russian consumers want healthier food and beverage products - in particular, freshness/natural/traditional ingredients - but they’re also concerned about inflation. Those interests and concerns were evident pre-COVID.

The Russian carbonated water market is said to be approximately the same as the bottled water market in terms of volume. It’s bigger though in terms of revenue as the product is more expensive due to the perceived value-add and branding. Many “children’s water” brands appear to be profiting from parents’ concerns around quality and safety.

Effective market research must account for key cultural and structural differences.

In terms of beverage export markets, this means knowing where your product is most relevant and how it can be repackaged, reformulated, or rebranded to gain even more relevance. The Russian market is potentially lucrative but it carries a high degree of risks and requires a high degree of patience. Processes might be more protracted and less defined or transparent.

With careful attention to detail, this report helps to guide strategic decision-making. It is structured as follows:

  • Introduction to the Functional Beverage Market in Russia: An introduction and executive summary sets the stage for the functional beverage market in Russia.
  • Drivers of a Healthy Lifestyle: This section identifies the key drivers that could increase functional beverage consumption in Russia over the long-term. For ease-of-use, the report breaks down data that may be valuable to makers of beverage products positioned as beauty drinks, beverages with potentially immunity-boosting properties, energy drinks/nootropic beverages, and calming beverages.
  • Better Product, Higher Prices: This section looks at the viability of switching from higher volumes to higher perceived value across Russian beverage aisles, brick-and-mortar or virtual. This is prefaced with a summary of the financial performance associated with recent CPG industry evolutions.
  • On a global basis, Red Bull helped to reframe the way that consumers think about pricing, volume, and functional benefit but the Russian market is unique as it seems to be periodically hit with financial crises, the most recent being COVID-19. These economic setbacks have included levels of inflation that psychologically scarred some Russian consumers and encouraged habits of practical spending or frugality.
  • Digital Trends of Russian Consumers: This section looks at Russian ecommerce, new distribution options, barriers to digital adoption, and the fast growth in smart lockers.
  • The Challenges of Doing Business in Russia: This section lists off the compelling reasons to export in general. It outlines the customized approach that is required for Russia, and details the very significant political and economic risks associated with this market.
  • Russia and China, Trends Comparison: This section notes the congruent economic interests of these two countries and the ways that they align with the financial interests of multinational corporations. These markets have many similarities but there are also many subtle yet significant cultural differences.
  • Category Opportunities and Trends: Finally, and most importantly (from a commercial perspective), this section identifies the functional beverage opportunities and trends that stand out on the Russian market. These insights are useful for product development and the marketing of products in Russia.

This report will provide comprehensive answers to the following key questions:

  • What quantitative and qualitative insights illuminate the unique characteristics and categories of the Russian beverage market?
  • How has the pandemic affected product interests and consumer behaviors?
  • What are the unique cultural attributes of the Russian beverage market? How are these factored into marketing strategies?
  • How should product evolutions and socioeconomic conditions be factored into pricing strategies?
  • What is the status of digital adoption and infrastructure in Russia?
  • What is the impact of politics on the risks and opportunities in the Russian beverage market?
  • How should multinational companies manage the relationships that are essential to success in Russia and prepare for possible legal complications?
  • What are the similarities and differences between the Russian and Chinese export markets?
  • How have lingering impressions and associations from the USSR affected perceptions of consumer goods and consumer behaviors?
  • How have inflation fears in Russia shifted consumers’ focus to value, and how is ecommerce enabling them to more carefully sort and scrutinize beverage products?
  • What should multinational consumer goods companies know about Russian consumers’ general belief in natural, traditional, and fresh ingredients? How might this affect the market viability of existing products or new categories?
  • What are the unique drivers of water category consumption in Russia?
  • Why are energy drinks, and calming drinks, both capable of addressing the needs of Russian consumers, as indicated by surveys?
  • Why has the transition to plant-based milks been more limited, or delayed, in Russia?
  • How could functional beverages, especially functional dairy products, potentially address the nutritional and hydration needs of the elderly Russian population and align with public health programs?
  • How might local or iconic soft drink brands be successfully scaled or leveraged in the creation of new beverage categories?
  • How does seasonality affect the rate of consumption and quality of kvass?
  • Why are juice sales declining in Russia?

Table of Contents

1. Introduction to the Functional Beverage Market in Russia
1.1 Key Benefits of this Report
1.2 Target Audience
1.3 Companies Mentioned in this Report
1.4 Methodology
2. Executive Summary
3. Drivers of a Healthy Lifestyle
3.1 Yandex Wordstat Data
3.2 Data for beauty drinks
3.3 Data for immunity-boosting beverages
3.4 Data for energy drinks/“nootropic” beverages
3.5 Data for calming beverages
4. Better Product, Higher Prices?
4.1 Premium Pricing and the Russian Market
5. Digital Trends of Russian Consumers
5.1 Ecommerce
5.2 Barriers to adoption
5.3 Fast growth in the click-and-collect space
6. The Challenges of Doing Business in Russia
6.1 Reasons to Export
6.2 Russian Export Considerations
6.3 Dealing with interference
6.4 Legal and compliance challenges in Russia
6.5 The Lag of Perceptions
6.6 The Elephant in the Room
6.7 The Relative Degree of Difficulty
7. Russia and China, Trends Comparison
7.1 China
7.1.1 An appetite for novelty
7.1.2 Ads should depict beverages in the home
7.1.3 China is the next China
7.1.4 Brand loyalty will be tested as frugality increases
7.1.5 Shoppers are going digital
7.2 Comparisons with Russia
7.2.1 How Russians feel about product novelty
7.2.2 Unemployment and self-isolating in Russia
7.2.3 Less optimism about the Russian market
7.2.4 Russians and brand loyalty
7.2.5 Russians are using some of the same digital platforms
8. Category Opportunities and Trends
8.1 Functional dairy products on the Russian market versus dairy alternatives
8.1.1 Relevant policy drivers
8.1.2 Functional dairy products
8.1.3 Lab milk?
8.2 Retro drinks & retro + functional are a huge opportunity
8.2.1 Kvass and traditional beverages
8.2.2 The precedents in reformulation
8.3 Beverages for the elderly
8.3.1 Functional beverages with added fiber
8.3.2 Functional dairy products have strong appeal
8.3.3 Dehydration among seniors
8.3.4 Beverage recommendations for seniors
8.3.5 Additional factors for consideration
8.4 Highlighting family in beverage marketing
8.5 Regional soft drink brands aren’t traveling as far as they could
8.6 The water category is and will remain important in Russia
8.6.1 Water category data
8.6.2 Drinking water specifically for children
8.7 Energy drinks remain a commercial opportunity with regulatory risks
8.8 Juices and nectars are falling out-of-sync with consumer trends
8.9 Key takeaways
8.10 Infographic 1: The Russian Non-Alcoholic Beverage Market
8.11 Infographic 2: Russian Beverage Trends

Companies Mentioned (Partial List)

A selection of companies mentioned in this report includes, but is not limited to:

  • PepsiCo
  • The Coca-Cola Company
  • Red Bull
  • Mars, Inc.
  • Multon
  • Sady Pridonya
  • Jeunesse
  • Dobry
  • Imunele
  • Laimon Fresh
  • Borjomi
  • Svyatoy Istochnik
  • Chernogolovka Sodas
  • Kvass brands
  • Magnit
  • X5 Retail Group
  • Yandex
  • VKontakte
  • PickPoint
  • Utkonos
  • Aliexpress Russia
  • DiDi
  • Paper Planes
  • GfK Rus
  • Mildberry
  • Ipsos
  • Albion Overseas
  • Frontier Strategy Group
  • Bass, Berry & Sims
  • All-Russian Dairy Research Institute
  • OPORA Russia Commission for the Development of the Soft Drinks Industry