Income in Russia has soared from an average of US$1185 per capita in 2001 to US$4803 per capita in 2007 – and this impressive growth translates into an emerging middle class, higher disposable incomes, and a new set of consumer demands for food firms to cater to.
National Starch Food Innovation has been present in Russia for about ten years, Thomas Barth, sales manager for Central and Emerging Europe, told FoodNavigator.com. Although it has always had sales staff on the ground there, the company has just appointed a new regional sales manager for Russia, Kazakhstan and Belarus, Tatiana Matveeva.
“The food industry has been very focused on Greater Moscow and the south west, around St Petersburg,” said Barth. “Now there are other interesting regions like Volga, Siberia, southern Russia and the Urals.”
This makes up “quite a sizeable market in terms of consumer living”, as people have prospered in the last few years and the middle class has grown.
Indeed after opening its first store in Moscow this year, French retailer Carrefour is understood to be planning more outlets in 20 cities across the country.
This decentralisation of affluence away from the two metropolitan hubs has played a part in National Starch’s decision to increase its sales force and cover more ground.
“Russia is just big,” he said. “Even from A to B in Moscow is a long way.”
Where international meets local
Barth said that Russia is highly competitive because of the size and importance of the market. The major international companies entered early, and that has translated into sales potential for ingredients firms who import or have operations on the ground.
Despite the new spending powder, affordability is still an important driver for various industries. However quality and availability are also increasing in importance, and there is demand for more sophisticated and convenient consumer products.
That makes for some different discussions between ingredients suppliers and their customers. “Before it was price price, cost cost. Now we are talking about sophisticated food categories”.
Certainly in Moscow and St Petersburg, consumers are tending to travel more and bring back tastes of foreign food, such as Mediterranean-style cuisine and foods marked as organic, alongside traditional Russian tastes.
“In a Moscow supermarket you can see the same foods as you see in London.”
Nonetheless, National Starch does not just serve the multinationals – even though it may build relations with them in other market and be able to translate that into other countries like Russia.
Barth noted that there are some very successful local companies and some, like dairy firm WimmBillDann, are market leaders.
The future
Over the next five to ten years there is an expectation that the Russian potential will continue to grow, necessitating more resources on the ground.
“It is important to make sure you get more resources to serve the market and care for more customers,” said Barth.
National Starch does not presently manufacture its ingredients in Russia, but imports them from other sites – and setting up a facility is not in the plans for the short- to medium-term.
“It is very far-thinking,” Barth said, but added “we may need to consider it in the future.”