Russia : a pulse on the consumer products market ...FILE/...trading down; Private label is currently...
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Dmitry Khalilov Consumer Products Leader Commonwealth of Independent States [email protected] + 7 495 755 9757 December 2014 Russia — a pulse on the consumer products market How to adapt to the new reality? Key trends In the current environment, all executives are in “survival” mode, managing their business day by day. © 2015 EYGM Limited. All Rights Reserved. EYG no. EN0637. EMEIA Marketing Agency 1001769. ED None. EY contacts For more information: ey.com/consumerproducts Follow us on Twitter: @EYconsumergoods Ivan Butyagin Consumer Products Advisory Leader Commonwealth of Independent States [email protected] + 7 495 705 9713 What to watch for Source: DT Global Business Consulting GmBH GDP 0.4% (2014 year-end) Inflation 10.2% (2014 year-end) Retail sales 1.8% (November 2014) Ruble/US$ 53 (2014 year-end) Real wages 0.5% (November 2014) • Further Ruble devaluation • Inflation likely to rise to 12%+ • Consumption declining due to lower purchasing power Executives feel this crisis is unique. They cannot see the bottom — which is making their regional and global HQs very uncomfortable — and they are clueless about the next few months. Corporate expectations for 2015 have deteriorated quite badly and some feel that 2016 will be tougher. Companies are surprised by the consumer resilience — with most having sustained single-digit growth with substantial price increases — but they all feel that it will change in early 2015. Key questions for management 1. How do you ensure your portfolio remains relevant and economically viable? 2. How do you balance cash flow within production, payments, etc.? 3. How do you manage shelf prices to protect the bottom line and not lose market share? 4. What are you doing to offset cost headwinds? 5. How are you setting HQ expectations? Key economic indicators Consumers are continuing to focus on value for money but premium is still holding up. Mass products are suffering as the consumer is trading down; Private label is currently low in Russia but likely to increase significantly. Executives are focused on delivering the operating profit, taking as much price increase as they can (to partly recover the devaluation impact) and challenging all costs in their business (some are talking about doing business the “European style”). They are looking at sharing the profit pressures with their partners. All executives recognize that they need to be as agile as they can with their P&L. Companies accept that they need to define a new business model that is fit for purpose in this new reality.
Transcript of Russia : a pulse on the consumer products market ...FILE/...trading down; Private label is currently...
Dmitry KhalilovConsumer Products Leader Commonwealth of Independent States
[email protected]+ 7 495 755 9757
December 2014
Russia — a pulse on the consumer products marketHow to adapt to the new reality?
Key trends
In the current environment, all executives are in “survival” mode, managing their business day by day.
© 2015 EYG
M Lim
ited. All R
ights Reserved. EYG
no. EN0637. EM
EIA M
arketing Agency 1001769. ED
None.
EY contacts
For more information: ey.com/consumerproducts Follow us on Twitter: @EYconsumergoods
Ivan ButyaginConsumer Products Advisory Leader Commonwealth of Independent States
[email protected]+ 7 495 705 9713
What to watch for
Source: DT Global Business Consulting GmBH
GDP 0.4% (2014 year-end)
Inflation 10.2% (2014 year-end)
Retail sales 1.8% (November 2014)
Ruble/US$ 53 (2014 year-end)
Real wages 0.5% (November 2014)
• Further Ruble devaluation
• Inflation likely to rise to 12%+
• Consumption declining due to lower purchasing power
Executives feel this crisis is unique. They cannot see the bottom — which is making their regional and global HQs very uncomfortable — and they are clueless about the next few months. Corporate expectations for 2015 have deteriorated quite badly and some feel that 2016 will be tougher.
Companies are surprised by the consumer resilience — with most having sustained single-digit growth with substantial price increases — but they all feel that it will change in early 2015.
Key questions for management
1. How do you ensure your portfolio remains relevant and economically viable?
2. How do you balance cash flow within production, payments, etc.?
3. How do you manage shelf prices to protect the bottom line and not lose market share?
4. What are you doing to offset cost headwinds?
5. How are you setting HQ expectations?
Key economic indicators
Consumers are continuing to focus on value for money but premium is still holding up. Mass products are suffering as the consumer is trading down; Private label is currently low in Russia but likely to increase significantly.
Executives are focused on delivering the operating profit, taking as much price increase as they can (to partly recover the devaluation impact) and challenging all costs in their business (some are talking about doing business the “European style”). They are looking at sharing the profit pressures with their partners.
All executives recognize that they need to be as agile as they can with their P&L.
Companies accept that they need to define a new business model that is fit for purpose in this new reality.
