Insights of Russian consumer good business
Tikkurila Capital Market Day13.06.2012 St. Petersburg
Regional Director Russia & CIS
Mika Koskinen
Valio Russia & CIS
Number 3 on the Russian market right after Pepsico and Danone
Largest Finnish business in Russia & CIS
Sales in Russia and CIS
2 plants in Russia (own one in Moscow, partner plant in Hatchina)
15 export sertified plants in Finland
2 export sertified plants in Estonia
Sales volume 90Mkg and value 320MEUR in 2011. 2012 started on record high level
Market leader in branded cheeses and yellow fats. Top 3 in Moscow and SPb fresh product markets
Market leader in functional and added value products in Russia (HYLA, laktoce free, low-sodium and low-fat)
Best growth potential in the regions and CIS countries
What’s the most feasible target territory for companies making
serious FMCG business in Russia?
© Valio Oy 12.6.2012 4
Huge Emerging Country –Enourmous Potential
142 million consumersGrowing consumer powerUndeveloped FMCG Multifold growth potentialDo you need anything else?This is a wrong map!
CIS
300 million consumersGrowing consumer powerUndeveloped FMCG Expanding chainsMultifold growth potential for decades
THIS IS THE RIGHT MAP – GO AHEAD
Grocery Retail Market Sizes
Biggest food and grocery retail markets by revenue 2011, $trn
Russia Food Expenditure 2000-2014 Food,Retail Sales, Total Value (Per Capita)
Source: Datamonitor
Modern grocers' value market shares
9
Source: Euromonitor International, Retailing Industry
Value (RUB tr) and growth (%) of retail sales in Russia, 2005-2013
Share of Value Sales accounted for by Modern Grocery Retailers
Source: Report Retailing Russia 2011Market analysis and forecasts for 2011-2013
10
Top 30 Developing Countries for Retail Expansion Worldwide*
*By GRDI (Global Retail Development Index)Source: A.T. Kearney Global Retail Development Index.
Top 10 Grocery Retailers –Sales Share By Format (%)
Format Performance in RussiaMoscow and St. Petersburg, 2011
Changes in Clients and Distribution
Sales of consumer goodsSales will continue to focus:
– 2020 – the major part of sales will be carried out through 5-7 retail chains
– The share of independent stores and open markets will be significantly reduced
– Main retail chains will operate throughout the territory of Russia and CIS countries
– Market power of main retail chains will become the dominant.Private labels will grow rapidly.
12
Russian Food Retailers
Source: Reuters
Retail Sales Federal Districts of Russia
1. CentralMoscowRyazanTulaTwerVladimirVoronezhYaroslavl
7. VolgaNizhniy NovgorodSamaraPermUfaSaratovKazan
6. UralsYekaterinburgChelyabinskTyumen
3. NorthwesternSt. Petersburg
5. SiberiaNovosibirskKrasnoyarskOmskIrkutsk
2. SouthernKrasnodar Rostov-on-DonVolgogradStavropol
4. Far EastVladivostok
Dairy Category YTD Growth by channels and regions
Source: AC Nielsen
(1.6)
Private label is still an emerging concept on the Russian market. The opportunity is significant due to the economic disparities inherent to the Russian social make-up.
Russian retail chains have identified private label as a key area of focus and we can expect significant developments in 2011/2012 despite the fact that today Russian consumers are very brand oriented and pay close attention to the reputation and quality of brands
One of the key area for retailers is developing awareness and loyalty to PL products as the market is in its early stages
Future performance of private label in Russia will be determined by retailers’ strategies in terms of pricing and assortment
Private Label Development in Russia
Private Label Share %
Country of originFinnishness or your brand name?
© Valio Oy 12.6.2012 15
Research ResultsPerception of Finland
Case Valio
16
Dairy products origin is very important factor for usersSt-Pete pays more attention to the origin of milk products
15
5
25
21
27
14
48
56
40
9
10
8
7
1
13
Total
Moscow
St.Pete
The most important (5) One of the most important (4) Important (3) Not very important (2) I don't pay attention
B1. How important is dairy products origin to you? %%5-p. verbal scale (1 – I don’t pay attention, а 5 – it is the most important thing)
%%
Base: Valio loyal users, 200 Rs for each city, 400 Rs in total
Top-2-boxes
36%
32%
39%
17
Finland is the preferred producer for both citiesRussia is the second choice, far below Finland
B2. Dairy products of which countries you would buy most probably? Ranking, %%, Top-10 countries
Base: Valio loyal users, 200 Rs for each city, 400 Rs in total
First choice
Moscow St.Pete
50% 60%
13% 30%
6% 2%
6% 1%
3% 2%
5% -
3% 1%
1% 2%
2% 1%
1% 1%
89
75
17
16
21
13
10
22
3
14
54
22
4
3
2
2
2
1
1
1
Finland
Russia
Germany
France
Belorussia
Sweden
Italy
Lithuania
Swiss
Estonia
First choice One of first five
%%
Top-2-boxes
Total Moscow St.Pete
99% 99% 100%
92% 95% 89%
82% 84% 80%
73% 81% 65%
18
The leading claim is ‘Produced in Finland’Then goes ‘Produced by Finnish Valio’
Other claims do not force users to buy dairy products strongly
Base: Valio loyal users, 200 Rs for each city, 400 Rs in total
%%
74
64
34
25
25
28
48
48
0
7
14
19
0
1
3
6
0
1
1
Produced in Finland
Produced by Finnish company - Valio
Produced by Finnish recipe
Produced in Russia
Definitely would buy (5) Would buy (4) Not sure (3) Would NOT buy (2) Definitely would NOT buy (1)
B6. Would you buy the following dairy products? %%5-p. verbal scale (1 – Definitely would NOT buy, а 5 – Definitely would buy)
Finnishness – is it a value?
• Finnishness is a value, the closer you are to Finnish boarder the stronger is positive influence
• Country of origing is the strongest claim
• Produced by a Finnish company comes as the second strongest claim
• Produced by Finnish recipe comes as the third strongest claim
• It’s worth of showing Valio’s roots clearly
© Valio Oy 12.6.2012 19
And this works: drinking yoghurts made by Finnish recipe and under Finnish control are breaking all expectations!
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