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Consumer Goods

Russia is the second most attractive retail sales market according to the Global Retail Development Index 2005. Changing lifestyle and stable policies by the Russian government has catapulted the participation of international retailers in the market. Hence, Investors have realized the tremendous opportunities available in the consumer goods sector.

The main reason behind the consumerism boom in the Russian market is the growing economy. A stable economy has resulted in a higher income to the consumers. There is also a huge increase in their living standards. The average monthly income of a Russian is $300 a month. Retailers have targeted the middle-class section of the society, which is nearly 35% of the population. Most of them have a high expendable income. After the recent economic crisis, consumers are occupied with satisfying their immediate needs.

The Russian consumer market has doubled in the last ten years. It is expected to double again in the next five years. This has drawn several US companies for long-term investments in the country. P&G, Coca-Cola, PepsiCo, Mars, Inc. are some of the companies that have invested heavily in the Russian consumer products sector.

Consumer electronics, fashion apparel, food, toys, jewelry, footwear, travel goods and games are some of the consumer goods that have a high demand in the Russian market. Though there are several retailers competing in the major cities such as Moscow and St. Petersburg, potential market is available in the regions of outer Russia. Auchan, Metro, Mosmart, Billa are some of the retailers performing well in the market.

In 2002-2003, consumer goods accounted for $95 million of the total FDI in Russia. Retail sales growth in Russia was 25% in 2004-2008 and is expected to grow 18% by 2013. The predicted retail sales by the year 2013 are estimated to be at $800 billion.

PepsiCo has planned to invest $1 billion for the next 3 years in Russia. It anticipates rise in consumer demand in the coming years in Russia.

Why invest in consumer goods sector of Russia?
  • There are nearly 145 million consumers in Russia.
  • There is a growing competition among multi-national retailers for supplying quality products.
  • The Russian government has slashed income tax rates empowering the consumers with greater buying potential.
  • Bank loans in Russia are very cheap with less interest rates. Consumers are encouraged to ‘borrow and spend’.
  • The Russian government has a well-disposed policy framework, which favors economic growth.

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