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Though the Russian per capita spending power on food and drink is lesser than the average in better-developed markets, Russia continues to attract a huge amount of foreign investment to its food and drink industry due to its large population size. Another attractive feature of the Russian food and drink industry is that it is fragmented. In spite of a challenging economic environment, Russia has managed to bag the top spot in the Food and Drink Business Environment Ratings first quarter of 2010 for the emerging Europe region.
The food and drink industry has attracted a record amount of direct investment by Western as well as domestic companies. It is estimated that approximately $6 billion have been invested in food, drinks and tobacco products production.
As per some estimates, the food and drink industry of Russia is so big that it is responsible for about 60% of the direct foreign investment in Russian economy. The market capacity and thus, the food production is growing at a steady rate.
The overall growth rate of domestic food industry of Russia is approximately 5% to 7% annually and some sectors are growing at the tremendous rate of 15%-20%.
Another point that goes in favor of the food and drink industry in Russia is that the investment cycle of a food industry project is on an average one and a half times lesser than projects of similar size in other industries. The alcoholic beverage (beer, wine, brandy and vodka) and mayonnaise market are very strong sectors in the Russian food and drink industry. The packaged food sector is also growing rapidly.
Several multinational foreign brands are making long-term investments in the food and drink industry of Russia. The American food and drink giant Kraft Foods has invested about US $ 50 million in opening a biscuit manufacturing plant in Russia and Nestle is expanding its foothold in the premium ice cream market. The Anglo-South African beer heavyweight SABMiller is set to start production of Grolsch lager domestically. Domestic players of the food and drink market are aware of this foreign influx and are thus, increasing their investment in production facilities, supply chain and infrastructure. Their aim is to modernize the industry and make it more efficient.
Russia has received most number of points for its per capita spending on food and drink forecast. The spending is set to rise by almost 76% (in terms of local currency) until the year 2014. The overall food consumption in Russia is estimated to rise to US $ 350.9 billion by then. The sales in food and drink market of Russia are increasing because the disposable income of people is rising in the cities and so are employment and urbanization.
The food and drink industry of Russia is growing at a very healthy rate and will continue to do so because the government of Russia is working towards improving the infrastructure in remote areas of the country. This will make the food and drink industry even more attractive to foreign investors.
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