RETAIL RUSSIA Conference > TOPICS: Why Russia? Market Entry Strategy Practical Advice - Russia...

RETAIL RUSSIA Conference

> TOPICS:

• Why Russia?• Market Entry Strategy• Practical Advice - Russia

Copyright © 2003 MarketOption, Inc.

Presented by: With assistance from:


Why Russia?

> Solid Market Fundamentals

GDP Growth: 6.9% so far this year; 6.0% forecast for this and next year

Inflation effectively contained at 15%

> Rapidly Improving External Factors

Relative political stability: market economy rating

Moody’s and S&P Upgrades: Investment Grade

Overall positive change toward Russia business environment


Why Russia?

> Russia joins 25 top FDI destinations

> “Russia recorded the biggest positive investment sentiment shift in the entire index, as investor confidence grew 19 percent”

According to AT Kearney, a consulting firm, and its Foreign Direct Investment (FDI) Confidence Index from Global Business Policy Council:

Consumer Sentiment: RECORD HIGH due to higher employment and rising incomes


Why Russia?

Planned new market entry by region and its share of first-time investment

Russia in the 3rd place in the world


Retail Overview

Consumption growth: 1-2% more than GDP

Disposable income growth: over 30% in 2003

Consumption remains one of the main growth engines

Trade & retail benefit greatly: 8% growth of retail turnover

As a result:

However:

Regional market saturation

Competition is intensifying


Retail Overview Russia was ranked first in the Global Retail Development

Index for the World Emerging Markets in 2003

Country

* Source: AT Kearney

RANK

Russia 1

China

India

Ukraine

3

5

20

Poland 28

Main reasons:

Largest European food market

Increasing spending

12 cities with population of 1 million or more


Retail Overview

Case Study: Juice Segment Competitiveness

Market Share: 34% 29%

Key Strategies: production, market share, product line development

Market Share: Over 50% 4%

1998

2003

Key Strategies: brand & segment management, regional and international expansion, customer loyalty


Market Entry Strategy

Others Experience:

1 out of 6 (less than 20%)

8%

How many companies have been able to grow their revenues and profits by more than GDP growth plus inflation during a five year period?

Q:

A:

Average margin earned overseas compared to home market?

Q:

A:

* Source: Bain & Company

Market Entry Strategy – a must

Key to success: market entry strategy


Market Entry Strategy

Company Positioning – growth & profits

Profitable and stable core business at home

Keys to success:

Partners

Markets

Middle Class

Execution


Practical Advice - Russia

Key to success: partners

Develop close partnerships: business & personal

Ensure your partners value the relationship

Trust & manage

Key to success: know the market

> Resource: BISNIS at www.bisnis.doc.gov

Distribution channels and main players

Be competitive

Pricing


Practical Advice - Russia

Key to success: focus on middle class

Key to success: strategy execution

Flexibility: adjust & adopt

Real income growth: 10% this year; double by 2008

Consumption model becomes more western

Spending:> More than 50% on food products

> Food vs. Non-food – almost double the rate of growth (4.5% vs. 8%)

RETAIL RUSSIA Conference > TOPICS: Why Russia? Market Entry Strategy Practical Advice - Russia...

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