Transcript Document
RETAIL RUSSIA Conference Presented by: With assistance from: > TOPICS: • Why Russia? • Market Entry Strategy • Practical Advice - Russia Copyright © 2003 MarketOption, Inc. 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 Copyright © 2003 MarketOption, Inc. Why Russia? Consumer Sentiment: RECORD HIGH due to higher employment and rising incomes According to AT Kearney, a consulting firm, and its Foreign Direct Investment (FDI) Confidence Index from Global Business Policy Council: > Russia joins 25 top FDI destinations > “Russia recorded the biggest positive investment sentiment shift in the entire index, as investor confidence grew 19 percent” Copyright © 2003 MarketOption, Inc. Why Russia? Planned new market entry by region and its share of first-time investment Russia in the 3rd place in the world Copyright © 2003 MarketOption, Inc. Retail Overview Consumption growth: 1-2% more than GDP Disposable income growth: over 30% in 2003 As a result: Consumption remains one of the main growth engines Trade & retail benefit greatly: 8% growth of retail turnover However: Regional market saturation Competition is intensifying Copyright © 2003 MarketOption, Inc. Retail Overview Russia was ranked first in the Global Retail Development Index for the World Emerging Markets in 2003 Main reasons: Largest European food market Increasing spending 12 cities with population of 1 million or more Country RANK Russia 1 China 3 India 5 Ukraine 20 Poland 28 * Source: AT Kearney Copyright © 2003 MarketOption, Inc. Retail Overview Case Study: Juice Segment Competitiveness 1998 Market Share: Over 50% 4% Key Strategies: production, market share, product line development 2003 Market Share: 34% 29% Key Strategies: brand & segment management, regional and international expansion, customer loyalty Copyright © 2003 MarketOption, Inc. Market Entry Strategy Key to success: market entry strategy Market Entry Strategy – a must Others Experience: Q: A: How many companies have been able to grow their revenues and profits by more than GDP growth plus inflation during a five year period? 1 out of 6 (less than 20%) Q: Average margin earned overseas compared to home market? A: 8% * Source: Bain & Company Copyright © 2003 MarketOption, Inc. Market Entry Strategy Company Positioning – growth & profits Profitable and stable core business at home Keys to success: Partners Markets Middle Class Execution Copyright © 2003 MarketOption, Inc. 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 Distribution channels and main players Be competitive Pricing > Resource: BISNIS at www.bisnis.doc.gov Copyright © 2003 MarketOption, Inc. Practical Advice - Russia Key to success: focus on middle class 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%) Key to success: strategy execution Flexibility: adjust & adopt Copyright © 2003 MarketOption, Inc.