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Global 2015: REGIONS | RUSSIA

A wide variety of brands exist in Russia, including: strong strategically important brands, some international brands, some new private brands, and private brands from the Soviet era that are popular in Russia but mostly unknown anywhere else.

Within this context, brands became more important in Russia during the past decade, as consumers gained more experience with product and brand choice, either through travel or the Internet.

Brands developed in Russia at a slower pace than in other BRIC markets, however, because of politics and market structure. The state continued to predominate in the key strategic industries. The energy giants have international presence and are closely identified with Russia. The state banks are large and powerful, and competing with them is difficult.

At the same time, some strategic brands adopted marketing practices to better understand and respond to changing consumer needs. Sberbank, a bank formed in Czarist Russia is a clear example of the transformation of a heritage institution into a contemporary brand.

Outside of these strategic product and service categories, the government was more open to the presence of Western brands, especially if they partnered with Russian brands and did not impede the development of private local brands.

Several large Western food conglomerates increased activities in Russia through acquisition or joint venture during the
past 10 years. Russian brands in certain categories, including apparel and technology, have expanded across borders, particularly into the neighboring states of Eastern Europe.

Some aspects of brand building in Russia remained particularly Russian. E-commerce has great potential in Russia, a geographically vast country, larger than China but with about one-tenth of the population. Concerned about counterfeiting, however, consumers lack trust. They want to see the goods before they purchase them.

Some hybrid solutions have developed. In one option people order online, receive the product and confirm its quality, before paying in cash. In a variation of the "click and collect" phenomenon that is increasingly popular in the West, Russian retailers sometimes organize "inspect and collect" locations.



Importance of brands likely to grow

What a difference a year makes. The future of brands in Russia today is as uncertain as many other aspects of Russia’s development, following the conflict over Ukraine and the imposition of Western sanctions.

It’s likely that brands will continue to increase in importance. The larger questions are: 

(1) Whether a weakened ruble and political restrictions will inhibit the growth of Western brands; and

(2) Whether Russian restrictions on Western brand expansion could open more space for the growth of Russian brands.

Meanwhile, even the super-wealthy are feeling some pressure, but they’ve shifted some of their purchasing from London or New York to Dubai. Because of the currency value decline, luxury items priced in rubles were relatively cheap, and people purchased them in Moscow.