Western brands too expensive for most Russian consumersby Pierre-Emmanuel Mahias
Director of Strategy, Mindshare
The Russian recession has deeply hurt western brands, which have become in just a year too expensive to purchase for the vast majority of Russians. And while Russian consumers are still struggling to substitute western brands for Russian ones, ironically, there are an increasing number of Russian brands that have successfully crossed the frontiers to enter the global stage.
Not surprisingly, today’s Russian fast-growing brands have much less to do with oil and state ownership than their predecessors. They are entrepreneurial and some of them are consolidating their leading position at the forefront of innovation and technology. For example, Kaspersky is one of the world’s top security software makers for both businesses and consumers. In addition to the seven Russian platforms (search, social, portal) that are already among the world’s top 50 websites in terms of traffic, the last three years have seen the fast development of newcomers emerging from the Russian digital sphere, such as the franchise World of Tanks – a massive, multiplayer online gaming platform.
It would be shortsighted to focus on digital and technology alone. If Russians have lost 60 percent of their purchase power in dollar terms with the current economic downturn, the overall economy has become much more competitive and new brands have emerged in categories as unexpected as beauty care. The successful deployment across Europe of Natura Siberica is a good example of how some Russian marketers have managed not only to reapply best design practices, but also develop unique brand proposition with cosmetics made of natural ingredients from the world’s largest forests. And the combination of relatively low costs, good marketing skills and a scalable domestic market, will transform in the future some of the strongest Russian brands into serious contenders to FMCG global brands.
Last, but not least, living in the largest country in the world in land area; Russians have already developed the industries and the brands to join the dots across a country that stretches over 7,500 miles. Transport is probably the next big thing to watch in Russia, especially with the prospective impact of the 2018 FIFA World Cup, which will be organized in Russia’s five key cities. Indeed, both national players such as Aeroflot and Russian Railways have been through an unprecedented modernization and are now expanding their reach across the world – taking advantage of market deregulation and low labor costs in Russia. In parallel, private airlines such as S7 keep growing and expanding the number of destinations. The same applies to Russian Railways, which is not only building speed trains between key Russian cities, but also taking significant stakes in the European railways.
The recession is also an outstanding opportunity for Russia to become the economic contender it was before the fall of the Soviet Union, as evidenced by the comeback of the legendary Lada car brand in European markets, competing in the fast growing, low-price segment.