Russian market: macro analysis

Russia is one of the fastest-growing economies in the world. The country’s economy is expected to reach $3.18 trillion by 2018. Russia’s economic performance suffered during the global financial crisis but recovered in 2010 and 2011, due to factors such as government stimulus packages and export growth. Petroleum and iron and steel are the leading industries in the country. To add Russia is one of the most corrupt countries in the world (PESTLE Analysis of Russia, 2013). Its high Corruption Perception Index (CPI) has become one of the major concerns for the investors looking to invest in the country. Russia also suffers from a high homicide rate. Major crimes, including murder and robbery, are quite high in the country, which also reflects the risk of the country’s internal security. But all stated above can be considered as the most general characteristics, which only partly influence market of biscuits.

Biscuits in Russia constitutes up to 40% of the whole segment of confectionery goods due to their popularity as a supplementary products for drinking tea, which is very popular in Russia (Intesco Research Group, 2011). Biscuits is expected to post a CAGR of 2% in constant value terms over the forecast period, supported by stronger branding, a constantly increasing variety of sophisticated fillings and flavours, together with interesting packaging solutions (Pasport GMID, 2014). An increasing tendency towards indulgence is expected to deepen this tradition and strengthen demand for non-traditional and innovative products. Premiumisation will become more notable within ingredients and packaging. Imported biscuits compose only 4% of Russian market, the main importers are Ukraine – 13,7%, Korea – 10,1%, others – Czech Republic, Denmark and Italy (Intesco Research Group, 2011). Despite the fact that international companies lead biscuits in Russia, most of them were able to achieve this through having manufacturing facilities inside the country. The consolidated share of local manufacturers is still expected to prevail in 2013 due to the number of historically strong companies, which own well-known brands. Most Russian regions have their local bakeries and therefore their products are the most popular in those particular parts of the country.

If we conduct PESTLE analysis we may see that the main factors that influence possibility of successful enter of this market are economic and socio-cultural. In general political, technological, legal and ecological factors do not play the leading role.

Political	Economic
·         Current political situation around Russia doesn't threaten entrance of new Mondelez brand as the company already has fecilities in Russia ·         From political point of view the main obstacle for entering Russian market may be corruption and introduction of legislation limitating the imported goods trade or establishing production facilities inside the country ·         Corruption may be a serious problem, but cannot be influenced by the firm ·         Currently there is no political direction for protectionism of local brands in confectionary market	·         Average unit prices for biscuits are set to increase by slightly less than inflation in 2013 ·         To reduce price increase large retail chains implemented various price promotions ·         Increasing competition also helped restrain price growth
Socio-cultural	Technological
·         Gradual saturation of the category ·         Premiumisation is the strongest current trend, which influenced the cookies market: -          unusual flavors and fillings became more important to Russians -          innovations in packaging -          chocolate coated biscuits category is set to demonstrate the highest retail value growth in 2013 at 14% as it is perceived as the premium product	·         Increasing pace of life and demand for convenient storage and consumption – interest in packaged biscuits increased ·         Technological innovations in packaging. Higher number of packaged biscuits being available
Legal	Ecological
·         From legal point of view there is no limitations for importing products or building own facilities inside the country	·         Prices remain closely connected with the fluctuations in commodity prices of cereals, which in turn depend on climate conditions, which cannot be predicted