Marketers must strengthen brands in Russia

05 February 2010

MOSCOW: Marketers in Russia must continue to focus on strengthening their brands, despite the impact of the financial crisis on this emerging market.

The Russian economy contracted by 7.9% last year, with retail sales also declining by 5.5%, and while both of these measures are expected to improve in 2010, the situation remains unclear.

Richard Smyth, Mars' president for Europe and the CIS, said "I remember sitting in my office 18 months ago, with oil prices at $150 (€108; £95) per barrel and the ruble feeling historically strong against the dollar."

"We had a ninth year of consecutive growth, and I could never believe things would go as wrong as they did."

However, Stefan de Loecker, Nestlé's chief executive for Russia and Eurasia, suggested that the recession was not the only reason why many companies have found trading conditions challenging.

"Many businessmen blamed the crisis for the sales drops, but it was not always the case," he said.

"The crisis showed weakness of some brands and products. It revealed that some goods don't offer enough value for money to the consumer and made businessmen improve their assortment."

Nestle and Mars were both among the top ten biggest advertisers in Russia in 2008, a list headed by Procter & Gamble, L'Oréal and Unilever.

However, Warc's most recent Consensus Forecast estimated that adspend levels fell by more than 30% in the country in 2009, although it is predicted that the market will return to growth in 2010.

The Federal Statistics Service also reported last month that consumer confidence levels reached their highest level for a year in Q4 2009, but its barometer of popular opinion still stood at –20 points.

Mikhail Kusnirovich, chairman of Bosco di Ciliegi, the sportswear specialist, argued "in this country, people have a sane consumer mentality, and their consumption depends on the overall mood."

The key for manufacturers, he continued, is to "make the consumer fall in love with you" by delivering items of superior quality, and which appeal to the aspirational ambitions of shoppers.

"Those who could buy a jacket for full price want to feel they can afford it at 100%, and not at a 70% discount," he said.

"Consumers who only can afford quality clothes at 70% to 80% discounts will think 'look how much these retailers overpriced their stuff during good times – even with these discounts they make fair margins'."

Alexander Mechetin, chairman of Synergy, a vodka producer, similarly stated that low-cost lines have suffered the most heavily, while more expensive offerings have been able to improve their position.

"Sales of cheaper vodka brands fell most significantly, as more low-income consumers preferred to buy counterfeit vodka and save money," he said.

"As for premium-priced vodkas, our company had a surprise sales upturn of 20% for our Beluga premium brand."

"A man stays a man, and a consumer stays a consumer. People will keep on buying premium-priced goods and going to restaurants," he concluded.

Data sourced from Moscow Times; additional content by Warc staff