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Brands face Russian crisis

News, 23 December 2014

MOSCOW: A rapid decline in the value of the rouble is seriously affecting the operations of many Western brands in Russia, with some pushing up their prices and others temporarily suspending sales.

Apple has done both in the space of a few days, the tech giant having stopped all trading on its Russia website last week "due to extreme fluctuations in the value of the rouble", and subsequently adding a 35% price increase to its iPhones to follow a 25% increase in November. The rouble price of an iPhone has now risen 69% in less than a month, Bloomberg reported.

The falling value of the rouble not only pushes up the cost of imported goods, but also adversely impacts overall sales figures when translated back into the currencies of a parent company. According to the Financial Times, a report from Citi bank suggests that, outside of those businesses operating directly in the financial sector, drinks companies are most exposed.

Two examples of this are brewer Carlsberg and soft drinks bottler Coca-Cola Hellenic, for both of which Russia accounts for more than 30% of sales.

"Pretty much every company with international aspirations has been looking at Russia," said Freddie George, retail analyst at Cantor Fitzgerald. "But it's not the attractive market it once was." He added that he did not expect the current issues to be resolved any time soon, meaning that many retailers would delay expansion plans.

In further evidence of the extent of the crisis, Carlos Ghosn, chief executive Renault-Nissan has stopped all car sales in Russia, describing the commercial situation there as "a bloodbath".

But sales of luxury vehicles experienced a short-term boom, with Moscow car dealers reporting they had run out of stock as buyers raced to convert depreciating roubles into tangible assets before prices rose further.

"New cars will be manufactured in March, so you'll be able to get one in April," according to a manager at one Moscow Porsche showroom.

Data sourced from Bloomberg, Financial Times, Daily Telegraph, Russia Today; additional content by Warc staff