” We believe the likely evolution of Russia over the coming decade will be supportive of the consumer story.
Renaissance Capital Russia, Russia Tacks Left 5th July 2013
Russia, with a population of 143.5 million, is the largest consumer market in Central and Eastern Europe and Moscow is the city state that, larger than London, is the engine of this consumer demand.
Moreover, Russian consumers are culturally unique due to a specific set of historical circumstances. Very high demand for new, luxury or branded products and a strong aspiration for a higher standard of living is perhaps a by-product of a system that failed to meet more than basic consumer needs. The willingness of a Russian consumer to spend all disposable income and savings whatever the state of the economy is likely connected to the mistrust of banks and the ability to be self-sufficient which is no longer a feature of Western economies.
This consumption demand exists despite the fact that quality banking services are not yet available to all. This is where the growth is. Lending continues to grow at double digit rates whilst household debt remains low. Consumers will double to 40% of income the amount paid on debts before levels begin to reach those in Western Europe.Trinity’s events are focused exclusively on growth sectors of the “new Russia” driven by consumeris.These in turn are increasingly being driven by the revolution in communications and technology. The key sectors are e-commerce, retail/fmcg, pharmaceuticals, TMT. Alongside these Trinity is developing Large Scale Events (LSE’s) in other underpenetrated B2B sectors such as Transport and Logistics, Financial Services and Infrastructure Development.
In 2013 Russia became Europe’s largest retail market with a turnover of €474,3bn. For producers Russia is now their Number 1,2 market. Strong consumer demand and high levels of disposable income are fuelling this retail expansion. The modern retail environment is becoming more diverse, with sectors such as luxury, apparel, and consumer electronics booming and quickly expanding outside of major cities.
According to the “2013 Global Retail Development Index”, by international consulting company A.T.Kearney, Russia retains a high potential for intensive growth of international retail business. Today, there are 13 cities with over one million citizens in Russia able to offer infrastructure suitable for retail trade. Currently organised retail market is only 57% the overall. Growth is predicted at 6% p/a 2014-16.
Russia’s retail trade turnover according to Accenture report of 19.09.2013
2012 was the third consecutive period when the IT market in Russia recorded a healthy double-digit growth rate. According to the Central and Eastern Europe research business PMR in their July 2013 report “IT market in Russia 2013”. The sales of IT products and services in Russia increased to almost €17bn, 16.4% up on 2011. It is expected to reach €18bn in 2013.The Russian government has started to pay more attention to the development of the IT industry in the country as a sector enabling Russia’s growth and modernisation. Legislation to improve the performance of high-tech business in the country include a reduction in the social tax for IT companies to 14% of gross salary (compared to 30% for other industries; the tax facilitations are planned to be in place until 2021) and financing technology parks. The tax facilitations are used by more than one third of Russian IT companies. They also have less regulatory and legacy burdens of the “heavyweights” of “Old Russia”.
In telecommunications, the market is forecast to continue to grow over the next three years, triggered by internet access services provision market, IP TV and different content services developed for mobile and fixed networks.
According to Ernst and Young’s “Survey of the Pharmaceuticals industry in Russia – 2012”, the volume of the Russian pharmaceutical market grew by 12% in 2011, amounting to €17,3bn (including VAT) at end consumer prices. This growth figure easily betters results seen on the global market (5-7%).
The report concludes that in overall terms, good foundations have been laid for the future development of the healthcare sphere. In accordance with the Strategy for the Long-Term Socio-Economic Development of the Russian Federation, the volume of state healthcare expenditure will increase over the next nine years and will amount to 5.5% of GDP by 2020 (3.8% in 2012)