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Cracking Russia: Re-thinking operating model, talent, retail relationships and government intervention - EY - Global

Cracking Russia: consumer product approaches in 2011

Re-thinking operating model, talent, retail relationships and government intervention

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Relations with retail are not entirely brutal; there is still space for win-wins, especially on the premium side.

Operating model – striking the right balance

Getting the right operating model is critical to success. This is particularly true in markets such as Russia where companies face high operating costs and the challenges of a fast-changing environment.

Local managers need autonomy and authority to respond quickly to the evolving needs of the market. But leveraging global resources, leading practices and scale is also vital to allow local teams to focus effectively on execution.

There is often no perfect structure, but executives agreed on the importance of having a hybrid operating model to strike the right balance.

Making talent work

Human resources and talent management still top the agenda for many executives. The demand for talent is extremely high, with voluntary turnover levels back at pre-crisis levels of 14% to 17%.

Demands for higher salaries are intense, and companies have to work harder to sell themselves to applicants to attract and retain the best talent. Many businesses are concerned with how best to manage people and in particular to encourage better collaboration, teamwork and discussion.

Reassessing retailer relationships

More consumer products companies in Russia, as in other emerging markets, are paying extremely close attention to route to market, evaluating their supply chains and reassessing their relationships with retailers.

This is not to say that relations with retail are entirely brutal; there is still space for win-wins, especially on the premium side, but the relationship between retailers and manufacturers has changed and is continuing to evolve.

Government intervention

Government intervention is a fact of life in the Russian market. Executives are used to dealing with government moves and adapting to government influence, both positive and negative.

One example of government involvement is a public health campaign aimed at getting three million people into sports every year. The possible effect on consumer products companies is an increase in sports apparel sales and in performance drinks, juices and flavored waters.

However, some intervention may have negative effects for consumer product companies. For example, in 2010, ministers tripled the tax on beer and introduced a minimum price on vodka of RUB89 (US$3) per half-liter. The Russian beer market shrank by around 9% in the first six months of 2010 as a result.



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