EY - Russia: a pulse on the consumer products market

Russia: a pulse on the consumer products market

December 2014

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EY - Key economic indicators

What to watch for

  • Further Ruble devaluation
  • Inflation likely to rise to 12%+
  • Consumption declining due to lower purchasing power

How to adapt to the new reality?

In the current environment, all executives are in “survival” mode, managing their business day by day.

 

Executives feel this crisis is unique. They cannot see the bottom — which is making their regional and global HQs very uncomfortable — and they are clueless about the next few months. Corporate expectations for 2015 have deteriorated quite badly and some feel that 2016 will be tougher.

 

Companies are surprised by the consumer resilience — with most having sustained single-digit growth with substantial price increases — but they all feel that it will change in early 2015.

 

Consumers are continuing to focus on value for money but premium is still holding up. Mass products are suffering as the consumer is trading down; Private label is currently low in Russia but likely to increase significantly.

 

Executives are focused on delivering the operating profit, taking as much price increase as they can (to partly recover the devaluation impact) and challenging all costs in their business (some are talking about doing business the “European style”). They are looking at sharing the profit pressures with their partners.

 

All executives recognize that they need to be as agile as they can with their P&L.

 

Companies accept that they need to define a new business model that is fit for purpose in this new reality.

 

5 questions for management

  1. How do you ensure your portfolio remains relevant and economically viable?
  2. How do you balance cash flow within production, payments, etc.?
  3. How do you manage shelf prices to protect the bottom line and not lose market share?
  4. What are you doing to offset cost headwinds?
  5. How are you setting HQ expectations?

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