EY - Russia - a pulse on the consumer products market

Russia — a pulse on the consumer products market

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EY - Key economic indicators

What to watch for

  • Consumers trading up and trading down.
  • Declining ruble exchange rate (no longer aligned to the oil price).
  • Consumer demand under strong pressure due to debt levels and ruble instability.

Can Russian operations continue to meet the expectations of global headquarters (HQ) as the consumer products market slows?

Key trends

EY - Consumer consumption has slowed down

There is a slowdown in consumer consumption. No consumption crisis is anticipated, but some categories are declining.

Companies recognize they need to review their operating model to create value in the new normal, as they are currently set up for growth.

EY - Companies recognize they need to review their operating model
EY - The consumer is polarizing

The consumer is polarizing and becoming more complex. The middle of the portfolio is under pressure — one needs a strong value proposition; if not, the consumer trades down or up.

Routes to market remain a key issue. Companies are questioning whether they should own or create their own channel.

EY - Routes to market remain a key issue
EY - There is a softening of salary expectations

There is a softening of salary expectations. However, companies are still placing bets on their top talent.

Managing global HQ is increasingly challenging, especially in delivering strong top and bottom lines in a softening market. Companies are focusing on efficiencies.

EY - Managing global HQ is increasingly challenging
EY - Annual budget targets will not be met

Annual budget targets will not be met by most companies. Companies are not sure how to plan for 2014.

Russia still offers plenty of opportunities, particularly in regions, but one has to take a long-term approach and adapt to the market as it changes.

EY - Russia still offers plenty of opportunities

Key questions for management

  1. The consumer is now looking for unique offerings — how do you address this?
  2. Russia is a vast market, with local cultural and economic differences across regions — do you develop one marketing strategy or regional marketing strategies?
  3. The business operating model was developed to support double-digit growth — how do you adapt it quickly to the new environment?
  4. Salary increase expectations are higher than market growth — how do you protect and keep the best talent?
  5. More investment is required to deliver the same results as in the past — how do you put the business case to HQ?

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