Degree of departure: foreign brands are returning to Russia
Another 13 international brands may enter the Russian retail market in the near future, according to media reports. The companies maintain confidentiality in the process of agreeing deals, which reduces the possibility of predicting the entry of new players. However, it is expected that in general the number of new foreign names in the Russian market will remain at the level of 2023-2024(up to 25 brands). How will this affect Russian manufacturers and should we expect lower prices for goods?
Restoring relationships
Up to 25 foreign brands may enter Russia in 2025, which will correspond to the level of 2023-2024. As indicated by Marina Malakhatko, Senior Director of Soge.Xp, they show moderate optimism about the prospects of opening on the Russian market. Plans to enter the Russian market at the moment, according to her, announced 13 international brands, among them 10 players specializing in the sale of clothing, footwear and accessories. Seven of them are representatives of European countries.
At the same time, the companies maintain confidentiality in the process of agreeing deals, which reduces the possibility of predicting the entry of new players. However, the overall number of new foreign names in the Russian market is expected to remain at the level of 2023-2024 (up to 25 brands).
"Expansion is very moderate. Few enter the market without partners. Small family brands show interest in the market," Malakhatko pointed out.
In the last few years, we have seen a structural restructuring of the consumer market, instead of anchor foreign residents actively appear domestic brands that are in demand among modern Russian consumers, becoming recognizable and in demand, the press service of the Ministry of Industry and Trade told Izvestia.
"This is confirmed by the results of analytics conducted in 2023 by SberMarketing and Avito, according to which only a third of Russians are waiting for the return of foreign brands, while 55% this year began to buy domestic clothing brands more often. It is also worth noting that according to the results of the study 17% of Russians do not want the resumption of sales of foreign brands that have gone away", - noted in the statements.
Healthy competition can have a positive impact on domestic manufacturers, which at the same time continue to strengthen their position in the market and increase the confidence of the Russian consumer, the ministry emphasized.
"With an increase in the number of foreign players in the market, the prices for the products of Russian brands may decrease, but it is impossible to reliably assume the development of these changes, manufacturers independently form the pricing policy of brands, analyzing the situation in the market and taking into account the totality of various factors affecting the final price of goods," - said the press service of the Ministry of Industry and Trade.
Obviously, the emergence of new competitors on the Russian market in the moment will have a negative impact on the saleability of goods of Russian manufacturers, said Antonina Levashenko, head of the Center-OECD IPEI of the Presidential Academy. However, in the long term it is good, as this situation may encourage Russian producers to improve the quality of goods sold. As for the possible reduction of prices for goods, first of all, one should pay attention to the cost of production and demand for the given goods on the Russian market. In case of high production costs and stable demand, prices for goods will not go down.
- Speaking about the entry of new international brands into the Russian market, we should note the return of foreign suppliers, who earlier announced their withdrawal from the Russian market," Antonina Levashenko told Izvestia. - These include well-known manufacturers of household appliances, food products, software, cars, electronics, etc. Their potential return to the Russian market depends on many factors, especially the complexity of the return procedure, which in turn depends on what exactly the foreign company produces.
In other words, the easier it is to produce goods, the easier it is to return, she noted. It also matters how far the company has distanced itself from the Russian market.
- For example, after announcing its departure from Russia, Mercedes-Benz sold its plant in the Moscow region, buildings with service areas and office to the brand's dealer GC Avtodom. It will be much harder for this player to fully return to the Russian market than, for example, Sosa-Cola, which banned the use of its brand on the territory of Russia, but at the same time the subsidiary company continued to produce the basis for drinks and supply it to Russian companies, - said the expert.
Market transformation
The arrival of foreign brands in Russia slowed down after 2019 due to the pandemic: coronavirus restrictions significantly slowed down the level of international business expansion, Alexander Shepelev, a stock market expert at BKS Investment World, explained to Izvestia. Then, in 2022, geopolitical events came to the fore. And if in quantitative terms it is possible to trace relative stability, in structural terms there were tangible changes.
- For example, brands from Turkey, Belarus and China began to expand their presence in Russia more actively, while European and American brands, of course, began to enter less frequently. Nevertheless, the Russian market and its potential are attractive, and small brands from European countries, especially from Italy, Spain, Germany, are still interested in business development in Russia," he emphasized. - Based on this, it can be assumed that Russian manufacturers are dealing with relatively low competition. As for prices, to a greater extent their dynamics will depend on the efforts of the Central Bank and the vector of exchange rate movements.
Russian manufacturers actively used the window of opportunity due to the departure of foreign brands, says Stanislav Andreev, General Director of SberMarketing. And now the situation on the market is such that saturation of Russian brands and offers has already occurred.
- It will not be easy for incoming foreign companies, especially European ones, to gain market share, as Russian companies intend to retain it. They are already actively investing in marketing to increase the knowledge of their brands - 55% of companies have increased their marketing expenses this year," Stanislav Andreev reminded Izvestia.
Foreign companies, in his opinion, will need to make significant investments in promotion in order to be visible in the changed brand landscape.
There are too many unknowns at the moment, says Tatiana Khansuvarova, an expert of ACRA's corporate ratings group.
- Given the devaluation of the ruble, as well as high transaction costs, we cannot say with certainty that European brands will have a price advantage. Besides, we don't know what price segments these companies belong to," the expert told Izvestia. - The market in Russia has changed a lot in recent years, domestic companies have strengthened. The Russian market, of course, remains attractive for foreigners due to the availability of solvent demand. Many foreign companies have maintained their presence in Russia, but sell their products under new signs.
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