Russia�s retailing manufacturers
A unique regional strategy or the right way to diversify the business model?
Demid Golikov, Head of Strategy Consulting from ARB PRO Group, writes that forward integration has become a common practice for designers and manufacturers of branded, lifestyle goods, such as fashion and electronics in Russia. Grocery stores owned by FMCG producers are a lot less common, however this might be about to change.
About 20% of manufacturers in the food and drink industry in Russia are considering the development of branded company stores or grocery outlets under a different name. Currently it is unclear, whether this is just a peculiar trend reflecting regional circumstances in Russia or a wider trend of business model diversification that more manufacturers can learn from and adopt.
The majority of FMCG manufacturers, who follow this model, do so to provide shoppers with an alternative to powerful retail chains in the growing market and to establish their own distribution channels. Many of these manufacturers, having started with mono-brand stores, are now moving further into modern grocery formats, such as neighbourhood shops in residential areas, convenience stores in business districts or transit and high footfall traffic locations and even supermarkets.
Never Miss a Retail Update!While their involvement into the retail sector varies, some manufacturers plan for their retail operations to exceed their production capacity in their respective categories. If the market experiences excess supply, such a strategy can secure revenues and full use of the production facilities while guaranteeing a reasonably good margin.
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