Crisis as a challenge

Difficulties and problems

Officially, no economic crisis has been declared, with Western commentators saying that it is not so much a question of economic crisis as it is of incorrect Russian government policy. Whatever the reason, small and medium sized businesses have felt the squeeze, just like the people.

Price increases

The principle barrier hindering the Russian pet market’s growth has been the weakened rouble, which has caused the prices of imported raw materials to go up, while packaging costs have also increased. Moreover, between 30-80% of raw materials used in pet foods are imported. The consequence of this is a tangible increase in wholesale and retail prices, even of Russian produced pet foods. Imported goods have also become significantly more expensive.

Purchasing power

Purchasing power has decreased as well. Not only pet products, but all consumer goods have gone up in price by an average of 30 to 100%. In addition, state and private enterprises have started to cut costs, reduce wages or make workers redundant. Russians have been forced to economise, spend less on food, stop spending on expensive goods, services and trips abroad, and feed their pets with cheaper food. 

Customer debt

Increased customer debt is another serious consequence of these developments, which is mostly felt by smaller companies in remote areas. A lot of companies have had to change their payment policy, by demanding immediate payment and working with ‘problem’ customers on a pre-payment only basis.

Number of pets

The last year has seen a decrease in the number of pets kept in Russian homes.

Sales volumes

All of these factors combined have had an immediate effect on the Russian pet products market. The statistics provided by wholesalers and pet stores show a drop in sales in pet goods over the last year (measured in tonnes) of approximately 30%. 

Freighting and logistics company Radius has announced that in the first half of 2015, the Russian Federal Customs Service recorded dog and cat food import volumes of 39,200 tonnes, at a value of $75.9 million (€69.3 million), compared to 66,100 tonnes and $144.9 million (€132.3 million) a year earlier, a drop of 40.7% in volume and 47.6% in value of dog and cat food imports. The largest share of dry food imports to Russia comes from the Netherlands, with Germany leading in wet food imports. 

New opportunities

Nonetheless, the Russian pet market continues to develop in the face of these problems. 

New economic laws

The difficult conditions have forced the introduction of new economic laws. In order to increase or even maintain sales at their current levels, managers have had to be au fait with the evolutionary laws of business and absorb them into their daily living. The survival of the fittest has become more pertinent than ever. 

Reassessing partnerships

The situation is forcing distributors to reassess their partnerships as they try to improve their ranges, and adapt them to the changing demands of Russian pet owners. The Zoomark exhibition in Bologna, Italy in May 2015, however, showed that the search for foreign suppliers and signing of distribution contracts has not ceased.

Growth in pet retail

Chains are expanding and opening new stores. Within the first half of 2015 alone, Moscow saw the opening of two new stores in the Markvet chain, one Bethowen, one Dinozavrik and a new Zoogaleria in Ryazan. Small independent stores with too many weak spots have found themselves unable to survive and have been closing their doors.

More and more internet stores have appeared, popping up like flowers in the spring, an indication that online sales continue to be profitable and are growing. 

Increase in private labels

Large retailers are seeking to work more with private label companies. Federal wide chains have opted for serious private label production in all main product categories. This ongoing trend has become extremely relevant in today’s circumstances, due to the price/quality ratio. 

New products

Strong importers and private label producers are bringing new products to market. Those whose pricing policy has not cut the mustard are experiencing a tangible fall in sales. Russian producers are putting out new products using Russian-only raw materials in order to become less dependent on foreign suppliers.