Russia is an interesting market, but the economic recession and other challenges such as seasonality and bureaucracy confront ice cream and gelato makers in Russia. But the segment has been showing increasing success and the Russian gelato market continues to present an important growth opportunity.
Untill two years ago, Russia was considered an interesting BRIC market with strong growth and a great interest for made in Italy products, not only in the food market. But today, the economic outlook is less positive. The fall in oil prices and the international economic slowdown has caused a strong recession, while the depreciation of the ruble has forced prices up, prompting the collapse of domestic demand for goods and services.
According to the OECD, growth is expected to turn positive in 2017, with falling inflation and rising real incomes likely to boost consumption. Nevertheless, the recovery will be slow given the lack of structural reform in the country and uncertainty over oil prices.
While Italian artisan gelato is starting to become popular, according to data from the Russian Union of Ice Cream Producers, the market since 1991 has grown 2.5 times in value terms. And it is still growing. The union says ice cream consumption in Russia grew in 2015 by 1.5% to 380,000 tonnes. Estimated total market annual turnover for 2016 is US$1.5bn.
This is corroborated by figures from market researcher Nielsen, which suggest the Russian ice cream market grew in 2015 by more than 6% in volume and by 23% in value compared to 2014. This was the second consecutive year of growth, Nielsen noted.
According to other statistics for the second consecutive year, the sale of ice cream in Russia is constantly rising. In real terms, sales have increased by 6-7% and revenue by 23%.
However, the cost of ice cream has grown exponentially with average prices rising by 15%, more than 360 rubles ($5.627) per kilogram.
The expansion of ice cream consumption can in part be attributed to improved consumer perceptions of the category. During the Soviet era, ice cream was considered a low-quality by-product of refrigeration plants, making it harder for legitimate manufacturers to establish a reputation for quality. However, since 1991, attitudes to the product among Russian consumers has shifted significantly – they now expect and appreciate quality products.
Experts believe the sector will continue to grow in the coming years.
Russian ice cream sales have not only been increasing, they have become different, with consumers being offered more choice from Russia-based and international food corporations. Consumers are also becoming more and more careful about quality.
Another aspect to consider is the significant seasonal fluctuation in sales due to Russia's cold winters and hot summers. Indeed, the vast majority of ice cream sales – 70% – are impulse purchases. As such, Russian consumers have proven themselves disinclined to make regular ice cream purchases.
Given this scenario, the Russian gelato market can be still be considered an interesting opportunity.
Steps to open a gelato shop in Russia
1 Visit existing gelato shops in Russia, which types of locations draw the most traffic,analyze their offer.
2 Talk with Italian ingredients and machinery companies with distribution in Russia, they will give you information and prices for products. They might also have interesting insight about the market, the local preferences, where to open and the kind of shop you should open.
3 Attend trade shows, such as SIGEP (www.sigep.it – www.ru.sigep.it ) in Rimini, Italy.
4 Visit Italy, see shops and try the best gelatos in the world.
5 Take time for training and learning how to make the best gelato in one of the Italian schools.
6 Define what kind of products you want to offer.
7 Find a location after defining the right dimension and considering the machinery and equipments you need.
8 Get information about all business licenses and permits required by your state and local governments.
9 Define a positioning and how to communicate your gelato: logo, in store communication, packaging, website, social media, etc.
10 Develop a business plan that includes all equipment and supplies needed and estimates of monthly and yearly sales based on the research you have conducted. Also, define how you will market your store and what prices you will charge.
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