Unilever Expects Its Russian Sales Growth To Be In Double Digits In 2009

Aug. 1, 2009 - PRLog -- Unilever expects its Russian sales growth to be in double digits in 2009, despite a slowdown in sales in H209, due to the global economic crisis. In the Business Environment Ratings (BER) matrix for the Central and Eastern Europe (CEE) region in Q309, Russia occupies pole position, to which it climbed from fourth previously. Although one of the main reasons for its improvement is the more severe worsening of absolute scores of other countries, Russia's top spot also indicates the resilience of its marketplace in the face of severe difficulties. However, one of our core views for 2009 is that the effects of the external sector slowdown will be much more sharply felt in private consumption, which has thus far held up relatively well. As output contracts alongside investment reductions, the inevitable outcome will be rising unemployment, declining real wage growth and shorter hours worked in key sectors. Combined, these will be the feedthrough processes that push private consumption growth into negative territory in 2009. Overall, we forecast private consumption in Russia to contract by 5.0% this year.

Nevertheless, foreign companies continue to invest in Russia, clearly eyeing the longer-term potential of the country's populous market. To this end, consumer goods giant Unilever acquired Baltimor Holding - the parent company of Baltimor - Russia's market leading tomato ketchup maker, and a popular Soviet-era brand. Around the same time, Unilever stated that it expects its Russian sales growth to be in double digits in 2009, despite a slowdown in sales in H209, due to the global economic crisis. Around the same time, India-based tea manufacturer Tata Tea Limited (a subsidiary of Tata Group) joined forces with the European Bank for Reconstruction and Development (EBRD) to acquire a controlling stake in Russian tea and coffee manufacturer Grand. The Coca-Cola Company (TCCC) announced plans to invest US$1.2bn in Russia over the next three to five years, as it aims to capitalise on growing demand for carbonated drinks.

However, in what are perhaps surprising developments, other multinationals are cutting their losses in Russia. For example, Nestlé Waters agreed to sell its Russia-based bottled water arm Saint Spring to rival bottler IDS Group, while Sun InBev, a Russian arm of the world's largest brewer Anheuser-Busch InBev (A-B InBev), is potentially to be sold off, as its parent company aims to reduce the amount of debt that needs re-financing. It has been reported that should A-B InBev decide to entertain offers for Sun InBev, SABMiller would probably be at the front of the queue, as it aims to expand its currently singledigit market share.

In terms of the domestic food and beverages, as well as the mass grocery retail (MGR) industry, the year 2009 will be a challenging one as smaller companies fall prey to larger players. Leading dairy company Wimm-Bill-Dann (WBD) and private equity fund Russia Partners are already eyeing acquisition targets throughout the region. Global MGR operator Carrefour recently made a move to acquire the majority share of one of the top ten MGR operators, Sedmoi Kontinent, as it makes its entry into Russia, with three Carrefour hypermarkets schedule to open during in the course of 2009.

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