Russia is the largest consumer market in Europe and nearly 75 percent of the population liveswest of the Ural Mountains. Russian consumers are predominantly urban. Almost 25 percent of Russia’s 143 million people live in cities of over one million. Moscow, with 12.4 million inhabitants, is the commercial capital with an average per capita income that is almost two times higher than income in other Russian cities, and four times higher than income in rural areas. St. Petersburg, with 5.2 million inhabitants, is the historic and cultural capital with the main seaport on the Baltic Sea. Together, the cities of Moscow and St. Petersburg are considered to be “trend-setters” and serve as the main gateway for nationwide distribution. Notwithstanding limitations in disposable income, Russian consumers, especially in urban centers, are increasingly sophisticated in searching for quality and value. Five years of economic sanctions have driven Russian consumers to economize and reduce expenditures on expensive imported products.
In March 2014, 31 countries, including the United States, imposed financial sanctions on Russia for violating the territorial integrity of Ukraine. Russia responded by imposing its own countersanctions on many agricultural imports. As a result, since 2014, Russian domestic agricultural production has increased by 30 percent. Russian Government policies generally seek to reduce dependence on imports and promote exports of Russian grain, meat and processed food products.
While imports of consumer oriented products have fallen by more than 35 percent since 2014, Russia continues to rely on foreign supplies of fresh and dried fruit, nuts, vegetables, beef, cheese, wine, spirits, food ingredients, and processed foods, including condiments, snacks and juices. Many imported products are now supplied by countries that are not subject to Russia’s countersanctions (Belarus, Turkey, China, Brazil, Ecuador, South Africa, Chile and Argentina). However, even in the face of many challenges, non-sanctioned products from Europe and the United States are in demand creating business opportunities in niche market segments.