Russia: Fighting Inertial Growth

 
So far the year 2011 hasn’t brought any dramatic changes to the overall foodservice landscape in Russia. The major trends that emerged last year are now in full progress.
From mid-2010 to mid-2011, Russia’s top 20 restaurant operators showed a unitgrowth of 11%. The number of operations belonging to the top 15 brands in Moscow went up by 8%. Various entrepreneurs are continuing to invest in the foodservice, especially the QSR, sector, often serving as franchising partners for local or international brands. It has become clear, however, that the high margins people were accustomed to before 2008 are no longer possible, and the Russian foodservice has to get used to the idea of more modest profitability.
 
According to official figures, total turnover in the Russian foodservice sector in 2010 came to RUB780 bn, which was 9.6% more than in 2009 when the market dropped by 1.7%. These figures, however, don’t seem so optimistic if we remember that inflation reached 8.8% last year. At the same time, foodservice operators had to face a notable increase in rentalrates and food-costs owing to the increase in product prices. All these factors are exacerbated by a rather limited consumer demand, as most people did not return to the unrestrained consumption of the pre-recession years.
 
As a result, the profitability of a restaurant business now is nothing like the amount that Russian entrepreneurs were used to in the early 2000s, when operating a casual dining concept could bring them margins of up to 25%. Local chains are working hard to increase the efficiency of their existing units, to consolidate their brand portfolio, to pursue a flexible pricing policy and often refrain from investing in new company-owned restaurants. Most growth potential comes from franchising both in the QSR and casual sectors. Large and medium operators are willing to increase the share of franchising units in their portfolio and are often ready to cooperate with small entrepreneurs without any foodservice experience. Concepts where initial investment is comparatively small have proved the most successful here, like Subway, which remains market growth leader for the second year in succession.
 

 

 

 
| 2 November 2011 |