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International Resources: Global Market Profile: Russia
As part of its commitment to providing its members with market analysis and insight, PMA has compiled the following information about Russia from the Russian Ministry of Agriculture and Food Production and from Attaché Reports submitted by the U.S. Department of Agriculture’s Foreign Agricultural Service, as well as the CIA World Factbook, embassy sites, and business etiquette reference guides.
Table of Contents
Fresh Fruit, Vegetable, and Flower Market
Fruit and Vegetable Market
Russia is the sixth largest worldwide importer and consumer of fruit. China, South Africa, and the European Union are major exporters of fruit to Russia. Bananas are Russia’s top fruit import followed by oranges, tangerines, lemons and grapefruit. Cherries, peaches, apricots and other stone fruits are imported mainly from southern European countries such as Spain, Portugal and Greece. Morocco is an important supplier of citrus fruit to Russia, and in return Russia exports vegetables such as tomatoes, green beans, and peppers to Morocco.
Russia is also a large importer of vegetables, and China is a main supplier. Root vegetables such as potatoes, turnips, radishes, carrots, and beets are staples in Russian cuisine. Because production of fresh produce is limited, many countries export to Russia.
Currently agriculture counts for 5.3% of Russia’s GDP and 10.8% of the country’s labor. According to the Economist, food and agricultural products account for 13.1% of Russian imports.
Fresh Flower Market
Russia is the sixth largest importer of cut flowers. The annual turnover on the Russian flower market is estimated at $1 billion. The Netherlands provides 75-80% of flower imports, supplying popular flowers such as roses, chrysanthemums and tulips.
The flower market greatly depends on special calendar dates which increase prices and demand for flowers; March 8, International Women’s Day, and February 14, or Valentine’s Day, are the two most important dates for selling flowers. Over 25 million flowers are sold in Moscow alone on these two dates, and for several days leading up to and after these special dates Russian flower importers, distributors, wholesalers, and retailers make incredible profits.
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Consumer Trends
Russia does not produce large volumes of fresh produce due to poor soil and inconvenient climates, and generally consumers have had diets high in protein and fat. However, there is a shift towards healthier foods and more produce as consumption of fresh fruit and vegetable is rising. When it comes to fruits and vegetables, consumers want quality, quantity, variety, and availability. There has been a small shift towards organically grown foods,.
Fruit is ranked second among the food products most frequently eaten at home. However, fruit is not usually perceived as a component of main meals.
Flavor is also a major determinant in Russian food. Most traditional dishes include a bland vegetable like a potato and a spicier one such as garlic. Many fruits and vegetables are pickled, due to the fact that they are hard to acquire between October and April.
Apples, grown locally and imported, are the most popular fruit in Russia; bananas are second in popularity, and oranges are third. Seasonal times influence the consumption of some fruits: lemons, bananas, berries, melons and pears are frequently consumed in the summer. However, lemons and bananas are considered winter fruit as well, and are consumed in winter along with oranges and mandarins.
Consumers in Russia have a higher purchasing power. About 70% of fruit sales in Russia are from wholesale warehouses and markets, according to dealers’ poll results. A strong 81% of shoppers prefer to shop at markets for fruit; this is due to the lower price of fruit sold in the markets as compared to grocery and supermarket prices. In addition shoppers believe that food sold in markets is of better quality and is fresher. Consumers are cautious buying imported fruit in the winter and look for a fruit’s quality based on aroma, visual appearance, size and durability.
Supermarkets are slowly gaining customers, and western-style supermarket chains, particularly in Moscow, are growing. Currently only 10-15% of retail food sales come from supermarkets. Most buyers from supermarkets are middle- and upper-income consumers. There is a lack of brand awareness and marketing in the fruit industry, which may benefit exporters who want to start advertising in Russian grocery markets and stores.
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Entering the Russian Market
There is a Russian term meaning "connections" or "influences.” It is extremely difficult to do business in Russia without help from a local. A company, operating on its own, will generally pay higher customs fees, face more difficult inspection procedures, and be forced to contend with more administrative delays than would a local importer. The local importer may or may not also be the distributor.
Choosing the right trade partner is probably the best thing you can do to develop your business in Russia. Banking and supplier references are necessary. It is essential to examine the company’s experience and business history. There are local and non-Russia based organizations that can help provide this kind of information. However, keep in mind that credit reporting is still a fairly new practice in Russia, and credit-reporting agencies may not have complete information on potential business partners.
There are several ways to find out whether your product has market potential. You may choose to participate in a well-established trade show in Russia, which would allow you to examine the local market, meet importers, and determine how competitive your product is compared to similar products at the show. You can review recent Trade Leads submitted by companies in Russia, which will inform you of the general demand for certain products and give you trade contacts.
Four main guidelines to keep in mind when dealing with the Russian market are:
- Sell directly to a Russian importer/distributor/processor.
- Use the services of a trading or export management company.
- Sell to an agent/consolidator in Western Europe.
- Set up your own import and distribution facilities in Russia.
Business hours are generally from 9:00 a.m. to 5:00 p.m., Monday through Friday. The usual times to find employees working are from 10:00 a.m. to 6:00 p.m. In the provinces, work finishes earlier.
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Trade Agreements
Russia is currently serving time and on its way to becoming an official member of the World Trade Organization. Russia has free trade agreements with a few of its neighbors in eastern Europe as well as with other countries:
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Food Standards and Regulations
Russia has complex food import regulations and exporters should carefully question importers regarding certificates and procedures needed for clearance into the Russian Federation. USDA has provided substantial reporting on these issues in the reports listed above and on our website http://eng.usda.ru/ at the Market Access page.
Labeling procedures and pesticide levels can be found here.
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Business Protocol
- Dress professionally and conservatively: Businessmen in Russia usually wear dark, well-tailored suits along with good dress shoes. Women should wear a suit (skirt, not trousers) and heels. Women should also avoid anything flashy.
- Dress well when going to a Russian home; it shows respect for your hosts.
- Prior appointments for meetings are necessary.
- For business meetings punctuality is expected (since you are a foreigner); however, your Russian counterpart is allowed to and often will be late. This is done to test your patience. Do not expect an apology for their lateness. It is considered rude to express disappointment in your counterpart’s tardiness.
- Allow for extended amounts of time when it comes to meetings. In Russia meetings will often not start on time and end hours later than originally planned.
- When attending a social event it is acceptable to be 10 or 15 minutes late, but no more.
- A firm handshake accompanied with a smile, eye contact and appropriate greeting is normal in a business setting. However, never shake hands over a threshold (it is considered bad luck). Some women may not shake hands with men, although this is becoming less common.
- Make sure to remove gloves before shaking hands; it is impolite not to do so.
- Introductions are made beginning with the most important person and ending with the least ranking member.
- Carry plenty of business cards. Have one side translated into Russian. Keep cards in good condition – a tattered card will reflect badly on you. Make sure to include advanced university degrees. When presenting the card, hand it so the Russian side is legible.
- Make all presentations straightforward and comprehensible. Length is normally not an issue.
- After meetings, it is common to sign a form detailing what went on and what was discussed.
- It is important to be patient as time is not of the essence in Russia – meetings will last as long as they need to last. When you travel to Russia to visit potential trade partners, do not expect to spend a few days and close a deal. That may happen, but a successful partnership may take months to develop.
- Decisions are made at the top, and authority can overrule subordinates; however, Russians look for the common good and try to work collectively.
- Negotiations will often include flared tempers. Do not be surprised if you witness temper tantrums or walk-outs. If confronted with confrontation, take a more personal approach rather than an official one, because Russians are people-oriented.
- It is considered that if there are not at least two walk-outs during a negotiation, you are being too easy. You should negotiate hard with Russian business people.
- While negotiating, you should not remove your jacket or disagree with members of your team. Bring a plan of action and include a few items you would not mind relinquishing during negotiations.
- Russians are known as great "sitters" during negotiations. This demonstrates their tremendous patience.
- Some 'hard-line' Russians still view compromise as a sign of weakness, and often refuse to back down. To these individuals, compromising is bad business.
- Russia is a very status-conscious nation and believes in co-equals. Due to their egalitarian background, it is important to use strategies of equality, reciprocity, and mutual advantage. A "deal" is often thought of from the perspective of equally shared benefit. However, negotiations often end in a win-lose manner. It is not common for a win-win situation on all accounts. Also, knowledge of the hierarchal system will help ensure achieving and maintaining business partners.
- As a foreigner, you should realize that "Final Offers" are often not actually the end of the negotiations and that often times the outcome will be more beneficial and attractive if you can hold out.
- Remember that business might be conducted out of the office, but the final negotiations and deals will be made in the office.
- Be prepared to make a toast or have a drink. Refusing to toast or drink is a poor breach of etiquette.
- Showing the soles of your shoes is very offensive. They are considered dirty and should not make contact with any type of seat (like a subway or bus).
- Do not stand with your hands in your pockets, because it is considered rude.
- The American symbol for “OK” is considered very rude in Russia.
- When dining at a Russian home, keep hands visible. Use the fork in your left hand and the knife in your right.
- Men pour drinks for the women seated next to them. Also do not begin eating until invited to or leave the table unless told.
- Leaving a small amount of food on the plate shows you enjoyed the meal.
- It is a good idea to know a Russian toast. One of the most common toasts is “Nah-zda-ROE-vee-ah”.
- It is common to have two bottles of clear liquid on the table at both business and social outings. One bottle is water and the other is vodka. If the bottle of vodka is opened be prepared to finish it in one sitting. Russians are known for their ability to drink heavily and have a clear frame of mind.
- Gift giving is common not only to gain local connections but also to show the importance of the impending business deal. Take a gift that symbolizes the stature of your company, preferably an item characteristic of your local area or one that displays the company logo.
- Never give vodka as a gift; this would imply the recipient’s liquor stock is not of good quality. If attending dinner at a family residence, it is appropriate to bring a gift, such as a good bottle of wine, dessert, chocolates, or a bouquet of flowers. If bringing flowers only bring them in odd numbers; even-numbered flowers are only given at funerals. Also try to avoid white or yellow flowers, and remember red flowers are considered symbols of romance. More expensive gifts should be wrapped, while cheaper ones need not be wrapped. Avoid giving gifts such as pencils, pens, lighters (unless they are expensive ones), cheap wine, notebooks, etc. Also, gifts of thanks are expected.
- When you enter a building, you should remove your coat. Never sit with your coat on during a concert, at the theater, at a concert, etc.
- Never whistle indoors. There is a belief it will cause a loss of money.
- Shaking your fist is considered vulgar.
- Do not sit with your legs wide apart or with your ankle resting on your knee.
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Export Business Reminders
- Take time to research the market for your product. The better you understand local conditions and opportunities, the more likely that you will succeed in finding a buyer.
- Build at least a minimum team within your company to help on the Russian market.
- Pay attention to business fundamentals. Business basics - knowing your market, putting the customer first, and offering quality products - are as useful and necessary in Russia as in any other market.
- Use metric terms.
- Ensure that all sales documentation is correct. Exported goods will not be allowed into Russia without proper documentation.
- Signed contract and shipping documents
- Certificate of Origin and Quality
- Phytosanitary Certificate from the exporter
- Import license of the importer
- Certificate of Conformity
- Holdups also occur when there are discrepancies when invoice prices are at odds with Russian customs. Ensure all prices and paperwork are the same for you and your counterpart.
- Pay all VATs and duties prior to shipping. This will allow for a smoother entry for your products into Russia.
- Use letters of credit to reduce risk.
- Hedge export values with your bank if you are concerned about exchange rate risk.
Russian Regulatory Bodies
The most important Russian regulatory agencies involved in food imports:
Federal Service for Technical Regulation and Metrology of the Ministry of Industry and Energy is the national body for conducting surveillance and testing for conformity with state standards. This Federal Service is the result of transformation of Gosstandart into two institutions as part of administrative reform.
Department of Technical Regulation in the Ministry of Industry and Energy develops standards and technical regulations.
Federal Service for Surveillance in the Sphere of Protection of Consumer Rights and Well-Being of People (Rospotrebnadzor) is responsible for surveillance in the areas of nutrition and food safety.
Federal Service for Veterinary and Phytosanitary Surveillance (VPSS) is responsible for plant and animal health issues.
Certification Bodies
The Russian Testing and Certification Center (ROSTEST) provides a full range of quality control and inspection facilities in Russia.
Phone: 011 7 (095) 129-3200
Fax 011 7 (095) 124-9966
The Russian Research Institute for Certification (VNIIS) issues Certificates of Conformity.
Phone: 011 7 (095) 253-3580
Fax 911 7 (095) 253-3360
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Related Links and Government Resources
Government Resources
Russian Ministry of Agriculture and Food Production: www.aris.ru (in Russian) Information in English
Food safety regulation in Russia is not a straightforward process. Presently a number of different bodies are involved in the process, each having a specific area of specialization. Those organizations include the National Body of Sanitary Control, Ministry of Agriculture, Agency of Technical Regulation, State Trading Inspection, Ministry of Economic Development and the State Grain Inspection which all have a hand in traceability, safety and hygiene for the Russian food market.
Russia is also following the Health Approved Safety Standards Protection Act (HASSP). Following the procedures has helped Russian manufactures gain food safety confidence abroad.
Important websites in Russian
Russia’s Growing Agricultural Imports: Causes and Outlook: During the 2000s, Russian agricultural imports have grown considerably, from $7 billion in 2000 to $33 billion in 2008. This import growth has made Russia the second largest agricultural importer among emerging markets, after China. The main reasons for the import rise are macroeconomic—high growth in Russian gross domestic product, which increases consumer income and purchasing power, and real appreciation of the ruble, which makes imports less expensive vis-à-vis domestically produced goods. The economic crisis that hit Russia (and the world) in autumn 2008 makes the outlook for Russia’s agricultural imports uncertain in the short term. However, the Russian economy is expected to stabilize within a year or two, at which time agricultural imports should continue to grow, although at a lower rate than in past years. *By William Liefert, Olga Liefert, and Mathew Shane- USDA ERS Outlook Report No. (WRS-09-04) 22 pp, May 2009
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