Convenience Goods Poised for Massive Growth in Russia

Consumers in Russia’s major metropolitan areas are constantly under pressure to do more in less time. And while city-dwellers worldwide may nod along knowingly with this statement, several factors of modern life in Russia have ratcheted up demand for time-saving products and services, and convenience goods. Consider, for example, that the UN predicts 83% of Russians will live in a city with over 1M residents by 2050. This means even longer commutes for the working-age population and (god forbid) even more traffic jams during peak hours.

Other factors driving demand for consumer “convenience” goods include the high workforce-participation rate among women. According to Nielsen data, sixty-nine percent of Russian women work outside the home and 52% of women are sole heads of households. These trends have contributed to the rapid development of technologies that promise to lighten the housework burden. The sharing/gig economy has also taken off as more people save time by hiring dog walkers and housekeepers and opt for car-sharing services that take you door to door.

Four key FMCG growth areas

1) E-commerce

According to the Ministry of Industry and Trade of Russia, the e-commerce market is predicted to grow by as much as 20% by 2025. Even the fast-moving consumer goods (FMCG) market, which traditionally takes in 99% of sales from brick-and-mortar stores, has seen an uptick in online sales in certain categories. For example, 35% of online consumers in Russia have ordered personal care items on the internet, and 19% have ordered children’s goods.

In response to online demand, more popular mega-retailers like Auchan, Perekrestok, and OK have developed their online FMCG presence. They are joined by delivery aggregator-services like Dostavista, Instamart, and Golomago.

Food delivery apps are also starting to take flight (this dovetails with point #3 below). Though demand is still much higher in the USA (where 15% of those polled had downloaded at least one delivery app), 4% of Russians have downloaded a food delivery app and that number is expected to grow.

2) Fast food within retail establishments

Russians love fast food and fast casual dining. The fast food market has grown 5-8% per year and has reached 40-50% of the total food services market according to the media holding company RBK. FMCG retailers have reacted to this trend and launched their own cafes/food stands within retail sales points. According to Nielsen research, 21% of consumers had noticed this trend and 51% of them had eaten at a café within a retail store.

3) Meal delivery services

The Foodtech market in Russia is growing by 20-30% a year and has already reached $1.4B US in sales. Additionally, the potential for further growth is huge. Right now, 3x more Americans and 7x more Brits than Russian consumers have ordered food online.

Meal kits are also poised to take off. Unlike traditional meal delivery services, kits contain the ingredients needed to prepare a particular recipe at home. In the US, 25% of consumers stated that they planned to try such a service and 10% already order kits on a regular basis. Given the drive to find more ways to save time on household tasks, this trend is likely to take hold in Russia as well.

4) Packaged convenience goods

As consumers expectations continue to rise regarding the quality and convenience of fast-moving consumer goods, retailers have found new ways to meet them. The packaging and ingredients of snacks has evolved as people opt more for grab-and-go options instead of traditional breakfasts. Likewise, the modern Russian consumer has started to demand more health benefits from the products they buy. Sales of sports drinks has grown by 28% a year and protein bars — by a whopping 113%.

Even though many of these trends are still in their infancy, the market has tried to adapt to them. Clear examples of this include the meal-replacement drink Octa and the protein- and “superfood”-rich yogurt developed by the brand Epica. And Russians don’t want to waste time cleaning up after meals either: demand for dishwasher liquid grew by 20% in 2018 as more Russians purchase what was once a luxury appliance.

Over the next several years, these areas of the FMCG market will continue to experience growth as more consumers strive to alleviate the demands on their time. If we unpack the concept of convenience, we see that it consists of usefulness, speed, and simplicity. These have become the three main characteristics driving the FMCG-purchasing decisions that Russian consumers make every day.