Juices Market in Russia

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M ANAGERIAL ECONOMICS
-- MIB 2014 --

Instructor:

Ekaterina Sokolova
Senior Lecturer

Table of contents
Market definition ........................................................................................................................ 3 Cost Structure ........................................................................................................................... 12 Demand drivers......................................................................................................................... 15 Competitors analysis ................................................................................................................. 19 Conclusion ................................................................................................................................ 21 Five Forces analysis .................................................................................................................. 23 Costs of typical firm ...................................................................................................... 23 Customers and Demand ................................................................................................. 24 Substitutes and Complements ........................................................................................ 26 Competitors and competition ......................................................................................... 27 Threat of Entry .............................................................................................................. 29 Resources and Suppliers ................................................................................................ 30 Conclusion. Nature of competition and strategies of long‐term profitability: .................. 31 Reference list ............................................................................................................................ 32

2

Market definition
We focus our analysis on the Russian market of juices and nectars that usually is considered as a part of Russian soft drink industry. Juices and nectars have a long history of production in our country und have undergone a considerable transformation for the last twenty years since USSR collapse in 1991. Being mostly domestic product of direct extraction made of grape, pear or peaches this market started to go through significant changes since 1992 when many foreign companies entered a newly-opened market: new aseptic way of filling juices in boxes instead of glass jars came to existence while some totally new flavors for Russian customer, like orange or pineapple, were introduced. Nineties were the time when large foreign corporations such as PepsiCo and The Coca-Cola Company (TCCC) established themselves in Russia that, as will be shown in the research later, has a great impact on the market status quo today. At the same time it is important to notice that despite the ever-growing importance of foreign players in the framework of the Russian juice market, the situation of import predominance that could be observed in the 1992-93 has changed dramatically. According to the most of the sources1, today import accounts only for 5% of the product market share, which means that 95% of juices and nectars are produced on Russian factories. This estimation doesn’t lack some generalization as mostly the Russian part of production is based on juice concentrate import due to the country’s geographical position and climate that unfavor the growth of some tropical fruits, but still creates work places for Russian labor and accumulate taxes.

To a certain degree the Russian market of juices and nectars did shape in the beginning of 2000-s after the Russian financial crisis of 1998 when most importers along with relatively small players had to leave the market and Russian Juice Producers’ Union was created. While in 2000 the market produced only 750 mln. liters a year, by 2008 this number has reached...
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