Ice Fili

Topics: Russia, Ice cream, Marketing Pages: 7 (2432 words) Published: February 13, 2011
1) Is Russia’s ice cream industry attractive?

Yes, it is. Russia is one of the largest nations in the world and, as such, holds promising market share potential due to its sheer size in geographic, demographic and economic terms. Russians love ice cream, even in the subzero winter climate. Despite decreased market share due to recent increased consumption of beer, soda and confectionary products; the Russian ice cream industry is attractive due to its lower entry barriers, competitiveness and profitability. As the case-study indicates, in the aftermath of the 1998 Russian economic crisis, rivalry in the Russian ice cream industry doubled, from 150 in 1998 to 300 companies by 2002. The intense rivalry can be explained by the fact that profit ratio for ice-cream production is about 15 to 20 %, a margin that is “considered high by Russian food industry standards” (p.5). In addition, domestic Russian ice cream is one the cheapest in the world to produce and buy, which in part explains the significant rise of highly competitive regional ice cream producers, who nowadays account for about 30% of the domestic Russian market (p.11).

Foreign companies such as Nestle and Baskin & Robbins have been able to thrive in the Russian ice-cream market by producing, distributing and selling their ice cream products locally through Cafes and Kiosks. Moscow-based producers such as Ice-Fili have mainly focused on sales Kiosks and Supermarkets. Regional producers dominate the rural and more distant areas of Russia, such as Siberia. However, as the piece indicates, they have been attempting to compete in the larger metropolitan areas as well. The key word is “open market.” For years, Russian ice cream was produced and consumed in a communist regime. To understand that is to know that the population had limited access and flexibility to the ice cream it consumed. When the dissolution of the Soviet Union came it unleashed a large desire for change throughout the entire country. A good analogy to show the environment of the market in Russia after the collapse is the Renaissance Era. The same way the Renaissance was the resurgence of culture throughout Europe, the new market was the resurgence of new ideas, and experiences to Russia. It was a perfect time to introduce new products, more variety of existing products, and an ideal time for international companies to enter the market. However, the financial collapse of 1998 derailed the market significantly. Ben n Jerrys left the market, others like Nestle stuck around because of their huge investment. Fast

forwarding to the 2000’s you then saw an emergence of local companies. These local companies were free from the olds restrictions of the Soviet Union and were able to function at lower costs. Overall, the market really is up for the taking for several reasons; 1) the market leader (Ice-fili) has not reached its potential, slowly but surely it is starting to wake up, but their competitors can take advantage of their lack of urgency; 2) the international companies seem to be happy with what they have and although they experiment with new ideas, there isnt any real aggressive strategies for taking over (Nestle has been making bold moves and they might be the first to take Ice-Fili from the top); and 3) the smaller companies are getting their crumbs but not making enough of an impact to significanantly impact the market, at least not yet. So I’d say, yes this market is attractive, and it is a very good time for Ben n Jerrys to come back with full force. 2) Do you expect its attractiveness to change over the next five years? Yes, I expect the Russian ice cream industry to increase its market share in consumption as long as, among other things, the industry changes its approach to the marketing and selling of ice cream (for more on this, turn to question 3). The case study expresses concerns for domestic ice cream producers by raising the...
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