Nestle in Russia

Topics: Coffee, Russia, Caffeine Pages: 24 (8229 words) Published: June 21, 2013

| Nescafé in russia|

Executive summary

Table of Content

* Introduction

The company overview
The industry overview
Coffee is the world’s most valuable agricultural commodity. The coffee industry in the United States, and around the world, has exploded in recent years. Instead of simply drinking caffeinated and decaffeinated, coffee consumers are trying different types of coffee, such as, cappuccino, espresso, mocha, and latte. Consumer demand is ever increasing, and as consumers drink more and more coffee, quality and value become more and more important.

The coffee industry is becoming more and more interdependent and interrelated. The supply chain can be very complex and complicated because there are so many different and diverse layers. Producers, which are the base of the supply chain, are often located on remote and distant farms in undeveloped countries. Therefore, it requires a very long and complicated chain to get finished coffee products to consumers, often-located thousands of miles away. The success of these chains is dependent on the relationships of those involved. Producer cooperatives are a very clear indication of the interdependency and collaboration of the growers around the world. The International Coffee Council is currently seeking to increase the coffee consumption of the 80% of the world that does not consume coffee. The Chinese and Russian markets are going to be major markets that promotion and marketing will be conducted. The International Coffee Council will look to increase coffee consumption by holding coffee festivals and associated coffee with cultural events. The main objectives are to develop, through education, promotion and media coverage, a coffee culture that would enhance the image of coffee drinking. Imports of coffee into China have more than doubled and imports into Russia have gone up 75% since promotional activities began. The PESTEL analysis

* Politics 
Russia is a hybrid regime combining both authoritarian and democratic modes of rule. In fact, political risks in Russia are high profile. First of all, it is a state constituted of 89 administrative jurisdictions such as republics, provinces, autonomous regions and territories. According to the Constitution of 1993 the model of checks and balances in Russia has been officially adopted; three branches of power (executive, legislative and judiciary) were to enable a censorship of each other and straighten civil society fundaments. At the same time Russian political system gave an absolute power to president. Thus the government fulfils only a formal role while judiciary system is badly corrupt in Russia. In general terms, corruption perception risk is very high for Russia. OOO Nestlé Russia with its outstanding brand awareness in the country is somewhat exempted of political risk because of its long experience in dealing with Russian realities, but nevertheless today political risks are huge for any investor in Russian Federation.

* Economics
According to the World Bank’s data, Russian GDP growth is expected to get 3.9% point in 2013 if a price for barrel of crude oil is fixed at 98$. If it is priced at 125$, GDP growth rate is expected to be 4.2%. Once the process of WTO accession achieves its end, an additional growth of 3.3% is expected to take place in Russia due to the leverage effect of foreign investments. This increasing in terms of GDP growth will continue until the annual growth gets an 11% point. According to the rule of 70, if Russia is able to maintain such a high growth rate (11%) 6.36 (70/11) years will be needed to double a GDP per habitant in Russia. Due to the decrease of prices in services sector and improved competitiveness of Russian producers, disposable income of households is to be increased by about 7%. All these data witness about a consolidation and straightening of a middle class and its purchasing power. In general terms Russia has a good potential for...

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