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MARKETING CONSUMER PRODUCTS IN RUSSIA
by Bill Raisner

Reflecting on his company's 1988 entry into the Russian market, a Vice President
for the parent company of Dunkin Donuts and Baskin Robbins commented that
Russia's high level of economic and political risk was an attraction, because it
"tends to keep out competition and allows us to get a head start."  Lower risks 
already make Russia's lucrative consumer products markets more challenging for
U.S. companies, that must now adapt to an increasingly competitive environment. 
In particular, U.S. firms should consider new methods of distribution, a broader
range of  financing options and greater attention to advertising. 

No More Kiosks

One indication of change in Russia's consumer products market is the gradual
appearance of Western-style retail outlets in place of the dingy kiosks that were
once the mainstay of the Russian shopper.  The Polaroid Corporation made Russia
its second largest export destination by using a network of kiosks, on the
assumption that the street vendors "were the only people who knew anything." 
Small retail shops are gaining ground however, displacing nearly 7,000 kiosks in
Moscow last year.

Image-oriented manufacturers such as Estee Lauder and Benetton rely on
high-quality brand shops to boost awareness of their products.  In contrast,
Masterfoods, a Russian subsidiary of Mars Inc., has established a broad network of
domestic distributors which has been very effective in mass marketing Mars candy
bars and pet foods.  In general, these advances in distribution have opened
markets in Siberia and other far-flung regions, fueling an influx of importers outside
of the hotly contested urban markets of Moscow and St. Petersburg. 

Financing Options

Recent surveys conducted by the Commercial Service of the United States and the
U.S. Department of Agriculture indicate that U.S. companies demanding 100
percent prepayment for their products often lose out to European and East Asian
exporters offering more aggressive financing terms.  Shipping delays put distant
U.S. suppliers at an added disadvantage, given high interest rates faced by Russian
importers.  Companies which are not overly risk averse can counteract this
situation by offering credits or consignment sales.  Franchises, joint ventures and
exclusive distributorships can offer a higher degree of security, though these
arrangements are often complex and time consuming.  In the case of larger U.S.
corporations, European-based subsidiaries and warehousing facilities provide yet
another option.  

Ultimately, local production facilities bypassing many of these distribution
obstacles, in addition to avoiding import duties, are increasingly attractive as
companies establish stable markets for their products.  The domestic production
option is most advanced with respect to consumer-ready food producers, though
purveyors of personal hygiene products such as Gillette and Tambrands are
beginning to take the plunge, as well.

Madison Avenue Meets Nevsky Prospekt

A final ingredient in marketing U.S. consumer products in Russia is advertising. 
Television plays an increasingly important role in Russian advertising.  The growing
demand for Russian air time boosted the cost of a minute of prime-time television
from $15,000 in January 1994 to more than $45,000 in March 1995, according
to the Economist.  Despite this growth, the cost of reaching 1 percent of the
Russian population one time in March 1995 was still a mere $530, compared with
$2,600 in France.  Print media have also become increasingly consumer oriented. 
The Russian language version of Cosmopolitan, a prime source for the
fashion-conscious shopper, is now the second largest edition of the magazine.   
U.S. companies should bear in mind the still novel character of the Russian
consumer experience.  Consumer education in the form of taste testings,
preparation tips and special labeling, for example, will continue to be important as
Russian shoppers unfamiliar with Western products are exposed to an ever wider
range of choices.  By acknowledging these and other new marketing possibilities,
U.S. companies can take advantage of existing consumer perceptions about the
superiority of American products to secure a solid customer base in Russia. 

Bill Raisner covers consumer products for BISNIS.
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