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Boom times ahead for Russian consumers

Russia may become the largest consumer market in Europe and the 4th largest in the world by 2025, according to the latest data from the market research firm, Nielsen.

According to the company, in the year to mid 2007, Russia's overall Fast Moving Consumer Goods market grew by 9% in value.

“The main issues of this growth are growth of the purchasing power of the consumers, development of Russian retail and development of Russian FMCG manufacturers,” said Aleksandr Pismenny, Managing Director of Nielsen, Russia.

Food still plays a dominant role in the consumer basket – 74%, while pet food plays a smaller part in the FMCG market, but expands at a rapid rate of 15%.

The fastest growing food categories are not just the smaller and more recent ones. Among the Top-5 growth champions is beer. The largest category in the Russian food market – with 22% of its growth driven by the premium segment. The other fastest growing products are partially-prepared goods, instant meals, drinking yogurts and liquid milk desserts.

While many food categories saw growth due to consumers switching to premium items, the non-food segment is growing even faster.

Nielsen says FMCG growth in Russia is set to overtake markets like the U.K., Germany and Japan.

“If you will simply make the projection on a few years ahead, you will see that Russia is becoming a more and more interesting market in Europe. Russia has all the chances to become number one in the long-term perspective,” Aleksandr Pismenny adds.

Although quite bold, this projection is shared by other analysts.

“According to our forecast, by 2010 the Russian market of food and non-food will grow to $US 630 billion, and thus will become the third largest market after France and Germany,” predicts Vuitaly Baikin, retail analyst of Trust Bank, Moscow.

FMCG growth is largely dependent on macroeconomic factors – like the price of oil – and it's often counter-productive to make longer-term forecasts.

But if the Russian economy continues growing at the current rate, in 18 years, the Russian consumer market may become Europe's most important.