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How to use the period of the embargo in its favor and found a promising niche for business development?
16.11.2015
Author: Ekaterina Beletskaya Marketing Director of the company «VVS»
After the start of the introduction of sanctions policy in Russia it has passed more than a year. What are its results for Russia and other countries in Europe and the US? The first reactions were immediate: reducing the level of investment, decline in imports, the outflow of capital and, as a result of falling oil prices, the growth rate of foreign currency. What did the domestic companies in the world? Businesses whose activities are closely connected with the use of imported raw materials or sale of foreign products, had to go through not the best of times. Many of the abandoned goods "premium" and switched to cheaper versions of imported goods, some have turned to alternative domestic suppliers in whose pricing is influenced by this situation to a lesser extent. As it turned out, to find an alternative to imported products is not easy, and at times and it is absolutely impossible for the reason that such production in Russia there is no or very small amounts compared to the total consumption.
For example, more than 88% of machine tools used in various kinds of industry, are brought in Russia from abroad, while only about 11% are produced here. The volume of imports of medical equipment, namely well-known MRI apparatus, which are actively using our hospital up to 95%! Naturally, in such cases, in any way affect the fluctuation of the value of those goods is very difficult.
In view of this situation, Government has identified policy of import substitution, which aims to decrease the volume of imports in 2020 to an average of 40%. In 2015, we developed 19 industrial programs of import substitution in the various sectors of the economy. One of the incentives for businesses to participate in these programs, in addition to subsidies and co-financing is the granting of preferences in public procurement. In the past year and a half passed several decrees restricting purchases of foreign-made goods. In particular, it concerns the import of medical products, engineering goods and light industry and some others.
Indeed, why the state should invest their money in the development of industry and agriculture in other countries, while the same funds can be redirected to domestic producers, thereby providing a positive impact on the economy as a whole ?!
Surprisingly, it turns out that it is the sanctions have led us to realize the need to overcome the critical dependence on imported goods and technology by creating and building its own production facilities in various industries.
And here the question arises: what projects are promising in terms of import substitution and the development of domestic industries? Analysts «VVS» found a solution to this issue through accurate analysis of the volume of foreign deliveries.
Of course, one of the main vectors of development activities in this area because of the embargo in 2014 - 2015 year was agriculture and animal husbandry. Statistics show that before the start of the process performance of some markets were as follows: about 67% of the volume consumed in the Russian hothouse vegetables imported from abroad, imports of apples amounted to about 50%, slightly more than 20% of the fish on the shelves of our shops were of foreign manufacture . During the year the situation has changed, but has not yet reached the target values. For example, the Russian market is the apple planned figure of 30%, that is, the share of imported products in 2020 should not exceed 1/3 of the total consumption.
How to achieve the desired index? Some companies and agribusiness investors are already thinking about what benefits you can get to do this business right now. Not so long ago we received an interesting order for market research. Customer needed to understand the dynamics of the market for 10 years and to identify the most popular varieties of apples in the past 1.5 years, to then begin to build on the territory of the Southern Federal District of gardening. Analysts company «VVS» faced a difficult task to analyze every delivery as a separate and count the variety of apples.
It turned out that the dynamics of the import volume (excluding the trade with Belarus and Kazakhstan) after the embargo has significantly changed in some months the difference is 300%. In January 2014 the volume of imports in the Russian market in volume terms amounted to 108.9 million. Kg a year later - is 32.7 mln.kg.
Figure 1. Dynamics of imports in volume terms, kg
The largest purchases of imported apples fell to the JSC "Tander" - 9% (more than 240 mln.kg). At 1% of the market are JSC "South Dixie" (43 mln.kg), LLC "MegaFrut" (38 mln.kg), LLC "Myasoprom" (24 mln.kg). Other importers of apples together occupied 86% market share of imports.
Figure 2. Shares of the leading importers,%
As a result of the analysis of import volumes it was found that the most popular apple varieties (most often found in the description of supply) is «IDARED», turned out to be slightly less in demand: «FUJI», «FUSHI».
Figure 3. The five most sought after varieties of apples
The company contracting draw their own conclusions, and identified a list of grades for the most suitable in terms of adaptation to the climatic conditions and the degree of demand for them in Russia.
Further, the company was to identify possible suppliers of seedlings. They were horticultural businesses in Italy and Poland. By the way, this issue was also resolved on the basis of the data for the analysis of apple imports. The company examined our report, which was presented to the rating companies - suppliers of seedlings, and plans to enter into a contract directly with foreign nurseries, without intermediaries, and hence additional costs.
The outcome of this project is to plant in the short term 680 hectares of apple trees on the territory of the Southern Federal District. However, the client company did not stop there. Using current market and political situation, it has begun to develop the project for growing nuts in the same area. What experts of the company «VVS» conducted an analysis of imports of certain types of nuts. After examining the main Russian importers, they clearly understand, on what share of the market, you can safely apply and planning for a year to create your own hazel, an area of about 700 ha! The next projects on pears, kiwi, cherry, plum.
Is not that a solution worthy of respect, during the active development exclusively Retailing? We hope that in a few years the company products are already known to press the Russian market of foreign suppliers of fruits and nuts.
Of course, a similar market research can be carried out to help domestic enterprises to find their own niche, exploring the market and other commodities: fruit, meat, dairy products and vegetables. Do not forget that the import statistics is also useful not only for those businesses that are already working in these sectors, but are only planning activities. So, with the help of statistics of imports and exports can be found the best foreign and domestic suppliers of cattle for breeding farms, suppliers seeds and seedlings for agricultural enterprises.
Time is money - colleagues, do not forget about it! Let us use to the maximum provided by the state it is now promising opportunities for development and so necessary for us all sectors of the economy. Otherwise, after a while niches are occupied again by us.