System Approach Needed to Develop End Food Markets

20 october 2016

The Analytical Center in cooperation with the Retail Companies Association (AKORT) launched a series of round tables on the "Priorities of the Key Players of the Russian Food Market". During the round table experts discussed existing risks and problems, and measures needed to be taken by the Government and businesses to facilitate the systematic improvement of the situation with food markets and the emergence of new points of economic growth.

During the period of decline in real incomes of the people it is important to understand what the customers need from food markets, what they give preference to and how to solve the problem of the quality of consumption, noted Tatiana Radchenko, Deputy Head of the Analytical Center, opening the event.

Chairman of AKORT Presidium, Ilya Lomakin-Rumyantsev, emphasized the need for a constructive dialog between all participants in the food market to find the best options for the market's development and to pursue the government priorities by providing consumers with high quality food at fair prices and in required quantities.

"In order to reveal the attitude of Russians to the situation in the food market and the possible measures for its regulation, Russian Public Opinion Research Center (VCIOM) and Social Design Center Platforma conducted several surveys of citizens and experts in 2016,'' said Olga Kocharina, Deputy Director General for Research, SDC Platforma. The population has long tightened their belts, and more than half of the citizens are less likely to make purchases. This creates a spiral effect: reducing consumption pulls a decrease in production, followed by a decrease in income and, as a result - reduced consumption, the expert believes.  "People buy most of the food products in retail chain stores, where prices are the lowest," said Olga Kocharina, adding that the chains are able to offer lower prices due to competition with each other and by working directly with manufacturers and suppliers.

"In this country there is a clear underestimation of the role of trade. It is perceived as one of the links in the distribution chain. And the adopted Trade Law well illustrates this tendency: only about 3 months are reserved for a global restructuring of the market. Now most of our suppliers are confused and do not know how to react to this situation," said Alexander Perekrest, Government Relations Manager at METRO AG. Such underestimation, in his opinion, leads to a lack of systematic approaches to the development of the industry. The existing standards and conditions for the implementation of government initiatives (in particular, accounting systems that are already more than six) are completely different, the expert believes. "We need a systematic approach to trade development, not only of the network trade but also of retail, wholesale, small-scale wholesale trade and e-trade. It is important for trade to be seen as a single sector with different directions", - the expert explained.

Most experts believe that the market participants have almost reached the demand ceiling. Despite the fact that the healthy consumption rate has not been reached for a variety of food products yet, lower incomes lead to a significant contraction of the market. Accessing export markets is becoming a key task for Russian manufacturers. In this case, the greater support from the state is needed. In particular, the state should promote business co-operation to develop export standards, experts believe. According to the FAO representative, the problem of access to foreign markets can only be solved at the intergovernmental level.

During the discussion participants also noted that no global research of end food markets have yet been carried out, so no real evaluations have been made so far.