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Russian e-Commerce: Robust Growth Continues
Russia: Large market and fast growth. Total e-commerce sales volumes in 2017 exceeded RUB1,100 billion (US$18.5 bln), up from only RUB200 million in 2010.
But a lot of room for further growth. In 2017, e-commerce sales were approximately 3.9% of total retail sales, compared with 12-14% in markets such as the UK and Germany.
Russia’s bank sector consolidation continues … creating opportunities
The Central Bank of Russia continues to cull bad banks. The recent nationalization of 3 large private banks seems to mark the beginning of the end of this process. The sector will remain tightly regulated and the remaining private banks should not be allowed to get themselves into the same bad situation. Investors should do careful due diligence on partner banks in the region, and any decision by local staff not to use a state bank or foreign-owned bank should be carefully reviewed.
Russia’s Alcohol Industry: Challenges and Opportunities
A US$40 bln market. The total value of the alcoholic beverage market is estimated at US$40 bln, with beer sales at approximately US$15 bln (38%).
Substantial black market. Illegal products accounted for 38% of the alcohol market and up to 50% of vodka sales in 2016.
Beer sales fell 40% since 2008. Sales of alcoholic beverages have been declining since 2008. Beer sales have fallen 40% in that period. Last year beer sales fell 3% and a 4% drop is expected this year. The market is, however, close to leveling off as the economy pulls out of recession and heads into sustainable, if modest, annual growth.
Russia Insurance Sector – continuing improvements
Opportunities for informed investors exist in the Russian insurance market. Our core argument remains valid: in our report of July 2016, we argued that, there were now clear signs that it was worth taking another look at the insurance market. The positive trends we identified have continued into 2017 and there will be opportunities for well-informed investors. Time to develop a market entry strategy? Current economic conditions are improving and the insurance market is in a much better shape than during the last major entry of international capital into the Russian market in the early part of this century.
Russia Infrastructure Initiation
Russia inherited transport infrastructure from the USSR that was well-developed relative to other early-stage emerging markets. However, a lack of investment in the 1990s led to a relative deterioration. The slowdown in investment since 2013 means that macro-economically it would make sense for the government to boost infrastructure spending to give the economy a Keynesian kick-start.