Russian Foodservice: The Future of Foodservice in Russia to 2019

FS0011MR August 2015

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Single User Price: US$3,200

Summary • The ban on food imports from the EU and US in 2014 led to surge in the prices of imported food products. Consequently,

consumers will move towards more affordable restaurants, offering local and fresh food at a lower cost.

• The Restaurants will remain the dominant channel while the Workplace will be the fastest growing channel.

• The government’s efforts to promote the local food market in order to substitute food imports, will boost the Russian

Foodservices market.

• Out of the seven Profit channels, the Restaurants remains the dominant channel in terms of sales in 2014. Although the

channel will be primarily hit by the food import embargo, the sales will be driven by fast food and local coffee houses.

• Out of four Cost channels, Education channel will fuel the growth of Cost Sector foodservice sales during 2014-2019.

Scope Russian Foodservice: The Future of Foodservice in Russia to 2019 provides a detailed analysis of macro-economic factors and

the important trends within the market. The report offers detailed analysis of the market in terms of sales, outlets and

transactions. It also covers the major players in the market and regulatory scenario for the foodservice operators. Get access to:

• Macro-economic analyses and trends: GDP per capita, consumer price index, unemployment rate and age profile, which

impact the foodservice market. Consumer, operator and technology level trends are also covered.

• Foodservice market attractiveness: details and insights into the development of the foodservice sector from 2009-2019.

• Sector analysis: provides in-depth data on the valuation and development of both the profit and the cost sectors, details on the

number of outlets, transactions, average price, foodservice sales, sales per outlet, and transactions per outlet across nearly

50 sub-channels

• An overview of key players, together with insights such as number of outlets, business description and product profiles.

• Regulatory scenario insights for foodservice operators in the Russian market

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This report provides a top-level overview and detailed market and channel insights into the operating environment for

foodservice companies. It is an essential tool for companies active across the Russian foodservice value chain, and

for new companies considering entering the market.

Macro Economic Analysis and Trends

To assess the impact of economic recession and recovery on foodservice market growth. It also identifies the major

trends at consumer, operator and technology level that will shape the foodservice market and will provide a clear

picture about the future opportunities that can be explored, resulting in revenue expansion.

Foodservice Market Attractiveness

To gain the confidence to make the correct business decisions based on a detailed analysis of the Russian

Foodservice market. The report also provides historic (2009-2014) and forecast (2014-2019) view, with a special focus

on foodservice sales, outlets and transactions.

Sector Analysis- Profit Sector and Cost Sector

To have a thorough fact based analysis with information about value of the foodservice market across the channels

and sub-channels in both the sectors and the underlying factors that are driving the channel sales.

Competitive Landscape

Overview of key foodservice companies in Russia with information about their business description, product profile

and number of outlets wherever available.

Reasons to buy this report

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Macro-economic analysis: Falling oil prices and Western sanctions will further worsen the GDP per Capita

GDP Per Capita

Consumer Price Index

GDP per capita (nominal) declined by XX.X% annually in 2014

due to the devaluation of the Ruble, attributable to falling crude

oil prices in 2014. The GDP per capita is expected to fall

further in 2015 due to sustained falling oil prices and Western

sanctions* on Russia.

The consumer price index (CPI) was XX.X in 2014, up XX.X%

from the previous year. The ban on food imports from the EU

and the US has increased the prices of domestic food items

especially vegetables.

Source: Timetric

100

110

120

130

140

150

2009 2010 2011 2012 2013 2014

Co

ns

um

er

Pri

ce In

de

x

*Western sanctions- The EU and US have imposed sanctions, such as excluding Russian state banks from raising long term loans in

the EU and banning exports of dual use equipment for military use in Russia, for supporting separatists in eastern Ukraine.

**IMF- International Monetary Fund

-30%

-20%

-10%

0%

10%

20%

30%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2009 2010 2011 2012 2013 2014

An

nu

al G

row

th (%

)

GD

P P

er

Cap

ita (

RU

B)

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Consumer Trends: Consumer behavior shifting towards low-cost and local cuisine

Switching to low-cost restaurants

Russian consumers are shifting from full-service and fine-dining

restaurants to low-cost eateries such as QSRs, local coffee houses, and

street food outlets. Rising inflation and the depreciating Ruble have

impacted consumer purchasing power, leading Russian consumers to cut

back on eat-out frequencies in high-end restaurants. The real wage

growth in Russia slowed down from XX.X% in 2012 to XX.X% in 2013,

and in August 2014 it fell by XX.X%, for the first time since 2009, due to

rising inflation rates. This has resulted in declining consumer purchasing

power. Consequently, consumers prefer fast food outlets that serve fresh

food at a lower cost.

Shifting to local cuisine

International cuisines such as French, Italian, American, and Japanese

restaurants are very popular in Russia. Approximately XX.X% of food

products are imports from the EU and the US. For example, pork

(imported from Germany, Denmark, France and Canada), fish and sea

food (Norway), fruits (Poland), poultry (the US), and cheese (Finland and

Netherlands). The ban on food imports from the EU and US in 2014 led

to soaring prices for these products, which arrived indirectly in Russia

through intermediate countries. Therefore, Russian consumers are

heading towards more affordable restaurants, offering local Russian,

Georgian, and Uzbek cuisine.

Switching to low-cost restaurants

Rising inflation and depreciating Ruble leading to falling consumer purchasing power

Shifting from international to local cuisine

Due to soaring prices of imported food products Russians are heading towards local cuisine

Stimulating health & wellness trend

Unavailability of Western processed food created an unexpected health boom among Russians

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Despite the economic and political crisis, the Russian Foodservice industry grew at a CAGR of XX.X% during 2009-

2014 and valued RUBXX.X billion (US$XX.X billion) in 2014. The growth of the low-cost fast food/street food market

will alleviate the impact of Western sanctions on the Russian Foodservice market. Furthermore, the government’s

efforts to promote the local food market in order to substitute food imports, will boost the Russian Foodservices

market, which is forecast to grow at a CAGR of XX.X% during 2014-2019.

The Profit sector accounted for the majority share, at XX.X0% of total Foodservice sales in 2014, and is forecast to

increase marginally, to XX.X% of total sales by 2019. The Cost Sector accounted for the remaining XX.X% share in

2014.

Foodservice: The food import embargo will boost local production and, lower food prices leading to favorable conditions for Russian Foodservice market

Russian Foodservice: Overall Sales (RUB

Million) & Annual Growth (%), 2009–2019

Russian Foodservice: Sales by Sector (%),

2014 vs. 2019

0%

2%

4%

6%

8%

0

500

1,000

1,500

2,000

2,500

3,000

200

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201

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)

Fo

od

serv

ice S

ale

s in

RU

B B

illi

on

Profit

Cost

2019

2014

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Although Restaurants will remain the dominant food service channel, accounting for XX.X% of total

Foodservice sales in 2014, consumer behavior will shift from high-end restaurants to less expensive

Foodservice options, such as local coffee houses and street side food outlets.

Furthermore, Workplace will be the fastest growing channel, at a CAGR of XX.X% during 2014-2019,

followed by the Accommodation (XX.X%) and Retail (XX.X%) channels. International sports events such as

the Winter Olympics, Russian Grand Prix, and FIFA World Cup will stimulate the tourism market and

contribute to the significant growth of the Accommodation Foodservices channel.

Restaurants will remain the dominant channel driven by less expensive local coffee houses and street food

Bubble size = 2014 Sales

-2%

1%

4%

7%

10%

13%

-2% 1% 4% 7% 10% 13%

Sale

s in

RU

B M

illi

on

CA

GR

(%

) 2014

-2019

Sales in RUB Million CAGR (%) 2009-2014

Comparative growth analysis by channels, 2009-2014 vs. 2014-2019

Restaurants

Pub, club and bar

Travel

Workplace

Healthcare

Retail

Accommodation

Military & civil defense

Education

Leisure

Welfare & services

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Profit sector sales by channels: International events will drive the tourism market and consequently Accommodation Foodservice sales

Accommodation- Sales (RUB) and sales growth (%)

Sales and Sales Growth by Channels, 2009–2019 (in RUB)

Leisure- Sales (RUB) and sales growth (%)

Accommodation Foodservice sales are forecast

to grow at a CAGR of XX.X% during 2014-2019.

Hotel & Motel is the largest sub-channel at RUB

XX.X billion (US$XX.X billion) sales in 2014, and

is forecast to grow at a CAGR of XX.X% during

2014-2019. Bed & Breakfast will be the fastest

growing sub-channel, forecast to grow at a

CAGR of XX.X% during 2014-2019.

Leisure Foodservice sales are forecast to grow

at a CAGR of XX.X% during 2014-2019. Visitor

Attraction is the largest sub-channel, at

RUBXX.X billion (US$XX.X billion) sales in 2014

and is forecast to grow at a CAGR of XX.X%

during the same period. Entertainment will be the

fastest growing sub-channel, at a CAGR of

XX.X% during 2014-2019.

-30%

-10%

10%

30%

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An

nu

al G

row

th (%

)

Sale

s (

in R

UB

Bil

lio

n)

Hotel & Motel Holiday Park Guest House

Hostel Bed & Breakfast % Annual Growth

0%

3%

6%

9%

12%

15%

0

10

20

30

40

200

9

201

0

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An

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)

Sa

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(R

UB

Bil

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n)

Visitor Attraction Entertainment Venue % Annual Growth

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Cost Sector outlets by channels: Tertiary sub-channel will drive the Educations outlets

Education - Outlets and Sales per Outlet by Channel (RUB)

Outlets and Sales per Outlet by Channel (in RUB)

The number of outlets for the Education channel

is forecast to grow at a CAGR of XX.X% during

2014-2019, while sales per outlet for the channel

are forecast to grow at a CAGR of XX.X% during

the same period. The Further Education sub-

channel will register the highest growth in terms

of sales per outlet, at a CAGR of XX.X% during

2014-2019, while the Tertiary sub-channel is

forecast to register the highest growth in terms of

number of outlets, at a CAGR of XX.X% during

2014-2019.

Healthcare – Outlets and Sales per Outlet by Channel (RUB)

The number of outlets for the Healthcare channel

is forecast to decline at a CAGR of XX.X%

during 2014-2019, while the sales per outlet for

the channel are expected to grow at a CAGR of

XX.X% during the same period. The Medical

Center sub-channel will register the highest

growth in terms of sales per outlet, at a CAGR of

XX.X% during 2014-2019, while the Hospital

sub-channel will register the highest growth in

terms of number of outlets, at a CAGR of XX.X%

during the same period. Bubble size = Number of Outlets 2014

-3%

0%

3%

6%

9%

-3% -1% 1% 3% 5% 7% 9%

Ou

tlets

by C

ha

nn

el C

AG

R (

%)

2014-2

019

Sales per Outlet by Channel CAGR (%) 2014-2019

Pre-School

Primary School

Secondary School

Training Centre

Further Education

Children's ActivityCentre

Tertiary

-3%

-1%

1%

3%

5%

-3% -1% 1% 3% 5%

Ou

tlets

by C

ha

nn

el C

AG

R (

%)

2014-2

019

Sales per Outlet by Channel CAGR (%) 2014-2019

Medical Centre

Hospital

ResidentialCare

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Competitive Landscape – Key players

Leading Foodservice players in Russia

Company Name 2014 Number of

Outlets Overview Product Portfolio

Subway XX

Subway is a US based

QSR chain, and opened its

first outlet in Russia in

1994.

The product menu includes

sandwiches, salads, rolls,

beverages, and desserts.

Shokoladnitsa XX

Shokoladnitsa is a Russia

based coffee chain.

The product menu includes hot

dishes, appetizers, salads,

desserts and beverages.

McDonald’s XX

The US based fast food

chain, McDonald's, opened

its first outlet in Russia in

1990.

The product menu includes

burgers, fries, desserts, and

beverages

Source: Company Websites & Secondary Research

Appendix - Profit Sector Outlets

Channel Sub-Channel 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Accommodation

Bed and Breakfasts

(B&B)

Guest Houses

Holiday Parks

Hostels

Hotels and Motels

Leisure

Entertainment

Venue

Visitor Attractions

Pubs, Clubs and

Bars

Pubs and Bars

Private Member and

Social Clubs

Nightclubs

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Market Data Methodology: Foodservice Market Data is created by the consistent application of robust research across all channels

Creating Robust, Consistent & Comparable Results through:

100% Standardized Definitions 100% Standardized Processes

Phasing work by channel by country Systematic Senior Management Review

1. Baselines Developed using Internal Research Resources

• Socio-economic and demographic databases

• Historic market databases and reports

• Company database and Foodservice database

2a. Industry Research:

Extensive Desk Research (Ongoing)

• Industry and trade research

•Reports published by international

organisations

• National statistics and other publically

available sources

• Expert Opinion: Collation of opinion

taken from journalist interviews of

leading industry figures

Top-down

cross-checks

Bottom-up

data creation

Data

Finalization

3. Marketing Modeling & Analyst

Triangulation

•Modeling of any gaps in data from

previous two research phases

•Consolidation and verification of inputs

for creation of models to benchmark

data across sectors and geographies

• Forecasting

• Triangulation and Conflict Resolution

•Review by Senior Project Managers

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Key Foodservice Definitions

Term Definition

Foodservice

Foodservice is defined as the cost of all food and drink, including on-trade drinks not drunk

with food, for immediate consumption on the premises or in designated eating areas shared

with other foodservice operators, or in the case of takeaway transactions, freshly prepared

food for immediate consumption. Foodservice is restricted to the sale of food and drink in

specific foodservice channels defined below and excludes vending machines.

Profit Sector

A number of foodservice channels have been grouped together to be termed the 'Profit

Sector’. These include Accommodation, Leisure, Restaurants, Retail, Travel, Workplace,

and Pubs, Clubs and Bars. Neither operators nor consumers, or companies in the case of

the Workplace channel, typically receive a subsidy for the foodservice transaction, and

largely represent non-state foodservice operations.

Cost Sector

A number of foodservice channels have been grouped together to be termed the 'Cost

Sector'. These include Healthcare, Education, Military and Civil Defense, and Welfare and

Services. This sector typically represents the state’s foodservice operations.

Food Transactions

The total number of visits by individuals to foodservice locations that involve the

consumption of either food, or food and drink. Drink-only transactions are excluded from

transaction data, but covered in sales data; if several people visit one location at once and

there is only one bill, such as a group dining in a restaurant, the number of transactions is

counted as being one for each person in the group. The concept of ‘meals’ is broadly

analogous to transaction data, less a typically very small amount for snack-only

transactions.

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Related Reports

• Japanese Foodservice: The Future of Foodservice in Japan to 2019

• Spanish Foodservice: The Future of Foodservice in Spain to 2019

• French Foodservice: The Future of Foodservice in France to 2019

• German Foodservice: The Future of Foodservice in Germany to 2019

• Chinese Foodservice: The Future of Foodservice in China to 2019

• The UK Foodservice: The Future of Foodservice in the United Kingdom to 2019

• Italian Foodservice: The Future of Foodservice in Italy to 2019

• Turkish Foodservice: The Future of Foodservice in Turkey to 2019

• Austrian Foodservice: The Future of Foodservice in Austria to 2019

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Executive Summary

Macro Economic Analysis and Trends Macroeconomic Analysis

Consumer Trends

Operator Trends

Technology Trends

Foodservice Market Attractiveness Market Size and Forecasts

Market Share split by Profit Sector and Cost Sector

Profit Sector Analysis Profit Sector Analysis by Channels & Sub-channels- Sales Analysis, Outlet Analysis and Transaction Analysis • Accommodation - Bed & Breakfast, Guest House, Holiday Park, Hostel, Hotel & Motel

• Leisure – Entertainment, Venue, Visitor Attraction

• Pub, Club & Bar – Pub & Bar, Private Member & Social Club, Nightclub

• Restaurants - Full Service Restaurant, Quick Service Restaurant & Fast Food, Coffee & Tea Shop, Ice Cream Vendor

• Retail – Baker, Convenience Store, Delicatessen, Department Store, Garden Centre, Other Retail, Service Station Forecourt,

Supermarket & Hypermarket

• Travel – Air, Rail, Sea

• Workplace - Government Department & Local Authority, Industrial, Retail, Financial & Office Based

Cost Sector Analysis Cost Sector Analysis by Channels & Sub-channels- Sales Analysis, Outlet Analysis and Transaction Analysis • Education - Children’s Activity Centre, Further Education, Pre-School, Primary School, Secondary School, Tertiary, Training Centre

• Healthcare – Hospital, Medical Centre, Residential Care

• Military & Civil Defence - Military Overall, Police & Emergency Service

• Welfare & Service - Other Welfare & Service, Prison, Welfare Meal

Competitive Landscape Company Overview , Product Portfolio and Number of Outlets

Regulatory Scenario

Appendix

Table of Contents

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Appendix

Profit Sector Outlets

Cost Sector Outlets

Profit Sector Transactions (Million), 2009-2019

Cost Sector Transactions (Million), 2009-2019

Profit Sector Sales (RUB Billion), 2009-2019

Cost Sector Sales (RUB Billion), 2009-2019

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List of Figures

Figure 1: GDP per Capita, 2009-2014 Figure 2: Consumer Price Index, 2009-2014 Figure 3: Unemployment Rate, 2009-2014 Figure 4: Age Profile, 2014 Figure 5: Russia Foodservice: Overall Sales (RUB Million) & Annual Growth (%), 2009-2019 Figure 6: Russia Foodservice: Sales by Sector (%), 2014 vs. 2019 Figure 7: Comparative Growth Analysis by Channels, 2009-2014 vs 2014-2019 Figure 8: Profit Sector: Channel share (%), 2014 vs. 2019 Figure 9: Profit Sector: Average Transaction Price (RUB), 2009-2019 Figure 10: Profit Sector: Comparative Growth Analysis by Channels, 2009-2014 vs 2014-2019 Figure 11: Accommodation- Sales (RUB) and sales growth (%), 2009-2019 Figure 12: Leisure- Sales (RUB) and sales growth (%), 2009-2019 Figure 13: Pub, Club & Bar- Sales (RUB) and sales growth (%), 2009-2019 Figure 14: Restaurants - Sales (RUB) and sales growth (%), 2009-2019 Figure 15: Retail - Sales (RUB) and sales growth (%), 2009-2019 Figure 16: Travel - Sales (RUB) and sales growth (%), 2009-2019 Figure 17: Workplace - Sales (RUB) and sales growth (%), 2009-2019 Figure 18: Profit Sector: Comparative Growth Analysis by Channels, Sales per Outlet & Number of Outlets, 2009- 2014 vs 2014-2019 Figure 19: Accommodation - Outlets and Sales per Outlet by Channel (RUB), 2009-2019 Figure 20: Leisure - Outlets and Sales per Outlet by Channel (RUB), 2009-2019 Figure 21: Pub, Club, and Bar - Outlets and Sales per Outlet by Channel (RUB), 2009-2019 Figure 22: Restaurants – Outlets and Sales per Outlet by Channel (RUB), 2009-2019 Figure 23: Retail – Outlets and Sales per Outlet by Channel (RUB), 2009-2019 Figure 24: Workplace - Outlets and Sales per Outlet by Channel (RUB), 2009-2019 Figure 25: Profit Sector: Comparative Growth Analysis by Channels, Transactions per Outlet & Number of Transactions, 2009- 2014 vs 2014-2019

Table of Contents

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List of Figures

Figure 26: Accommodation - Transactions and Transactions per Outlet by Channel, 2009-2019 Figure 27: Leisure - Transactions and Transactions per Outlet by Channel, 2009-2019 Figure 28: Pub, Club, and Bar - Transactions and Transactions per Outlet by Channel, 2009-2019 Figure 29: Restaurants - Transactions and Transactions per Outlet by Channel, 2009-2019 Figure 30: Retail - Transactions and Transactions per Outlet by Channel, 2009-2019 Figure 31: Workplace - Transactions and Transactions per Outlet by Channel, 2009-2019 Figure 32: Cost Sector: Channel share (%), 2014 vs. 2019 Figure 33: Cost Sector: Average Transaction Price (RUB), 2009-2019 Figure 34: Cost Sector: Comparative Growth Analysis by Channels, 2009-2014 vs 2014-2019 Figure 35: Education- Sales (RUB) and sales growth (%), 2009-2019 Figure 36: Healthcare- Sales (RUB) and sales growth (%), 2009-2019 Figure 37: Military & Civil Defense - Sales (RUB) and sales growth (%), 2009-2019 Figure 38: Welfare & Services - Sales (RUB) and sales growth (%), 2009-2019 Figure 39: Cost Sector: Comparative Growth Analysis by Channels, Sales per Outlet & Number of Outlets, 2009- 2014 vs 2014-2019 Figure 40: Education - Outlets and Sales per Outlet by Channel (RUB), 2009-2019 Figure 41: Healthcare - Outlets and Sales per Outlet by Channel (RUB), 2009-2019 Figure 42: Military & Civil Defense - Outlets and Sales per Outlet by Channel (RUB), 2009-2019 Figure 43: Welfare & Services – Outlets and Sales per Outlet by Channel (RUB), 2009-2019 Figure 44: Cost Sector: Comparative Growth Analysis by Channels, Transactions per Outlet & Number of Transactions, 2009- 2014 vs 2014-2019 Figure 45: Education- Transactions and Transactions per Outlet by Channel, 2009-2019 Figure 46: Healthcare - Transactions and Transactions per Outlet by Channel, 2009-2019 Figure 47: Welfare & Services - Transactions and Transactions per Outlet by Channel, 2009-2019

Table of Contents

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List of Tables

Table 1: Leading Foodservice players in Russia, 2014 Table 2: Profit Sector Outlets, 2009-2014 Table 3: Cost Sector Outlets, 2009-2014 Table 4: Profit Sector Transactions (Million), 2009-2014 Table 5: Cost Sector Transactions (Million), 2009-2014 Table 6: Profit Sector Sales (RUB Billion), 2009-2014 Table 7: Cost Sector Sales (RUB Billion), 2009-2014 Table 8: Key Foodservice Definitions Table 9: Profit Sector Definitions Table 10: Cost Sector Definitions

Table of Contents