Russian Market Research: Facts and Trends

19 March 2007

Russian toy market turnover vs related industries

Sports goodsStationery

ToysInfant food

Sectors

2000

1500

650

410

0

250

500

750

1000

1250

1500

1750

2000

2250

2500

USD million

Сopyright © Igroprom MCA 2007

Russian share in global market.Just 0.43% of USD 150 billion

Global market

Russia

Global market

Russia

Сopyright © Igroprom MCA 2007

Russian market: financial growth history

20012002

20032004

20052006

Years

200260 345

425575

650

0

100

200

300

400

500

600

700

800

900

1000

USD million

Сopyright © Igroprom MCA 2007

Growth criteria and factors

1. Great potential 2. Improvement of

social and economic conditions

3. Demographic improvement

4. General growth in spending for toys

5. Increased focus on development of children aged 0-4 (this is the fastest-growing segment)

6. Minimum state regulation

Growth in spending for toys, million USD (СOMCON))

229

319 324

395

2004-II H 2005-I H 2005-II H 2006-I H

Сopyright © Igroprom MCA 2007

Industry trends1. Rapid market

development and niche filling

2. Oligopoly in the wholesale segment, which is controlled by a limited number of suppliers

3. Nationwide expansion of retail chains

4. Global leaders entering the market

Specialized stores vs marketplaces, % (СOMCON)

19,822

14,6

60,362,8

71,1

0

20

40

60

80

100

2005-I 2005-II 2006-I

Specialized stores Marketplaces

Сopyright © Igroprom MCA 2007

Price segmentation of Russian toy market

Сopyright © Igroprom MCA 2007

22%11,6%

10%

8%20%

28,4%

dolls soft toys construction sets

video games vehicles board games & puzzles

Soft toy – market leader

The soft toy segment (28.4%) is the most fast-growing.Needs thorough research.

Russian Soft Toy Marketis an independent research conducted by Igroprom Marketing & Communications Agency in September 2006and is our gift to business program participants.

Сopyright © Igroprom MCA 2007

Challenges of the market

1. High demand for capital and modernization (extremely low domestic output of multimedia and interactive toys)

2. Shortage of skilled personnel

Сopyright © Igroprom MCA 2007

Challenges of the market

3. Dependence on Chinese producers

4. The accession to WTO may result in increased competition (there is a risk of aggressive market entry by foreign companies)

Сopyright © Igroprom MCA 2007

Responses to challenges

1. Improved climate for foreign investment

2. Growth of innovation activities

Сopyright © Igroprom MCA 2007

Responses to challenges

3. Branding. Development of own trademarks as a competitive advantage

4. National patents

5. Product licensing

Сopyright © Igroprom MCA 2007

Russian kid product market surveys

The market is highly sensitive to demographic factors.

Market models should be based on variable birth rate.

An important task is to calculate a “demographic wave” in allow companies develop a long-term strategy!

Сopyright © Igroprom MCA 2007

Demographic marketing

Сopyright © Igroprom MCA 2007

Number of children and teenagers in Russian regions (thousand people)

Igroprom’s Research Databank

1. Monitoring and classification of all surveys of the Russian market

2. Independent and syndicated research

3. Task-oriented data selection

4. Coming soon: monthly reviews of the children’s goods / toy market.

Сopyright © Igroprom MCA 2007

Thank you for your time!Thank you for your time!

Vladimir Izotov Vladimir Izotov Head of Information Analysis DepartmentHead of Information Analysis Department

5/3 Ulitsa Vavilova, Office 116, Moscow 119334 Russia5/3 Ulitsa Vavilova, Office 116, Moscow 119334 Russia(495) 231-1293(495) 231-1293

www.igroprom.ru

Сopyright © Igroprom MCA 2007