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. Last Updated: 07/27/2016

Russians Go Down Market to Make Ends Meet




Russian shoppers can now be found picking artificial chocolate and imitation imported sausages over the real thing as the financial crisis sparks a shift in consumer buying habits.


As the turmoil puts the brakes on spending, Russians are switching to more affordable goods and manufacturers are shifting production to match the new needs, industry experts said.


"Many people are not able to buy a lot of product categories any longer," said Yelena Belitskaya, a research manager at Profindex marketing company. "The names of the brand names that they are buying are quickly changing."


Forty-one percent of Russian consumers have altered their brand preferences over the past three months and 12 percent have drastically changed their buying behavior, a Friedmann and Rose poll found in November.


Among the goods to first lose loyal buyers were expensive cigarettes, toothpaste, detergents and shampoos, marketers said. A poll conducted by Comcon2 said 35 percent of Moscow's smokers have switched to cheaper brands, 25 percent are buying different toothpastes and 11 percent new shampoos.


Russian producers are eager to tap into the opening market for lower ticketed goods, and companies like the Krasny Oktyabr candy maker and Cherkisovsky meat factory are offering new products in a bid to meet the demand.


In September, Krasny Oktyabr began offering artificial chocolate as a less expensive substitute. "We call them sweet pills," said Olga Martynova, head of marketing.


The fake chocolates - called Voshebnaya and Zagadochnaya - look like regular chocolate but use a special confectionery fat instead of cocoa butter. The Krasny Oktyabr candies are selling for about half the price of chocolates, which use mostly imported ingredients.


"Our consumers do like this product," Martynova said. She added that company research showed that in addition to its low price, buyers praised the candy for its "tenderness" and "great taste."


Russians are flocking to cheaper meat products as well, and a sausage that is packaged to look like imported hot dogs has become a new bestseller for the Cherkizovsky meat-processing factory. Patrick Pando, the marketing director, said production of the vacuum-packed analogs and other cheap sausages has soared and now accounts for 60 percent of the plant's output.


Meanwhile, sales of premium meats such as Cherkizovsky's heavy-smoked sausages have dropped, Pando said. The smoked sausages made up 10 percent of the plant's production before the crisis but now that figure has fallen below 5 percent.


"I do not know a country where consumption of luxury premium brands was as high as it was in Russia before the crisis," said Pando, who has worked in meat plants in several countries.


Pando said the company is pushing the cheaper brands through in-store promotions.


Brand-switching is also taking place in perfume stores, and the Friedmann and Rose poll found that 7 percent of Russians have changed the way they smell.


This has brought drastic changes to Moscow's shops, Profindex's Belitskaya said. With people buying cheaper scents and purchasing them in smaller quantities, perfume sales have plummeted more than 50 percent, she said. The medium-sized perfume shop is now selling about 2,500 brands, down from 5,000 in July.


Russians appear to be a little more picky about their cigarettes, though. Not one person interviewed in the Friedman and Rose poll said he had given up Western cigarettes for a local brand. Still, smokers are shifting to more affordable brands.


The poll results corresponded with the Comcon2 survey in finding that one-third of Russians had changed their Western brand for a cheaper foreign brand.


Russians are not buying expensive cigarettes - most of which are imported - as willingly as they did before the crisis, said Andrei Rogov, a spokesman at major Western tobacco company RJ Reynolds.


Sales of RJR's cheaper, domestically produced cigarettes like Pyotr 1 and Magna are taking off, he added.


But all is not lost for those producing and selling upmarket goods. Russian consumers appear to dislike being forced to give up their favorite brand names and most want to return, the Friedmann and Rose poll said. The survey also showed that 10 percent did not care one way or the other about which goods they used and 16 percent were satisfied with the new brands they started purchasing during the crisis.