Blog: Dean BestRussia is the weakest of the BRICs

Dean Best | 21 October 2009

Cadbury's insistence today (21 October) that signs of recovery in markets in Asia - particularly in India and China - tallied with what some of the other confectioners told just-food this week at a global travel retail event in Cannes.

Todd Stitzer, Cadbury's CEO, also highlighted growth in key Latin American markets. Stitzer claimed that the region had been less affected by the global economic downturn and that, thanks to the "export-driven" nature of its economies, it was seeing growth sooner than other parts of the world.

So, there appears to be some solidity among three of the BRIC markets. But, while Brazil, India and China are gaining strength, as this piece by our deputy editor Katy Humphries highlights, there remains some concern over the economic outlook for Russia.

As the piece says:

'According to the latest World Bank figures, unemployment in Russia is expected to rise to 13% by the end of the year. And, significantly for retailers, Russia's middle class is likely to shrink by about 10%, to 51.2%. In real terms, this means 6.2m people will have dropped out the higher-spending "middle class" social bracket.

Last week, the European Bank for Reconstruction and Development cut its forecast for Russia's gross domestic product this year to a contraction of 8.5%, down from an earlier forecast of a 7.5% contraction.

"It is clear that the social costs of the global economic crisis are only likely to be felt in earnest next year, when corporate bankruptcies and unemployment will continue to rise," EBRD chief economist Erik Berglo warns.'

These turbulent economic conditions are also proving disturbing for food manufacturers selling into Russia.

Yesterday (20 October), research by the UK's Food and Drink Federation (FDF) said the country's food and soft drink exports were up by more than 10% in the first half of 2009.

However, amid rising shipments to scores of countries, the FDF said a "sharp drop" in exports to Russia had "dragged down" shipments to Eastern Europe as a whole.

The weak Russian economy has provided opportunities for some local retailers and today we reported on moves from Magnit, the country's largest retailer by number of outlets, to continue its expansion drive through a share offer.

Nevertheless, there is no doubt that Russia remains the weakest of the BRICs.


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