The Consumer Market Development Center presented a report at the online conference “Food industry in a crisis: is there a need for a change program?”
Moscow, May 14, 2020 — On May 14, 2020, the online conference “Food industry in a crisis situation: is there a need for a program of changes?” was organized by the Chamber of Commerce and Industry of the Russian Federation, the Ministry of Industry and Trade of Russia, the Center for Social Design «Platform» and the Consumer Market Development Center of Moscow School of Management SKOLKOVO. Within the framework of the conference, the director of the Consumer Market Development Center, Ilya Lomakin-Rumyantsev, presented an extended SWOT analysis of the food industry in Russia.
Online conference "Food industry in a crisis: is there a need for a program of change?" was organized by joint efforts of the Council for the consumer market development of the Chamber of Commerce and Industry of the Russian Federation, the Commission on the consumer market development of the Public Council under the Ministry of Industry and Trade of Russia, the Center for Social Design "Platform" and the Consumer Market Development Center of Moscow School of Management SKOLKOVO.
The online conference was attended by food market companies (X5 Retail Group, Magnit, OZON, Cherkizovo, Danone), analytical company Nielsen, Retail Companies Association, Food and Agriculture Organization of the UN. Director of the CMDC, Ilya Lomakin-Rumyantsev, presented an extended SWOT analysis of the food industry in Russia at this event. Also, based on the results of the event, Center for Social Design «Platform» released a review entitled “The Russian Food Market Pending Change”.
«The Russian food market is a complex system of relations between producers, trading companies, the state, society and other intermediaries in the form of banks, transport, logistics, legal and other companies. This system undoubtedly has both strengths and weaknesses; is exposed to threats from the external environment and has every opportunity for future improvement and expansion.
The current circumstances, obviously, accelerated the growth and development of distance methods of trade, delivery and interaction with consumers. A growing number of regions are getting the opportunity to use food delivery; an increasing number of manufacturers are launching their own online trading platforms. We optimize and debug this system in conditions of increased demand for this channel of consumption of goods and services.
At the same time, new opportunities are opening up for business, expressed both in expansion into foreign markets (increasing exports, opening of own trading facilities outside the country), and strengthening in the domestic market. New formats of interaction with the consumer are developing - contactless delivery, self-service cash desks and much more, which we still have to see in the future.
March and April of this year proved that the food market in Russia is ready for the uninterrupted supply of food and all necessary goods to the population. Also, the current situation has shown that the establishment of inter-industry and intra-industry cooperation can be a significant competitive advantage, save jobs for the population. However, this practice is still not universal and may not be used by all companies in the consumer market.
Unfortunately, the penetration rate of online services and food delivery services is still the prerogative of the Central regions of the country, and the distribution of services is slow. There was also a significant weakness in certain segments of the food market that were not ready for such a rapid drop in demand and the introduction of restrictions.
Along with these serious weaknesses for the entire food market is the high level of borrowing by producers and retailers (especially small and medium ones), as well as the use of cross-subsidization by companies. In the conditions of falling solvent demand, expensive products with high added value are not sold in the amount necessary to compensate for shortfalls in income from cheap products.
The food market is embedded in both the social and economic life of the country, which is why threats to it from the outside can arise from all sides. From the side of nature, there is a risk of a decrease in yield due to high temperatures in the summer of 2020. In addition, gardeners predict a loss of 60-90% of the crop due to frost during the flowering of apple orchards. In the context of quarantine measures, the question arises of the available labor force for harvesting in the summer of 2020. The consumer is also changing.
The strong point of the food market was cooperation between businesses. In contrast, low ability and willingness to cooperate between businesses can be a significant threat precisely for the post-crisis, recovery period, when the quality resources of the companies individually are insignificant and small for a breakthrough.
Russia, which has significantly increased its potential in the crisis of 2014, already has experience and modern equipment for the production of quality products with high added value. Increasing exports of such products may support the country's economy during the recovery period, but not to the detriment of the domestic market. A great help for this is an increase in the volume of physically available resources in the market: trade, industrial and warehouse premises are freed; experienced employees enter the labor market.
In general, the food market in Russia was ready for uninterrupted supply of food to the population and keeping prices at an affordable level. COVID-19 also showed a high level of food security in Russia in the conditions of closed borders. The rate of recovery of the food market will depend on the situation in related industries that consume food products».
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