The Russian Hotel Restaurant and Institutional (HRI) sector is set to return to its dramatic pre-crisis growth. Before the crisis, sales increased 10 to 12 percent annually from 2005 to 2008 together with consumer income growth.
THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY
USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT
Required Report - public distribution
GAIN Report Number: RSATO1102
Food Service - Hotel Restaurant Institutional
HRI Food Service Sector
The Russian Hotel Restaurant and Institutional (HRI) sector is set to return to its dramatic pre-crisis
growth. Before the crisis, sales increased 10 to 12 percent annually from 2005 to 2008 together with
consumer income growth. Restaurant players have noted renewed growth in the food service market
since autumn 2009. Most of the HRI sector?s growth is in the fast-food, coffee shop, and casual-dining
segments. Since imports make up the vast majority of HRI products (more than 65 percent),
opportunities for U.S. products are significant.
The Russian Hotel Restaurant and Institutional (HRI) sector is set to return to its dramatic pre-crisis
growth. Before the crisis, sales increased 10 to 12 percent annually from 2005 to 2008 together with
consumer income growth. After the autumn of 2008, when the Russian economic crisis began,
consumers were more cautious and pragmatic in their foodservice spending. But since then we?ve seen
some turn-around. Restaurant players have noted renewed growth in the food service market since
autumn 2009. Most of the HRI sector?s growth is in the fast-food, coffee shop, and casual-dining
segments. Since imports make up the vast majority of HRI products (more than 65 percent),
opportunities for U.S. products are significant.
Russian consumer markets offer many opportunities for American producers as domestic
competitiveness is still low. There are significant opportunities for U.S. companies to benefit from this
growth, as many importers, distributors, and managers in the HRI sector have expressed an interest in
buying marbled meat, cheesecakes, sauces, wine, tree nuts, high-quality ingredients, and other products.
The majority of HRI customers are price sensitive, but they are nonetheless interested in new and
To succeed, American exporters must be prepared to do extensive marketing and to educate potential
buyers on how to use their products. Logistics may be a problem, especially as shipping traffic
overloads the St. Petersburg port, Russia?s primary gateway for American food imports. American
products also face substantial competition from Western Europe, Asia, and South America.
While the main markets for American products are still in Moscow and St. Petersburg, the HRI sector is
rapidly developing in other large cities. These include Nizhniy Novgorod, Yekaterinburg, Kazan,
Novosibirsk, Samara, Ufa, and tourist cities on the Black Sea such as Sochi, the site of the 2014
Olympic Games. Operating outside major regions, however, adds an additional layer of logistical
complication for American exporters. To overcome these difficulties, they will need to collaborate with
strong importers or distributors.
SECTION I: MARKET SUMMARY
Before the economic crisis in autumn 2008, Russia had one of the fastest growing economies in the
world. Rising incomes in the 2000s boosted consumer optimism and spending on non-essential goods
and services. Real GDP growth rate was 8.1 percent in 2007, but in 2009 real GDP shrank by 7.9
percent. Real GDP growth of 4.0 percent was reached in 2010 with high oil prices and a government
policy geared toward economic growth.
Table 1: Russia: Social and Economical key figures
2005 2006 2007 2008 2009 2010
Population, million. 143.5 142.8 142.2 142.0 141.9 141.9
Unemployment, % of labor force of eap 7.1 6.7 5.7 7 8.4 7.3
Average monthly salary per person, RUR 8554.9 10633.9 13593.4 17290.1 18638 20798
Real GDP growth, % change y-o-y 6.4 7.4 8.1 6.8 -7.9 4.0
Inflation, % 10.9 9 11.9 13.3 8.8 8.8
Source: Federal State Statistics Bureau (Rosstat)
1 USD = 29 Russian Rubles in 2010
Russia is the ninth most populous country in the world, with almost 142 million people. However, the
Russian population has been declining in numbers since 1995. European Russia, geographically west of
the Urals, hosts over 75% of the total population, although it accounts for 25% of the country's territory.
According to Rosstat, 73% of all Russians lived in urban areas in 2010 and over 10% of the total
population lived in Moscow (10.5 million people) and St Petersburg (4.6 million people). Beyond the
two largest Russian cities there are nine cities (Novosibirsk, Nizhniy Novgorod, Yekaterinburg, Samara,
Omsk, Kazan, Ufa, Chelyabinsk, Rostov-on-Don) with a population of more than one million people.
The unemployment rate of the economically active population had declined to 5.7 percent in 2007, but
soared to 8.4 percent in 2009. That situation has turned around somewhat with unemployment down by
1.1% (1.8 million). In addition, individuals' real incomes in 2010 increased by 11% compared to 2009.
Russian consumer price inflation in 2010 was 8.8%, the same as in the preceding year. The government
had expected inflation to decline to 8.5% in 2010, but it hiked its inflation forecast several times,
primarily because of the abnormal heat and drought last summer, which boosted food prices. According
to the State Statistics Service?s data, prices of food products in Russia increased by 12.8% in 2010.
Since August 2008, when the financial and economic crisis began in Russia, the ruble has lost almost
one fifth of its value against the Dollar. The Ruble:Dollar exchange rate in August, 2008 was 24:1; in
December 2008 it was 27:1; in February 2009 it was 36:1; in April 2010 it was 29:1 and at the
beginning of January 2010 it was 30:1. Although the Ruble is recovering, it is still weak against the
Dollar and Euro compared to pre-crisis exchange rates, so imported food prices have risen respectively.
Figure 1. Russia?s Central Bank?s exchange rate of $1 USD to Ruble and $1 Euro to Ruble from
January 2010 to January 2011
Source: Central Bank of Russian Federation, and http://valuta.investfunds.ru/indicators/view/39/
Consumer markets flourished in Moscow and St. Petersburg as the incomes of their residents grew at a
faster pace. As a result, Moscow and St. Petersburg are Russia?s largest restaurant cities with market
shares of 30 % in Moscow and 8-10% in St. Petersburg.
Russian HRI sector sales had increased at a rate of 10 to 12 percent annually from 2005 to 2008 together
with consumer income growth. During that period, Russians spent a greater percentage of their income
on food than any other country in Europe. Since the advent of the Russian economic crisis, consumers
have become more cautious and pragmatic in their foodservice spending.
Table 2. Units, Transactions & Value Sales in Russia Restaurant Industry
2005 2006 2007 2008 2009
# of cafes, restaurants, food outlets 52.3 53.8 54.8 55.6 54.7
Transactions, mln 1251.2 1312.0 1383.6 1428.4 1396.4
RUR, billions 248.1 257.3 306.1 343.1 334.2
Growth Year on Year, % 10.9 11.1 12.1 -3
US Dollars, billion* 8.77 10.12 12 13.81 10.53
*Average exchange rates by years: 2005 ? $1 = RUR 28.3; 2006 - $1 = RUR 27.2; 2007-$1 = RUR 25.49;
2008-$1 = RUR 24.84; 2009-$1 = RUR 31.72.
Although the beginnings of an economic recovery were seen in the third quarter of 2009, consumer
confidence remains relatively low, with high unemployment and rising poverty bringing a decrease in
spending. Despite the difficulties faced by much of the foodservice market, fast food was the only
channel to see positive current value growth in 2009 and 2010, albeit at a significantly moderated rate
compared to previous years. Growth was driven by the generally rising popularity of fast food due to
busier lifestyles and the emergence of more outlets in new locations.
All foodservice operators were fairly unanimously hit by the recession and considerable declines in
consumer spending. The crisis mostly affected restaurants belonging to the higher price category
(falling by 30-50%) while sales at casual dining restaurants declined by 15-20%.
However, the market remained largely stable compared to the previous year in terms of company shares,
as the leading players were in the best position to weather the storm by addressing their menus and costs
and adapting to new market conditions. Smaller and independent players in particular were worst hit by
declining consumer confidence, although this appeared only to compound a fairly established trend of
consumer migration to chain outlets. The leading players in various segments of the restaurant market
made efforts to consolidate their positions through offering lower-cost meal solutions, and extending
their services to areas such as home delivery or catering.
Franchising has become a very popular tool for multinational players in Russia. Franchising offers an
easier way for investors to enter the Russian market with a lower level of investment, since the materials
required for the setting up of outlets and apparatus are often included as part of the franchise agreement,
cutting expenses and bringing about profits more quickly. As the economic situation stabilizes and the
business environment becomes more transparent in Russia, franchising in general is set to grow. This is
particularly true as more domestic players come to appreciate the benefits of this style of business,
including high profits and a degree of autonomy.
Major Restaurant Operators in Russia
According to FoodService magazine there are currently 30 to 40 restaurant chains operating in Russia,
each of which manages between 20 to 400 outlets. McDonald?s, Rosinter Restaurant Holding, Arkadiy
Novikov Restaurants, Markon, and Coffee House are the largest restaurant chains in different
foodservice segments in Russia. Rosinter estimates the value of its cafes and restaurants in Russia at 443
The Russian restaurant market consists of several market niches:
Fine-Dining/Full-Service Restaurants: higher priced/exclusive outlets;
Casual-Dining Restaurants: affordable, family dining outlets;
Quick and Casual Restaurants, which include coffee shops
Fast-food/Quick Service Restaurant (QSR), which is divided into two separate segments:
Stationary fast-food and street/mobile fast food (kiosks, stalls, etc.)
Fast food outlets, casual restaurants, and coffee houses are the most popular and fastest-growing sectors
Table 3. Russia: Restaurant Sales by Sub-Category, Billions of Rubles
2005 2006 2007 2008 2009 % change 2008/2009
Cafes/bars 35.8 38.5 42.2 47.7 45.7 -4.2
Fast-food 132.6 150 170 193 194 1
Self-service cafeterias 4.1 4.5 4.8 5.2 4.9 -5.8
Street stalls/kiosks 19.2 20.3 21.2 22.6 21.4 -5.4
Full-service restaurants 54.3 59.6 64.5 71.2 64.4 -10
100% Home Delivery/Takeaway 2 2.3 3 3.7 3.8 2.7
Total 248 275 306 343 334 -3
Source: Euromonitor International
Three main segments of the market stand out clearly. The highest-priced segment, ?fine-dining? in
Western terminology, has an average check of more than $70 per person. Patrons receive refined
cuisine, unique design, good service, and the availability of private dining space. The medium-priced or
casual segment has an average check of $20 to $70 per person, and it includes chains such as Il Patio,
Yolki-Palki, Goodman, and Planet Sushi. The lowest-priced segment, fast-food, mainly consists of
chains such as McDonald?s, Rostik?s-KFC, and Kroshka-Kartoshka.
The number of cafes, restaurants, and other food outlets in Russia currently stands at about 60,000.
Although Moscow and St. Petersburg are still by far the largest restaurant cities in Russia, leading
foodservice operators have begun regional expansion into other wealthy cities. The markets of Moscow
and St. Petersburg are expected to reach saturation in the near future, so modern retail formats such as
shopping malls and business centers, and entertainment hubs play a significant role in regional
expansion of foodservice competitors.
Table 4. Russia: Consumer Foodservice by Independent versus Chain Outlets (2009)
Outlets Independent Chained Total % of Total
Fast-food 15,663 4,698 20,361 34.9
Street stalls/kiosks 12,811 1,869 14,680 25.1
Cafés/bars 9,177 846 10,023 17.1
Full-service restaurants 6,101 1,158 7,259 12.4
Pizza consumer foodservice 2,981 768 3,749 6.4
Self-service cafeterias 1,668 74 1,742 3
100% home delivery/takeaway 511 153 664 1.1
Total Consumer Foodservice 48,912 9,566 58,478 100
Source: Official statistics, trade associations, trade press, company research, trade interviews, and
Euromonitor International estimates
Table 5 shows foodservice chain leaders in 2010, their brands, types, and number of outlets.
Table 5. Russia: Leading foodservice chains, 2010
Holding # outlets in % change # outlets in Brands Type
company Russia 2010/2009 Moscow
Markon 401 15.2 352 Stardog!s, Bageteria, Street +
Rosinter 362 2.6 197 Il Patio, Planet Sushi, Casual
Kroshka- 326 4 273 Kroshka-Kartoshka Street +
McDonald?s 251 12 91 McDonald?s, McCafe QSR
Coffee House 229 5 128 Coffee House, Asia, QSR
Shokoladnitsa 225 5.1 160 Shokoladnitsa, Vabi QSR
Teremok 181 5.2 93 Teremok, Bitte Gril Street
Planeta 158 3.9 68 Sbarro, Vostochnyy QSR
gostepriimstva bazaar, Viadzhio +casual
Yum!Brands 155 -2.5 84 Rostik?s-KFC QSR
Novikov Group 148 2.7 126 Different concept Fine
BRPI 145 -19.4 32 Baskin Robins QSR
Podorozhnik 130 -21.7 0 Podorozhnik QSR
Subway 127 76.3 58 Subway QSR
Grand Food 121 1.7 9 Tashir pizza, Kebab tun, QSR
Eurasia 103 14.4 2 Eurasia Casual
Vesta centr 77 0 57 Yakitoria, Gin-no Taki, Casual
international Menza, other
Ginza Project 75 22.9 42 Yaposha and different Fine +
concept restaurants casual
Chaynaya lozhka 69 16.9 0 Chaynaya lozhka QSR
Foodmaster 52 10.6 0 Vilka-lozhka, Pechki- QSR
lavochki, other +casual
AmRest 49 -14 13 Pizza Hut, Rostik?s-KFC QSR
Starbucks 43 130 43 Starbucks QSR
RP-Com 30 0 29 Goodman, Kolbasoff, Casual
Total 3452 5% 1857
Source: FoodService magazine, #12, 2010
Rosinter Restaurants Holding (Rosinter) is a major player on the Russian restaurant market. The
company gained its leadership role by its early deployment of chain restaurants in the casual-dining
segment of the market where Rosinter helds 16.7% of the market in 2009. As of December 31, 2010, the
holding company operated 362 outlets, including 113 franchised restaurants in 40 cities in Russia, the
CIS, Central Europe, and the Baltic states. It had 339 a year ago (88 franchises). The company offers
Italian, Japanese, American, and Russian cuisine under its proprietary brands (Il Patio, Planet Sushi, and
1-2-3 Café) and its licensed brands (T.G.I. Friday?s and Sibirskaya Korona). In addition, Rosinter is
developing the Costa Coffee chain with Whitbread PLC, which had 32 outlets at the end of December
Table 6. Rosinter restaurant brands
Brand name Type First year of operation # # outlets
in Russia outlets, 2010
Planet Sushi Casual 1999 110 129
Il Patio Casual 1993 114 139
(Italian) (rebranding in) 2005
T.G.I. Friday?s Casual 1997 24 30
American Bar & Grill Casual 5 5
Sibirskaya Korona Casual 17 19
1-2-3 Café Casual 2007 6
Costa Coffee Coffee house 2008 26
Other casual and fine-dining 5
Total 270 362
Source: Rosinter web-site
In May 2007, Rosinter Restaurants Holding held its IPO. Rosinter reported consolidated revenues of
6.73 billion Rubles in 2007, of 8.36 billion Rubles in 2008, and of 8.34 billion Rubles in 2009.
Rosinter's consolidated revenue for 2010 went up 16.9% year-on-year to 9.17 billion Rubles.
The company holds three main objectives. The first is to accelerate the expansion of its coverage in
Russia, the CIS, and Europe. The second is to increase its presence in transportation facilities, trade
centers, and Moscow residential areas. The third is to develop new formats of its brands for high-traffic
Following the aforementioned objectives Rosinter opened about 30 restaurants in 2009, half of which
were franchises, and about 20 new restaurants in 2010, 18 of which are franchises. In summer 2010 the
company sold a chain of fast-food restaurants under the Rostik?s-KFC brand to its partner American
Yum!Brands, with which Rosinter has had strategic alliance since 2006.
McDonald?s, the largest chain of fast-food restaurants in the world, entered Russia in 1990 and opened
its first restaurant in the center of Moscow. As of December 31, 2010 McDonald?s had 270 restaurants,
including 43 McCafes, operating throughout Russia and serving 950,000 customers daily. There are 91
McDonald?s restaurants in Moscow. The company operates in 60 Russian cities. On McDonalds?s 20th
anniversary in Russia in January 2010, company reported about serving 2 billion customers.
All McDonald's restaurants operating in Russia are corporate facilities rather than franchises.
McDonald?s operates in 120 countries and Russia is one of the ten top countries by sales volume.
McDonald?s growth rate in Russia is between 20 to 30 percent annually. The fast-food giant opens
about 40 new restaurants in Russia every year. The company spends between $1.5 million to $2 million
to set up each new restaurant. Opening one cafe costs about $250,000.
McDonald?s also plans to expand its McCafe chain, its premium class coffeehouse format. The first
McCafe opened in Russia in 2002 and now there are 43, most of which are in Moscow and in St.
Petersburg. McCafe also operates in Yaroslavl, Nizhniy Novgorod, Yekaterinburg, Volgograd, Kazan,
The corporation also owns the McComplex, the Moscow-based food processing and distribution centre,
which supplies the fast food giant McDonald's in Russia and the CIS. It has invested $45 million in the
McComplex. McDonald?s currently supplies 80% of needs from 130 local companies. Since February
2010, when Inalca JBS opened a new meat production and distribution facility near Moscow, JBS?
partner Marr Russia became the supplier of frozen hamburger patties to McDonald's restaurants is
The company's main operators in Russia are CJSC Moscow-McDonald's (47 restaurants in the capital
city) and LLC McDonald's (the remaining restaurants in Moscow and sixty other cities). According to
the SPARK database, these two enterprises reported combined sales revenues to Russian Accounting
Standards of 33.2 billion Rubles last year, and net profits of a little over 2.8 billion Rubles.
Baskin Robbins, the world's largest chain of ice cream specialty shops, entered Russia in 1990. In
1996, the company opened a major ice cream plant in Moscow -- the biggest in Europe -- able to churn
out 16,500 tons annually. The company sells more than 125 flavors of premium ice cream. The
company's turnover for 2009 came to 585.5 million Rubles, for the first six months of 2010 sales went
up 20% to 315 million Rubles. Last year was the company?s most successful year in Russia. In 2010,
the company expanded its assortment range and increased the number of prepackaged ice-cream
products offered at its outlets. Baskin Robbins Production International opened 33 new ice cream salons
in Russia in 2010. Baskin-Robbins' network in Russia consists of 145 outlets in 68 cities, most of them
Arkadiy Novikov Restaurant Group (Novikov Group) includes nearly 88 restaurant-retail-
entertainment projects of various formats and price ranges. The company has launched and managed
restaurants since 1992 and has continued to lie in second position in full-service restaurants. The
Novikov Group is slightly less chain-oriented. It operates more than 30 different Moscow high-end
concept restaurants, along with a five casual-dining restaurant chains such as Yolki-Palki, Malenkaya
Yaponiya, Sushi Vesla, Prime Star, and Kish-Mish. It also operates the premium grocery chain Globus
Gourmet, the Russian branch of the French gourmet chain Hediard, the greenhouse complex OOO
Agronom, and the Premium Class catering business.
RP-Com (Restaurant Professional Company) is one of the top 10 foodservice operators in Moscow. RP-
Com currently owns the following restaurants in Moscow: ten Goodman steakhouses, four Filimonova
& Yankel fish-houses, eight Kolbasoff beer-restaurants, and three Italian Mamina Pasta restaurants.
While RP-Com is not the leader in any one foodservice format, the company?s future growth seems
promising because it has built a reputation on quality and service. During its eight years of foodservice
experience, the company has gained success in the niche of North American full-service restaurants.
This type of restaurant is less developed in Russia, and currently only a few independent operators
specialize in grill menus. The Goodman chain became the third largest chain of North American full-
service restaurants in Moscow as well as in the whole of Russia.
RP-Com is a part of the Food Service Capital Group of companies which also includes Comfis, and
Legion, based in St. Petersburg. Comfis is a prepared food manufacturer and Legion is a food provider,
together they service passenger meals for Sapsan high-speed trains.
Ginza Project is one of the largest and the most dynamically developing consumer foodservice
businesses in Russia. The company operates various restaurants and entertainment venues with different
formats and price segments, although there is a bias towards various fine dining options. The restaurant
holding Ginza Project began developing a nationwide network of Yaposha cafés in 2003. Since 2008,
Ginza Project has continued to invest heavily in its expansion. In 2007 there were 22 Yaposha outlets in
total, with this number rising to 50 by the end of 2009. Besides regional development of the Yaposha
chain, the group doubled the number of its themed restaurants in Moscow. As of December 31, 2010
company operated 75 outlets, including 42 restaurants in Moscow.
Haute cuisine appeared in Russia in the mid 1990?s, and there is no shortage of high-end restaurants
with extravagantly expensive checks at meal?s end in Moscow and St. Petersburg. Fine-dining
restaurants are associated with names such as Arkadiy Novikov, Andrey Delos, and Ginza Project, but
most experts agree that the top-category restaurant sector is saturated. Restaurateurs are moving toward
casual restaurants where tables turn over more quickly and profit margins are higher. Nevertheless, there
is still an opportunity for U.S. products in the fine dining segment because consumers are loyal to high-
quality imported products such as marbled beef, seafood, high-end wines, and spirits.
Casual dining was one of the fastest-growing segments of the restaurant market, with growth rates
between 15 to 25 percent in 2005-2008. The leading position in this segment belongs to the chain
operators, including those specializing in Russian, North American, Italian, and Asian cuisines. The
poor development of independent operators across most full-service restaurant formats means it is
heavily concentrated with chains, especially in Moscow and St. Petersburg. Independent restaurants face
strengthening competition from cafés, bars, and fast-food outlets, which provide good quality food at
lower prices. Russian consumers prefer a diverse menu at affordable prices. The average price for a
meal at one of these restaurants ranges from $20 to $70 per person.
Although meat dishes are a staple of almost every Russian restaurant, North American?style
steakhouses are not yet widespread, accounting for only 3 to 4 percent of the Moscow market. Experts
attribute this to the fact that opening a steakhouse cost 15 to 20% more than opening the average
restaurant, due to the need for special grilling equipment and a downtown location to attract a profitable
number of customers. Rent is significantly higher in the city center than in the suburbs. Another added
expense is the marketing and education necessary to promote steakhouse culture. Currently, the main
American-cuisine restaurants in Moscow is the American Bar & Grill chains (operated by Rosinter),
Goodman steakhouses (operated by RP-Com), and five Torro Grill restaurants. Even though the number
of steakhouses is growing slowly, overall consumption of steaks is increasing steadily. These restaurants
use imported meat, usually from Australia or the U.S., since local suppliers do not provide consistent
quality. In 2011 there is the big interest in using American marbled beef at steakhouse restaurants.
Recently a new big player, Chili's Grill & Bar, entered the Russian market. This American restaurant
chain is owned by restaurant holding company Brinker, which opened the first Chili?s in Moscow on
February 1, 2011. The network in Russia will be developed by a local franchise partner company Trio
Group. According to the franchise agreement, which was signed in August 2009, the Trio Group shall
open 25 restaurants in Russia by 2017. Chili's Grill & Bar is the main rival of the American chain T.G.I.
Friday's, which operates in the Russian restaurant market through the holding Rosinter.
The enormous popularity of Japanese cuisine made Asian full-service restaurant chains the most
ubiquitous category of casual restaurants, with a value growth rate of 25% before the crisis. Japanese
restaurants, with sushi and fish menus, are heavily represented among fish and seafood-concept
restaurants in Russia. As Russian consumers become increasingly health conscious, sushi?s image as a
healthy food is an essential component of this growth.
Very few casual chain restaurants have a centralized system of purchasing. Most decisions regarding
products and purchasing are made at the restaurant level. On the one hand, there are many more
opportunities for sales, since each restaurant is a separate account. On the other hand, individual sales
are smaller and do not allow for the development of exclusive distribution rights and consistent
According to industry experts, casual eateries use imported meat, seafood, desserts, seasonings, and a
variety of ingredients. While quality is of some concern, prices dominate purchasing decisions.
American products will need to be cost-competitive to attract business in this segment.
The Russian fast food market is relatively young compared with those in Europe and the United States.
It has been 20 years since the first McDonalds opened in Moscow on January 31, 1990, and in the
intervening two decades Russia?s fast food market has grown and ranks 12th in the world by volume. In
the years prior to the crisis, the fast food market was the fastest-growing restaurant category in Russia
with an annual growth rate of 25 to 30% over the 2004 ? 2007 periods. According to Euromonitor
International, Russia's fast-food market was valued at 194 million Rubles in 2009 and is 58% of total
foodservice sales. Nowadays it is one of the few segments of the restaurant business to continue
growing after the onset of the crisis. Moreover, the popularity of fast food in Russia has grown
dramatically ever since the crisis first hit the country. Fast food restaurants account for about one-third
of all public eateries and account for as much as 70% of clients served.
Presently about a dozen large fast food chains operate in Russia. The McDonald?s, Rostik?s-KFC and
Sbarro chains together occupied 52.8% of fast-food chain sales in 2009. McDonald?s remained the
absolute leader with a 43% value share of fast-food chain sales. The biggest local fast food brands that
offer traditional Russian dishes, such as Teremok- Russkie Bliny, and Kroshka- Kartoshka, have a much
smaller share of the market. Table 7 shows the market shares of fast-food chain operators.
Table 7. Russia: Market Shares of Fast-Food Chain Operators
Company Global Brand Owner 2006 2007 2008 2009
McDonald's McDonald's Corp 41.4 42.6 40.8 43
Rostik's- KFC Yum!Brands Corp 2.3 5.0 4.0 4.2
Sbarro Sbarro Inc 4.3 5.1 4.8 4.1
Rostik's-KFC AmRest 1.0 1.7 1.5
Teremok Teremok - Russkie Bliny 1.0 1.3 1.5 1.6
Kroshka-Kartoshka Tekhnologiya & Pitanie Ltd 1.2 1.4 1.5 1.7
Chaynaya Lozhka Solo OOO 1.4 1.5 1.4 1.4
Baskin-Robbins Dunkin' Brands Inc 1.1 0.9 0.9 0.8
Subway Subway Russia LLC 0.4 0.6 0.7 1.0
Others 46.9 40.6 42.7 40.7
Total, % 100 100 100 100
Source: Official statistics, trade associations, trade press, company research, trade interviews,
Euromonitor International estimates
Since autumn 2008 consumers have tried to decrease their restaurant spending and are frequenting less
expensive restaurants, with simple menus, good-quality food, and affordable prices.
Consequently, more Russians started visiting fast-food outlets with average checks of 150-300 Rubles
($5-$10) on a regular basis. According to restaurant consulting company Synovate data, as of October
2010, 23% of Russians aged 16 to 50, both male and female, purchase fast food at least once a week.
Before the crisis only 18% of customers visited fast food outlets. Quick service outlets have captured
many new customers who used to eat at casual-dining or fine-dining restaurants. About 70,000 people
visit the 155 Rostik?s- KFC restaurants daily, most of them teenagers, young people aged 20 to 29 years
old and families with children. The average order nowadays comes to 200 Rubles ($6.50), a price that
hasn?t changed since 2008.
Russia?s fast food market still isn't saturated in spite of the development that has taken place for the past decade.
It?s a very attractive segment not only for existing large players, but also for domestic restaurant operators and
multinational companies alike reaping the benefits. Experts predict that the fast-food and street-food
market will not reach saturation until 2014.
Pancakes, burgers, chicken, pizza, and baked potatoes are the most popular types of fast-food in Russia.
The food-court format is gaining popularity among fast-food operators. The most dynamic chains --
including Rostick?s-KFC, Kroshka-Kartoshka, Sbarro, and Baskin-Robbins -- have opened numerous
outlets in shopping malls and hypermarkets.
While Americans often move quickly through food courts, stopping for a quick bite while shopping,
Russians usually visit food courts to socialize. In Russia, the food court is a popular venue for young
people to spend time together.
Stand-alone kiosks are popular in Russia, but there is some consolidation in the industry. The number of
independent stands is decreasing, but sales and the number of chained outlets are increasing. Domestic
chains dominate the street fast-food market. Chains such as Stardog!s (hot dogs), Kroshka-Kartoshka
(potato stand), and Teremok (Russian crepes) are ubiquitous throughout the major cities and are
expanding regionally as well. Table 8 shows the growth of fast food restaurant chains in Russia.
Table 8. Growth of fast food restaurant chains in Russia
Chain name Country of Year est. in # outlets # % change
origin Russia Nov. outlets 2010/2008
Ka Russia (Moscow) 1991 304 326 7 rtoshka
Stardog!s Russia (Moscow 1993 () 283 401 42
McDonald's USA (Canada) 1990 197 270 37
Teremok Russia 1998 159 181 14
R 1993 (2005 new ostik's - KFC Russia/USA 152 155 1
Baskin Robbins USA 1992 117 145 24
Sbarro USA 1997 126 158 25
Chaynaya Russia (St.
L 2001 58 69 19 ozhka Petersburg)
Subway USA 1994 47 127 270
Burger King USA 2010 11
Dunkin Donuts USA 1996/2010 8
Carl?s Junior USA 2007 6 11 83
Source: Restaurateur Magazine, trade press
Subway, the world?s largest sandwich chain, is one of the most rapidly developing fast food chains in
Russia tripling the number of its outlets in 2009-2010. The national Subway franchise for Russia is co-
owned by three Californians, all of whom originally invested in the franchise in the early 1990s. Despite
the profitability of their first restaurants, a long-running legal dispute with Russian partners jeopardized
the venture in the mid- and late-1990s. With that behind them and with the impetus toward the QSR
format afforded by the financial crisis, Subway has quickly developed in Russia. In St. Petersburg, the
popularity of the Subway brand is underscored by the fact that, from May to July 2010, one local
Subway restaurant had the highest sales turnover out of 31,000 Subway restaurants worldwide. Subway
has an ambitious plan of expansion, intending to reach 1,000 stores by 2015.
Fast-food restaurants tend to use a higher percentage of local ingredients (around 50 percent) as
compared to other restaurants. This decision is driven by high turnover and the need for a consistent
supply-chain more than by direct preference. Several fast-food chains have created internal supply-
chains based in Russia. For example, McDonald?s created McComplex to produce nearly 56,000
hamburger patties daily, but McComplex cannot produce enough to meet its needs. The company
therefore buys additional hamburger from meat suppliers. Since the beginning of 2010 Marr Russia
supplies frozen hamburgers to McDonald's, Rostik?s-KFC and Carl?s Junior restaurants.
Produce, dairy, and egg products are usually sourced locally, but import opportunities do exist. Many
chains use imported sauces and ingredients. Smaller fast-food restaurants that do not have the capital or
scale to justify creating their own production facilities may also import meat and produce. Poultry and
beef are the leading imported meats in this category. Most of the larger international chains have an
internal distribution network, while some independent and smaller chains rely on traditional or specialty
Fast-food is an increasingly attractive market for overseas investors and the appearance of new fast-food
players in Russia is not surprising. Experts explain the active interest of global restaurant chains in the
Russian fast-food market by its high, steady annual growth rate.
Franchising in consumer foodservice is undoubtedly now most evident in the fast food environment,
from its beginnings in street stalls/kiosks, with some trade sources indicating that more than 90% of fast
food chains in Russia work under various franchise agreements.
Burger King, one of the largest fast food corporations in the world, has established a presence in Russia
by opening its first restaurant in Moscow on January, 2010. Burger King, which operates more than
12,000 restaurants in 73 countries, has entered the Russian market as a part of its expansion strategy in
Europe, the Middle East and Africa. The company is using its traditional franchising scheme to expand
the chain. In order to launch operations in Russia, Burger King has established a daughter company
Burger Rus, managed by Alexander Kolobov who has successfully established a well-known coffee -
shop chain called Shokoladnitsa. Under the terms of its franchise agreement, Shokoladnitsa is required
to give 5% of its turnover to Burger King, while Burger King is obliged to pay for the opening of each
restaurant. The company also signed an agreement in February, 2011 with company Ginza Project, a
second franchising partner in Russia.
Burger King currently has eight restaurants in Moscow and four restaurants in St. Petersburg. Burger
King plans to increase the number of its outlets in the Russian regions to 30 before the end of 2011.
The average bill totals 120-150 Rubles ($4-$5). Burger King restaurants in Russia get most of their food
from domestic suppliers. The company has about 30-40 suppliers in Russia, of which more than half are
local producers. The hamburger patties, for example, are being supplied by Russian Inalko. Franchises
are required to buy product only from Burger King-certified suppliers.
Dunkin' Donuts, the U.S. doughnut chain that left Russia after a three-year stint in the 1999, returned
to Moscow in 2010 with big plans for rapid expansion. The Russian company Donuts Project received
exclusive franchising rights for development of the chain in Russia and the Ukraine. According to the
company?s plans, the brand will be situated in both street and business centers. Dunkin? Donuts opened
its first outlet in May 2010 and currently has eight restaurants in Moscow. Dunkin? Donuts plans to
open no less than 50 establishments in Moscow. Dunkin? Donuts outlets operate in a low price format
(average bill $5-7), which as noted above became a key factor for consumers during and after the crisis. To cater
to Russian tastes, the chain offers more substantial food choices, such as salads and sandwiches, alongside the
Dunkin? Donuts has ambitious plans to beat competition in the underdeveloped takeaway market
through more convenient packaging and also to inspire a love of doughnuts in young Russians.
Wendy's/Arby's Group, one of the world's leading fast food operators entered the Russian market in
2011 and will open 180 restaurants there over the next 10 years. Last year the company signed a
franchising agreement with Russia's Food Service Capital group, owned by Mikhail Zelman. Food
Service Capital initially plans to open 10 outlets in Moscow and St. Petersburg. Wendy's/Arby's have
around 10,000 restaurants in 24 countries. Wendy's main competitors in the world are McDonald's and
The popularity of coffeehouses among urban consumers in the largest Russian cities is growing faster
every year with 2009 being the only exception in the last five years, when Russians experienced a
significant decline in income due to the crisis. The recession resulted in a 20-30% decline in customers
on average and a decline in sales of 23% to $152.44 million that year. However, currently the largest
coffee shop operators are experiencing improved sales and forecast recovery to pre-crisis levels in the
short term. Before the crisis, the coffeehouse business in Russia showed impressive annual growth of
36% in value terms on average. Current growth is seen in Q3 2010 when sales reached $185.96 million.
Currently there are about 3000 coffeehouses in Russia and the market is far from saturation. Indeed, it
has great development potential. Nowadays, coffeehouses are prevalent in Moscow and in St.
Petersburg with 400 and 350 coffeehouses respectively. There is an increasingly high concentration of
the leading chains, including Coffee House, Shokoladnitsa, McCafé, Starbucks, and Costa Coffee in
these cities, so in the short term many coffeehouse chains plan to expand to the Russian provinces. Non-
chain coffee shops are significantly less common. The rapid development of modern hypermarkets,
trade centers, shopping malls, and business centers is helping leading chains, more so than
independents, to enter regional markets.
Two leading coffee-shop chains Shokoladnitsa and Coffee House together own about 450 outlets and
have value shares of 8% and 7% respectively. Shokoladnitsa is closer to an Italian type of café with a
cozy interior, while Coffee House is a more American-style coffee shop, with the décor being airy and
uncomplicated. As a result, the clientele differs: Coffee House is preferred by consumers under 30,
while Shokoladnitsa is favored by a more mature audience. Most of the Coffee House and
Shokoladnitsa outlets are located in the food courts of new shopping malls and business centers.
Local chains such as Traveler's Coffee in Novosibirsk, Kofeynya No. 7 in Yekaterinburg, and Pit Kofe
in Rostov-on-Don have strengthened their competitive positions in local markets. Currently the
Traveler?s Coffee brand name is used by about twenty franchises in different Russian cities.
In 2007, two leading multinational coffee shop chains appeared on the Russian market, adopting
different development strategies. The world leader, Starbucks Coffee Company, opened its first outlet in
Moscow in September 2007 and currently is number three by coffee sales after Shokoladnitsa and
Coffee House. As of February 2011, Starbucks operates 40 coffee shops in the capital. Following
Starbucks, Whitbread and Rosinter Restaurants Holding signed a joint-venture agreement and
announced their intention to launch the Costa Coffee chain in Russia. Costa Coffee outlets are not only
concentrated in Moscow and St. Petersburg but also in other Russian regions. The appearance of these
leading multinational coffee chains on the Russian market has changed the position of the coffee shop
segment. Table 9 shows the growth of Russia?s coffee shop chains.
Table 9. Russia: Coffee-Shop Chains
Chai First Year of n Name Locations Op outlets eration
Coffee - House Moscow, St. Petersburg, 187 216 1999
Moscow, St. Petersburg, 175 225
McCafe 2002 n/a 43
Traveler?s Coffee Novosibirsk, Siberian regions 1997 n/a 36
Idealnaya St. Petersburg, Moscow, 13 18
C 2000 hashka regions
Coffee - Mania Moscow 2001 12 9
Coffee Bean Moscow, regions 1996 12 12
Starbucks Moscow 2007 4 40
C scow, St. Petersburg, 10 26 osta Coff Moee 2007
Kofein Moscow 2006 n/a 17
Source: Restaurateur Magazine, trade press
The typical Russian coffee shop format differs from Western standards because Russian consumers
prefer a larger assortment of drinks and food items. According to industry sources, coffee accounts for
80 percent of sales for Idealnaya Chashka and Coffee Bean, but only 40 percent of those for Coffee
House and 15 percent for Shokoladnitsa. Coffee shops in Russia constantly increase their non-coffee
selections to include alcoholic drinks, dairy cocktails, salads, hot dishes, desserts, and tea. The average
bill at one of these coffee shops is between $15 and $25, and drinks average only 30 to 40 percent of the
total check. Russian coffee shops that sell a variety of desserts and confectionery products have created
a new market for U.S. exporters of nuts and dried fruit.
According to Russia?s State Statistics Bureau (Rosstat), Russia had approximately 6775 functioning
hotels able to accommodate guests in 500,000 rooms at the end of 2010. Almost 20% of hotel rooms are
in Moscow, 13% are in Russia?s popular Black Sea resort area Sochi, and 9% are in St. Petersburg.
Russia?s hotel industry is facing a severe room shortage. Jones Lang LaSalle and Colliers International,
the real estate money management and services firms, estimate that there are currently only 16,000
Western business-style hotel rooms available. In fact, most existing four and five-star hotels in Moscow
and St. Petersburg were built during the last decade. As a result, Moscow currently has 10,000 Western
business-style hotel rooms, and St. Petersburg has only 3,000.
Total visitation to Moscow grew at an annual rate of approximately 13% from 2006 to 2008, according
to figures provided by the Committee for Foreign Economic Relations of Moscow City. According to
Moscow?s Committee for Tourism, total tourism arrivals for the first half of 2009 declined 19% to just
over 1.5 million visitors. This was caused by the economic crisis which started to affect Russia during
the last quarter of 2008.
Table 10. Hotel Industry Sales in Russia
2005 2006 2007 2008 2009
RUR, billions 60.1 74.7 92.4 107.5 105.9
Growth Year on Year, % 24.3 23.7 16.3 -0.02
US Dollars, billion* 2.12 2.75 3.62 4.32 3.34
Source: Federal State Statistics Bureau
*Average exchange rates by years: 2005 ? $1 = RUR 28.3; 2006 - $1 = RUR 27.2; 2007-$1 = RUR 25.49;
2008-$1 = RUR 24.84; 2009-$1 = RUR 31.72.
Moscow is one of the largest cities in Europe and remains the country?s main city for hotel
development. According to NAI Becar, as of end 2010 about 242 hotels were operating in Moscow with
approximately 36,800 rooms. According to the British research company Hogg Robinson Group, since
2005 Moscow has taken first place as the city with the world?s highest accommodation cost.
Table 11. Accommodation costs in Moscow Hotels (rubles/per night)
Star rating 2008 2009 2010 # of rooms in 2010 Market share, %
5 17,087 12,236 11,500 4,115 11
4 14,442 9,615 9,500 7,421 20
3 9,718 6,476 5,800 15,795 43
economy 6,397 5,153 4,000 9,466 26
Total 36,797 100
Source: Consulting Company Cushman & Wakefield, NAI Becar
After peaking in 2007, the overall performance of hotels in the Russian capital has shown weaker year-
to-August results compared to 2007, with a year-to-August 2010 occupancy decrease of 13% on 2007,
and average rate decreases of 20% in Rubles.
Figure 2. Hotel occupancy in Moscow for 2007, 2009 and year-to-August 2009
Source: STR Globel
Figure 3. Moscow Hotels Occupancy rate Q3 2008 ? Q3 2010
Source: STR Global, GAO ?Moskva?, Blackwood research
Hotel occupancy dropped in 2009 as a result of many factors which affected the Russian economy,
including lower oil prices, decreased levels of oil production and a decrease in demand for the country?s
Since 1991 Russia has seen the emergence of more international brands and there remains further
opportunity for investment in the hotel sector across all categories. Moscow and St Petersburg alone
account for around 30% of the country?s hotel capacity. While the high-end sector is close to saturation,
there is a strong demand for midlevel hotel rooms. The highest level of unfulfilled demand is for quality
three star and economy hotels. The budget brands of Western hotel chains are not represented in Russia.
Table 12. Russia: Five and Four-Star Hotels Managed by International
First year of
H Other # of otel Operator Moscow Hotel Nam # ofe R operation in ooms Locations Rooms Russia
R Swissotel Krasnye affles H 233 2005 olmy 5*
Marriott Renaissance Moscow
International H 475 Samara 196 otel 4*
C 218 St. Petersburg
ity Center 4*
Ritz Carlton Moscow
Marriott Grand Hotel
urora Hotel 5*
Renaissance Monarch 366
H Ararat Park Hyatt yatt International Mos 97 2002 cow 5 219 Yekaterinburg 2*
Inter Holiday Inn 154 Samara 177 1998
Continental Hotels Vinogradovo 4* Chelyabinsk 54
Group St. Petersburg 557
312 Sushev ski 4*
523 Sok olniki 4*
Holiday Inn Lesnaya
Crown Plaza 577
217 Sim onovskiy 4*
Starwood Hotel & Le Meridian National
R 221 1997 esort 5*
Le Meridien Moscow
C 131 ountry Club 5*
Sheraton Palace Hotel
Best Western Art-Hotel 4* 85 St.Petersburg 2005
Kempinski Hotels Balchug Kempinski
& 232 St.Petersburg 197 1992 Resorts 5*
Accor G Novotel roup 488 St.Petersburg 233 1992
City-C 257 Yekaterinburg 168
Hotels of the Wo Savoy 5* 84
Rezidor Hotel Radisson SAS 1991
G 410 Sochi 415 roup Slavjanskaya 4*
R 150 Rostov on Don 82
Belorusskaya 4* 264 St.Petersburg 164
Radisson Royal 543 Kaliningrad 178
Source: Department of External Relations, Moscow City Government and Industry Data
The regions outside of Moscow and St. Petersburg represent a small fraction of the travel industry, but
some areas such as Sochi, Rostov-on-Don and Vladivostok are growing quickly. Yekaterinburg,
Novosibrisk, Nizhny Novgorod, Krasnoyarsk, Kaliningrad, and Kazan are other regions where travel
and tourism are growing, particularly for business travel. Major hotel chains are opening facilities in
these regions, and the Rezidor Hotel Group (including Radisson brands) is currently targeting some 35
key cities in Russia with a population of 500,000 and above to further develops its portfolio of hotels
and brands. Other international operators, such as InterContinental Hotels Group, Hilton Hotels
Corporation, Kempinski Hotels, Marriott International, and Accor have built two-three new hotels in
cities with populations over one million in the last five years.
Though many new hotels were opened in 2010 it should not be taken as a sign of a revival in hotel
investment. Hotel projects usually have a four to five-year development cycle, so the projects coming
online in 2010 were planned and, in many cases, financed prior to the start of the global recession.
Table13. Moscow Hotels: New openings and future developments
Hotel name Star Cost per room, Number of Opening
rating rubles rooms Date
Lotte Hotel Moscow 5 12800-13800 304 2010
Ukraine/Radisson Royal 5 12800 543 2010
Grand Hyatt Residences & Spa 5 368 2010
Four Seasons Moscow 5 185 2011
Kempinski Hotel Nikolskaya 5 200 2011
Kempinski Hotel Beryozki 5 200 2011
Mandarin Oriental Moscow 5 237 2011
Raffles Moscow 5 130 2011
Shangri La Moscow 5 400 2012
Aquamarin 4 6800-7980 159 2010
Renaissance Moscow Monarch 4 366 2010
Garden Ring 4 7600-9600 86 2010
The Mandarin Residences 4 45 2010
Courtyard Marriott Moscow 4 170 2010
Radisson SAS Riverside 4 150 2010
Radisson SAS Belorusskaya 4 264 2010
Scandic Khimki 4 300 2010
Mercure 4 103 2010
Radisson SAS Olimpiyski Hotel 4 382 2011
Holiday Inn Circus City 4 1000 2014
Katerina Park 3 260 2010
SK Royal 3 170 2010
Azimut Otel 3 144 2010
Source: www.prohotel.ru, Blackwood research, H/S Research
As many experts predicted, the 2014 Sochi Winter Olympic Games is spurring hotel development in the
region. All in all, 390 new hotels are expected to be built across Russia by 2012, with many in Moscow
and several in major regional capitals. International hotel operators are building hotels before upcoming
events in the Russian regional centers. The following events are planned for the near future: the APEC
Summit in Vladivostok in 2011, the World Students Games in Kazan in 2013, and the Sochi Winter
Olympic Games in 2014. Russia also won the right to host the 2018 FIFA World Cup. Matches are to be
held in 13 cities, including Moscow, St. Petersburg, Kaliningrad, Kazan, Yaroslavl, Nizhny Novgorod,
Rostov-on-Don and Sochi.
There are usually two restaurants in four-star hotels and three restaurants in five-star hotels. According
to industry sources, tourists often eat breakfast and dinner in their hotel, but they eat lunch in the city. In
an attempt to attract more of the tourist industry, hotels are offering special catering services for
different events. On average, room rentals account for 70 percent of hotel income, services account for
10 percent, and food and beverages account for 20 percent.
Luxury hotels represent the best opportunity for selling American products to hotels. Other sub-
categories usually have very limited foodservice offerings. Hotel restaurants operate like other
restaurants and purchase items through distributors. American meat, fish, wine, spirits, and fruit are
some of the better prospects for this segment.
Institutions are challenging customers for American producers. Before the 1990s, catering was a
miniscule segment of the Russian hospitality market. Now, catering is a quickly evolving industry, with
Moscow claiming 62 percent of the market and St. Petersburg at 22 percent. There are an estimated 500
catering companies operating in Russia, including 30 major ones. Each year, 15 new companies enter
and 20 companies exit this intensely competitive industry. Russia?s leading caterers are Sodexho, Mega
Foods, Parad Catering, Brizol, and Master foods which have total market share about 50 percent of
The Russian catering market consists of several segments, each of which has a different service
audience, number of players, average bill per person, and profit, including:
Corporate catering; and
Urban dwellers have less time to prepare their own meals, so they often dine out or have lunch delivered
to the office. Lunch deliveries are a strong component of the catering business. The estimated value of
the lunch catering business in Moscow was $100 million in 2009. There is room for development,
however, as only 15 percent of Moscow?s office employees eat lunch prepared by qualified chefs.
Office cafeterias form another changing segment. Until recently, most cafeterias operated in the Soviet
fashion, offering few choices and low quality. As incomes grow, however, the office cafeteria is
transforming. Corporate catering firms manage stationary foodservice facilities, placing them in office
buildings, business parks, shopping centers, administrative complexes, and industrial facilities. Their
goal is to give people high quality meals in these institutions on a daily basis. The average bill in office
cafeterias is $5 to $7. Newer cafeterias are beginning to use higher quality ingredients. They still prefer
to buy whole, non-processed items, and they are very price sensitive. Like many restaurants, they
monitor prices weekly and do not hesitate to change suppliers or menus if they encounter a better price.
Catering for private events and parties, especially those in the premium segment is another attractive
and profitable area of foodservice. Consequently, well-known restaurateur Arkadiy Novikov entered the
catering business at the beginning of 2006. Other restaurateurs and five-star hotels are also rushing to
enter this lucrative market, including Gurme (?Gourmet?) Catering, Baltschug Kempinski, and
Swissôtel Krasnye Holmy. Their teams of culinary professionals are willing and able to delight
customers. Hotels are attractive caterers because they are flexible enough to deliver a five-star
experience in any venue, and they have an extensive wine knowledge. The average bill for mid-level
off-premise catering is $45 per person, but prices can be significantly higher in the premium class.
Caterers use many categories to tailor their products to the client, and they usually work with the same
distributors as restaurants. Like restaurants, caterers use a variety of distributors and suppliers
depending on their needs. Mid-level and high-end caterers import a variety of food, presenting an
attractive opportunity for U.S. products. There is a particular demand for specialty items such as
seafood, meat, wine, and nuts.
While there is not yet a national school lunch program in Russia, there is interest in creating one. The
Russian government is working closely with the U.S. government to improving the school lunch
program in Russia. Packaged food for institutions may have some potential in Russia, but the cost and
logistics of importing U.S. products may deter potential customers. Nevertheless, potential demand
exists for rice, peas, beans, and lentils. Soup bases, spices, and institutional food packs could also appeal
to some companies.
Universities, hospitals, and the army could be other potential customers for catering companies, but
tenders are often not competitively bid for catering contracts with government institutions.
In 2008, Russian Railways created the joint venture Yedinaya Set Pitaniya with RP-Com, one of the top
20 foodservice operators in Moscow. This enterprise manufactures ready meals for passengers of the
Russian high-speed railways, which currently operates on three lines: Moscow-St. Petersburg, Moscow-
Nizhny Novgorod and St. Petersburg-Helsinki. By the end of 2010, the company produced 20,000 meal
trays per day from its first catering facility near St. Petersburg. Other catering facilities will be built in
Yekaterinburg, Novosibirsk, Sochi, and Rostov-on-Don. According to RF Government plan, 8 Russian
cities hosting 2018 World Cup matches should be linked by an integrated high-speed rail network.
Operators at the major airports in Moscow and St. Petersburg usually function more as part of a
restaurant chain than as an institutional operator. According to airport statistics, 30 to 40 percent of
passengers eat in airports. Leading Russian foodservice operator Rosinter has opened and operated
restaurants in Russian airports since 2003. Its experience earned Rosinter the responsibility of being the
primary foodservice operator in St. Petersburg?s Pulkovo airport in 2007. In addition to operating the
airport?s restaurants, Rosinter also feeds the airport staff. Rosinter built a kitchen facility in the Pulkovo
The volume of passenger traffic in Russia exceeded 50 million in 2010. The volume of passenger traffic
through Moscow?s two main airports, Domodedovo and Sheremetyevo, exceeded 40 million passengers
in 2010. Airlines contract with professional catering companies for in-flight meals for passengers. JSC
Domodedovo Air Service is the largest Russian company serving up to 60,000 in-flight meals and
rations per day in Domodedovo airport. AeroMar has provided in-flight catering services to the
passengers of Sheremetyevo airport since 1990.
Joint-stock company "Rossiya Airlines" is the leading air carrier in North-West Russia. Rossiya Airlines
is located in St. Petersburg and operates up to 40% flights from Pulkovo airport for more than 70
destinations. Since 1993, the airline has its own catering division. Daily, Rossiya Catering produces up
to 20,000 portions of in-flight meals for all domestic and international airlines flying out from Pulkovo
airport. Considering the increasing demand for high-quality airline food, airline foodservice could
become an attractive niche market for U.S. food and beverage exporters.
Another great opportunity for American producers and Russian foodservice operators will be the Sochi
Olympic Games in 2014. Last year the Russian government renovated the Sochi airport, increasing
capacity to serve 1,300 to 2,500 passengers per hour. In the buildup to 2014, Russia will construct
restaurants, stadiums, and 57,000 hotel rooms to serve sports teams and guests in Sochi. These will all
provide a valuable potential market for American producers.
SECTION II: ROAD MAP FOR MARKET ENTRY
Distribution Channels for HRI Products in the Russian Market
Do mestic and i mported fo od products for Russian foodservic e establishm ents come through
importers, distributors, and wholesalers. Large suppliers are typically also importers. For smaller
restaurants and hotels, most foodservice purchases are made through a wholesaler or
importer/distributor. Large chains may choose to purchase directly through customized growing
agreements or through a central buying office. Most hotels and restaurants choose to purchase the
majority of products through foodservice importers/distributors in the HRI sector, both large and
small. Specialty and seasonal products are purchased through smaller distributors or directly from
Table 14 . Russia: Advantages and Challenges for U.S. Exporters
Paying in dollars is advantageous for Ruble/$ exchange rate has led to an increase in the
exporting to Russia compared to Europe price of U.S. products, mitigating some of the
due to the lower cost of the Dollar positive effects of the advantage over the Euro.
relative to the Euro.
Official government opposition to growth in food
Russia with population of around 142 Still not fully recovered from economic crisis
million people is one of the largest which had a profound impact on purchasing power
consumer markets in Europe. among the middle class.
Rising disposable incomes in the long Economic vulnerability, dependence on oil and
term will allow Russians to spend more mineral extraction for most wealth.
on food and beverages.
U.S. products have a reputation for Logistics can be difficult. There are often long
consistency and high quality. shipping times from the U.S., the major Russian
port in St. Petersburg operates slowly and handles
volumes way beyond capacity, and there are
complex customs regulations.
The HRI sector has a lot of room for Customers can be very price sensitive.
growth. Restaurant chains are
expanding out of Moscow and St.
Petersburg to other cities with
populations over one million.
Russian trade and investment policy is Russia is not yet a World Trade Organization
converging with international standards. (WTO) member and accession is moving slowly.
Entering Russia?s market can be incredibly rewarding, but it requires hard work and careful planning by
U.S. exporters. Different types of products require different marketing strategies. Several meat, seafood,
wine, and spirits companies, however, are selling to the HRI sector, and their businesses are flourishing.
Several general recommendations may be helpful for developing a successful entry policy:
Work with a Russian Importer: Direct importation is difficult without a large customer base, so it is
best to find an importer. To work with Russian Customs, it is essential to have a physical presence in
Russia. U.S. exporters can approach the Russian HRI food and beverages market through a general
importer, with whom good relations are essential. Selecting the right trading partner is one of the most
important decisions for exporters when developing their businesses in Russia. A local Russian partner
who is familiar with market conditions and the regulatory environment can help exporters navigate the
Russian HRI market, resolve issues, and increase the likelihood of success. The importer should be able
to handle customs clearance, veterinary and phytosanitary inspection requirements, any necessary
guarantees, and all licensing procedures.
Logistics must be carefully considered and monitored, so close contact with the importer is also
necessary in order to avoid logistical problems and shipping delays. Consider the longer shipping time
for U.S. products compared to products from Europe. It is essential, for example, that all required
documents be filled out as quickly and efficiently as possible. Most products will enter Russia through
St. Petersburg, but if a U.S. exporter wishes to operate in the Russian Far East, Vladivostok is another
option. Consistency and necessary quantities of production in the supply chain are frequently cited as
primary concerns for the HRI segment.
Exporters representing U.S. companies may contact the Moscow ATO for assistance in locating
importers. Performing due diligence is nevertheless important, and exporters are expected to verify the
banking and supplier references of potential importers. Local and U.S.-based organizations in Russia
can also provide helpful information to exporters. Credit reporting, however, is a relatively new practice
in Russia, and credit-reporting agencies may not have complete information on potential Russian
business partners. We recommend the exporter ask for 100% payment for the first shipment.
Work with a Russian Distributor: U.S. exporters will need a distributor in order to sell their products.
Large suppliers are typically also importers, and most HRI outlets rarely import products directly,
preferring to procure supplies through local distributors. International chains with internal distribution
networks within the country are the exception. The larger distributors are suited for commodity and
large-volume sales. Smaller distributors work well for specialty, high-end, or new products that require
marketing and product education. The most promising categories of products fall into this segme