Primitivization of consumption – Newspaper Kommersant No. 244 (7445) of 12/30/2022

If this year we allow ourselves to talk about pleasant surprises, this can be called the overall preservation of the consumer market and goods in Russia. Pessimism and the expectation of a complete domestic catastrophe, characteristic of the mood of Russians in the first months of the crisis, are also softening as they contemplate far from empty store shelves. But these feelings can be deceiving. Market participants talk about the gradual “primitivization”, simplification and reduction of the range – as a strategy, and not just a response to local supply difficulties.

When Russia launched hostilities in Ukraine on February 24, 2022, my former colleague asked if there would be a strip of the consumer market in Kommersant now? So she expressed the fears of many Russians, who are thinking hard and nervously these days, in particular, about whether they will consume anything. Anxiety materialized into action, and in late February and early March, a wave of rush purchases of food, coffee, tea, personal care products and alcoholic beverages swept through the country.

Artifacts on the shelves

According to NielsenIQ, demand for the most popular categories jumped up to 50% at the peak in stores. Retailers even imposed restrictions on the sale of the most sought-after goods to one buyer, which, however, only strengthened the associations of Russians with previous crises, even outside the still fresh in memory of the first weeks of the pandemic in the spring of 2020. “Yoghurts, butter, margarine, semi-finished products began to disappear,”— wrote, for example, “Kommersant” about “confusion” in stores in September 1998. But this time, just like two years ago (unlike earlier crises), systemic problems have so far been avoided. In July, the head of the Ministry of Industry and Trade, Denis Manturov, assured that there was “not even close” a shortage of goods in any segment of the consumer market.

Chairman of the Presidium of the Association of Retail Companies (AKORT; includes X5 Group, Magnit, Lenta, Auchan, etc.) Igor Karavaev says that problems with logistics and the lack of a part of the imported assortment were compensated for by restructuring supply chains, increasing local production and private labels (STM).

Thus, according to AKORT, instead of Italy, the Czech Republic, Indonesia and Bangladesh, Uzbekistan, Turkey, Azerbaijan, South Korea entered the top five largest network supplier countries, and China’s share in the import of consumer goods increased from about 60% to 70%. The share of private labels in the sales of large networks-members of AKORT since the beginning of the year has doubled to 18-20% of turnover, says Igor Karavaev. According to him, the stocks of chains are being updated – last year’s products are no longer on the shelves and warehouses.

But against the background of the destabilization of supply chains, they can meet the most unexpected goods.

In one large supermarket, for example, you can buy Nellie’s, manufactured in Canada and packaged in the US, which until then was sold only on small specialized sites. Imported Coca-Cola and Fanta with various flavors from Germany, Poland, Great Britain, Albania, which is imported, among other things, by distributors from countries neighboring the Russian Federation, can hardly surprise anyone. In some cases, artifacts become the norm: Coca-Cola from Kazakhstan appeared in a large grocery delivery service.

Imported new goods, of course, differ in price, and in this case it is hardly possible to speak of a mass segment. Canadian-American washing powder, excluding discounts, is sold for 2.2 thousand rubles. for a package of 700 g, and imported Coca-Cola – from 90 rubles. for a can of 0.33 liters. And deliveries, apparently, do not differ in stability even within the same network. In addition, some of the goods still cannot be replaced – luxury chocolate, some herbal drinks, certain types of whiskey and champagne disappear from the shelves.

Satisfaction of basic needs

My interlocutor among large food manufacturers explains that despite the apparent diversity, there has been a noticeable reduction in the line in many categories, which negatively affects physical sales. For example, he says, due to the shortage of food packaging, juices in 2-liter bags, which previously provided about 30% of category sales by volume, almost disappeared from sales. And for some dairy products, the container format had to be changed.

In general, according to his observations, manufacturers in the current conditions are trying to leave only the most popular positions.

If earlier there could be a dozen flavors in the line, now half or less has been preserved. As noted in Infoline, the increase in food production this year may show an anti-record. According to Rosstat, in January-October 2022, the indicator in comparable prices increased by only 0.4% year-on-year.

The assortment is also narrowing in other markets, especially in car sales, where, against the backdrop of a general decline of 60%, only new Chinese and Russian (some of which are already Chinese) cars are actually available. In household appliances and electronics, parallel imports still provide supplies of the most popular Western brands, but the assortment is also declining and is being replaced primarily by Chinese brands.

One of Kommersant’s sources among product manufacturers notes that the networks’ revenue is supported primarily by high inflation. But at the same time, “the market is slipping into primitivism.” Instead of competition through innovation and active struggle for the consumer, suppliers will soon be focused only on meeting basic needs, the interlocutor of Kommersant believes.

For manufacturers of mass products, this is perhaps even good news. In the clothing market, for example, the long-known brands of the economy segment open most of the stores against the backdrop of the departure of some global brands. And in the category of smartphones, the largest growth is shown by the middle segment of 30-40 thousand rubles. per device.

According to the November survey B1, 63% of Russians today are worried about the decline in shopping opportunities. In addition, 40% cannot find a replacement among Russian goods, and 33% are dissatisfied with the price or quality of alternatives.

But the general mood of Russian consumers is gradually improving. As follows from data B1, in November, compared to October, the share of those who see new shopping opportunities increased from 7% to 12%, while the share of respondents who noted a reduction in the choice of respondents decreased from 56% to 51%.

Perhaps the reason is in the initial strongly pessimistic mood, in which expectations turned out to be greatly underestimated. The question is whether it is worth raising them again in an environment where supply chains are far from stable, the prospects for the development of the geopolitical situation remain vague, business resources are limited, and demand is also provided by the current product.

Anatoly Kostyrev