Export operations. Market conditions and strategic success criteria

The research conducted by SBS Consulting analyses the current export environment and strategic success criteria for Russian food exporting companies. The report covers the main market trends, existing obstacles, risks and opportunities for exporters. It also presents a roadmap of the company's export policy and state support measures for exporters.

Export environment and main trends

Food export dynamics:

• Export growth: Since 2015, the volume of food exports from Russia has been growing steadily by 17% in monetary terms and reached USD 24.2 bln in 2018.
• Export volume: In 2018, the volume of food exports totalled 77 mln tonnes.
• Decline in net imports: From 2014 to 2018, the volume of food net imports declined by 27%.

Export structure:

• Cereals: 43% of exports in 2018 were cereals, accounting for more than half of export growth since 2015.
• Fish and seafood, fat and oil products, oilseeds: Main export categories other than cereals.
• Markets: Main export destinations are Asia, Middle East; Europe and CIS, which are growing more slowly.

Value added:

• Low value-added products: Low value-added products accounted for 64% of food exports in 2018.
• High value-added products: The share of high value-added products decreased from 25% in 2015 to 20% in 2018.

Obstacles, risks and opportunities for exporters

Main obstacles:

• Protectionism: Complicated certification procedures for some countries (e.g. USA and EU).
• Regulatory mismatch: The Russian regulatory framework does not meet the requirements of many attractive markets.
• Business competences: Lack of skills in marketing, positioning and conceptual development.
• Skills shortage: Lack of highly qualified specialists in food production.
• Technical constraints: Lack of technical and product know-how.
• Operational efficiency: Low operational efficiency of production facilities.
• Brand toxicity: ‘Made in Russia’ has a negative connotation in some markets.
• Transport infrastructure: High transport costs and low availability of port infrastructure.
• Government-imposed restrictions: Possible export restrictions to prevent domestic shortages.

SWOT analysis:

• Strengths:

—Cheap labour

—Abundant natural resources

—State support for exports

—Large domestic market

• Weaknesses:

—High cost and limited access to finance

—A set of export obstacles

• Opportunities:

—Entering new markets through online platforms

—Competitive cost of production due to low labour and raw material prices

• Threats:

—Currency risks (strengthening of the ruble)

—Adoption of sanctions

—Market risks of importing countries

—Agricultural risks

—Domestic restrictions on exports

Strategic success criteria

Main criteria:

1. Uniqueness and brand positioning: Geographical, agricultural and historical aspects
2. Unique technology: Advantages in shelf life, flavour and other product characteristics
3. Unique product: Satisfying a niche or trending need
4. Commercial channels: Established distribution channels in importing countries
5. Price advantage: Sustainable price advantage in the market

State support for food exports

Main support instruments:

• Ministry of Agriculture (MoA):

—Subsidies for transportation within the country

—Loan interest rate subsidies and preferential lending to export-oriented enterprises

—Nation brand development

—Land reclamation programmes

• Russian Export Centre (REC):

—Subsidies for logistics of goods

—Promotion of products abroad

—Preferential lending

—Provision of guarantees for export transactions

—Insurance of export transactions

—Support in international patenting, certification and customs administration

Conclusion

The research emphasises the importance of developing an export policy aimed at increasing the share of high value-added products and overcoming existing obstacles. Successful export development requires investment in unique technologies, improvement of operational efficiency and development of competences in marketing and commercialisation. Government support plays a key role in ensuring the competitiveness of Russian exporters in international markets.