Introduction to the Functional Beverage Market in Russia

November 18, 2021  •  David Pring-Mill

By David Pring-Mill

The following text has been excerpted from Section 1 of the Policy2050 report “Functional Beverage Market in Russia, 2021,” in order to serve as a product sample and fulfill Policy2050’s mission “to keep the most socially-relevant insights outside of any paywall.”

The universal appeal of a food or beverage product cannot be assumed. Before exporting a product into a market, it’s important to understand the consumer behaviors/trends, retail channels, most effective digital strategies, and unique cultural attributes of that market.

In October 2017, at a publicly broadcast cabinet meeting, Alexander Tkachov, then Minister of Agriculture of the Russian Federation, compared Germany’s pork exports to Russia’s, rattling off a list of countries that he deemed to be relevant markets, including Indonesia. He suggested that Russia had to persist with its exports relentlessly and grow its volumes. Putin interrupted, “Indonesia is a Muslim country, they do not eat pork,” and then chuckled. Tkachov nervously said “very well… South Korea,” tried to recover from where he left off, then doubled down on the position by suggesting that it was a negligible difference.

This prompted the Russian President to do a facepalm.

The majority of the Indonesian population identifies as Muslim (over 200 million people); and Islam forbids the eating of pork. Social media commentators joked that the minister would next detail his plans to export beef to India, where cows are considered to be sacred by the majority Hindu population.

In 2016, Evan McMullin launched an independent presidential campaign that could have blocked former President Donald Trump’s pathway to victory in the state of Utah. Trump attempted to mock the scope of McMullin’s White House bid, suggesting that his opponent was campaigning full-time in the state, “going from coffee shop to coffee shop.”

More than 2 million Mormons reside in Utah. Their religion officially forbids them from drinking coffee, though noncompliance with these instructions is said to be increasing. The remarks caused some voters to conclude that Trump “doesn’t get” Utah, and it provided an opening for McMullin’s campaign to draw attention to that disconnect.

There are many examples of these gaffes, and in a business context, they can be costly.

When Mars, Inc. initially tried to introduce its Snickers candy bars to the Russian market, the ad campaign positioned the product as a lunch alternative. According to a podcast from a marketing agency based in Moscow, this was a swing and a miss: “Russian adults saw candy, Snickers in particular, as a sweet, which was something to be enjoyed with a cup of tea later in the afternoon.”

However, the product was still relevant to the market as there was, and is, strong curiosity around unfamiliar Western products, especially peanut butter and confectionaries. Mars retargeted its ads to teenagers, and became one of the most popular candy bars in Russia.

Years later, a Russian TV ad directly spoke to the strong interest in previously forbidden American consumerism and culture that had emerged in Russia after the fall of the USSR. The ad opened with a grainy home video, dated 1991, of a small Russian boy detailing all of his capitalistic aspirations. He concludes by stating that he will marry a trophy wife and eat as many Snickers bars as he desires.

The ad then transitions to the boy as a man, and as the modern Russian consumer. He is wearing a shirt and jeans and eating a Snickers bar on a city sidewalk. However, his life appears more realistic and less distorted by exaggerated cultural impressions. He then notices an older man who is living out those earlier impressions and appears quite jarring as a result, with an 80s hairstyle, leather jacket, and boombox on his shoulder.

The ads concludes: “Snickers, 20 years in Russia.”

It’s rare to have an advertisement that is so self-reflexive, commenting upon the cultural differences associated with a foreign brand and the eventual integration of that brand’s products into the culture of the export market.

It suggests that there’s an opportunity for makers of functional beverages to get things right in the Russian market and include it as a profitable component in the global beverage industry’s diversification/growth strategies.

However, it’s a very different environment today. Russian consumers are looking for higher quality consumer packaged goods, increasingly via mobile. They’re very concerned about inflation/rising prices and are looking for greater value. Technologies have introduced new opportunities and challenges involving distribution, while strained political relationships have introduced new hurdles to global trade.

Nevertheless, there is much opportunity.

In its Russian market-specific report, Policy2050 sees two strong yet opposing commercial opportunities in the form of functional dairy products and dairy alternatives. There is strong data in support of either maneuver, or even both.

We view retro drinks, namely Soviet era brands, as a unique opportunity on the Russian market, which could be enhanced further through the addition of functional benefits and international partnerships. Nostalgia has also proven to be a powerful factor influencing purchase decisions in the United States, where it’s frequently paired with bright colors or pastels in marketing, packaging, and product design.

Within Russia, it’s slightly different because the glossing over of past events often includes the recollection or assumption that food and beverage products used to be “more natural.” Russian consumers may lament this transformation, or appreciate the newfound variety. Either way, many subscribe to this narrative. Surveys of American consumers have repeatedly shown that they also seek out products with “natural” claims but there isn’t the same conviction that such qualities were recently compromised or lost as part of political/structural changes.

Some regional soft drink brands still have room to expand their market share domestically and globally, especially kvass.

The water category jumps out as having significant additional growth potential in Russia, owing to the poor quality of tap water, the long cultural (even spiritual) history with mineral water, and the increase in health/wellness consciousness. One notable trend within the Russian water category is the marketing of waters specifically intended for children.

Beverages for the elderly are an opportunity in Russia, as they are in other countries with aging populations. Freshness, natural ingredients, and dairy components are likely to be perceived as desirable product attributes on the Russian market. Beverage companies can succeed by including these attributes. Public health organizations could also leverage these consumer insights to increase fluid intake and fill nutritional gaps.

We also highlight family values-driven marketing strategies, the regulatory risks with energy drinks in St. Petersburg and throughout Europe, and the decline of juice/nectar sales as topics of interest to beverage companies.

While the report is mostly focused on beverages positioned as being “functional,” much of the material would also be useful for any consumer goods company attempting to introduce or more effectively market a healthy food or product within Russia.

A large amount of the information within this report is appearing in the English language for the first time.

Policy2050 infographic addressing the Russian beverage market and supporting infrastructure.

The full report “Functional Beverage Market in Russia, 2021” is now available for purchase on Policy2050.com.

  1. ← Previous Article Functional Beverage Claims Could Lead To Lawsuits

    Next Article → Business in Russia and the Relative Degree of Difficulty