The Russia Forum
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The Russia Forum on the consumer market of the economy:
Everyone is a leader on a growing market

31 January 2008

The second day of the Russia Forum began with discussions on the Russian consumer market boom. MARS LLC President Richard Smith, Chairman of Inmarco Board of Directors Dmitry Dokin, President of the Drugstore Network 36.6 Jerry Kalmis, Chairman of the Board of Directors of the Bosco di Ciliegi Group Mikhail Kusnirovich, Chief Executive Officer of Wimm-Bill-Dann Food Products Tony Maher, and Director General of X5 Retail Group Lev Khasis participated in the workshop headlined "The Biggest Army of Consumers in Europe".

President of the Drugstore Network 36.6 Jerry Kalmis spoke about considerable evolution of the consumer market, which he has witnessed over the ten years he has worked in Russia. Speaking about the pharmaceutical market, he noticed its rapid growth and immense development potential. The market is estimated at a total of 40 billion US dollars and is predicted to double in the near future. According to Mr. Kalmis, not only the market, but also the Russian consumer has evolved. Today consumers are paying more attention to the quality of products and request more detailed information about its contents and the producer. Discussion participants also noted that changes in the demand structure make producers change their own strategies to stand up to the expectations of their customers.

Another panel discussion on the Russian consumer market development prospects involved representatives of the most rapidly growing industry the car market. In 2007 the domestic car market growth rate exceeded 35% and its potential is far from being exhausted. Discussion participants: President of the AutoVAZ Group Boris Aleshin, Director General of Magna International Siegfried Wolfe, KAMAZ Director General Sergei Kogogin, Renault Vice-President Patrick Pelata, GM Group Vice-President and President of General Motors Europe AG Carl-Peter Forster, Severstal Director General Vadim Shvetsov, and Russian Machines Managing Director for automobile business Lars Erik Ebbe Eberhardson discussed the specifics of the Russian car market, the possible strategies for domestic and foreign companies to master it, and the possibilities of access for Russian carmakers to foreign markets.

Discussion participants believe that one of the major trends that would determine the development of the car market in the coming years is the change of consumers preferences towards more expensive and high-quality vehicles. Russian motorists specifically want to enjoy driving in contrast to the Germans, who prefer the functionality of a car. The reputation of carmakers and their conduct on the market is also gaining importance. Therefore, the strategic partnership of Russian producers with leading foreign brands is beneficial for both parties, as Russian enterprises participating in production processes of a foreign partner borrow technologies and work techniques, while the leading foreign carmakers can use their Russian partners to better meet the expectations of a Russian customer. The choice of a world known partner allows a Russian company to become a part of the global market and enjoy its possibilities and achievements.

The situation is somewhat different in commercial car-making. Such strong domestic brands, such as GAZ and KAMAZ, can choose other development strategies based on their high production and assembly technologies, a high domestic demand for their vehicles, and the reputation. In particular, KAMAZ resorts to the partnership strategy with foreign companies in the production of spare parts and accessories, but operates on the world market under its own brand. According to KAMAZ Director General Sergei Kogogin, "he who participates in the development of the global market will win the race".

Participants in a briefing that followed the panel discussion had a chance to see for themselves that the ambitious tasks of KAMAZ can be well accomplished. Besides, Sergei Kogogin, Chairman of the Board of Directors of the Troika Dialog Group Ruben Vardanyan also briefed journalists. He said Troika Dialog is a KAMAZ stockholder and the giant truck maker will continue to grow and expand on the world markets. Mid-term plans of the company include increased production up to 100 000 vehicles a year and establishment of partnership relations with foreign companies to manufacture truck components. So far there is no talk about a public offering of KAMAZ shares on the stock market, but the company is working to create the standards that provide for business transparency.