Russia’s reefer market is generally considered to be the single biggest reefer import market in the world at approximately 500,000 40ft equivalent units, of which only 25 per cent is containerised. It is also not an easy market to supply – not only is it tricky to supply fresh fruit in freezing conditions over huge distances, but the country’s historic context and its distance from the main shipping lanes make it even more difficult. Yet, with the Russian economy growing at a time when the rest of Europe has been brought almost to an standstill, the Great Bear has become a must-win market. The Russians’ buying power and preferences have changed, making this enormous country the next big growth market for many fruit companies based in Europe.
In May, I visited St Petersburg and Moscow, where I got the chance to go to a local fruit, vegetable and flower market. Despite preconceived notions of poor-quality fruit at outrageous prices, I was positively surprised by the impressive display of high-quality produce on sale at favourable rates. Alongside in-season Spanish stonefruit were local table grapes and stonefruit from neighbouring countries. Walking through the flower market reminded me more of Colombia, Kenya or Ecuador than a suburb just outside Moscow.
Russia should no longer be considered a second-tier market where bad fruit can be dumped. The country’s winter climate makes it difficult to get supply in, but the Russians are learning to appreciate good-quality fresh fruit and are increasingly willing to pay for it. The market generally pays higher prices than traditional west European markets and the volumes are huge. With local importers and retailers taking over from western Europe’s established traders and buying directly from source, producers are starting to divert volumes away from traditional markets like the UK and Netherlands. Russia’s import companies have a strong foothold in their marketplace and are interestingly very open to new, simpler and more efficient supply-chain models that can satisfy their increasing demand and secure lower costs. This rapid growth has resulted in Russian companies being open to pragmatic and ready-to-use solutions.
Supplying Russia does remain a logistical challenge, however. During the winter, ocean journeys often end in the Port of St Petersburg with -25ºC and icy waters, if it is accessible at all. Customs processes are regulated and a lot of decision-making is done ad hoc. Once the cargo is on a truck, possibly the biggest challenge begins since many of the roads are inadequate. Only within the last ten years have the roads between Moscow and St Petersburg been paved fully, and following an enormous surge in import volumes, traffic jams are still an everyday sight, making distribution difficult. Warehouse capacity is filling up too, with excess free space currently running at only 15 per cent against 60 per cent in 2008. Such challenges may discourage those with plans to conquer the Russia market, but they really shouldn’t. Instead, they should spark interest and desire to understand and carefully awaken this sleeping giant. The key will be finding out which parts of your business can be applied to Russia. Isn’t that what opening up new markets is all about?
Ole Schack-Petersen has worked in reefer logistics for close to 25 years and is currently global head of perishables logistics at Damco, part of the AP Moller Maersk group. With 10,800 employees in over 300 offices in 90 countries, Damco provides a range of customised freight forwarding and supply chain solutions.
