“Your first 50 right steps to enter the Russian food market”.
Step № 12 – “We are looking for a food distributor in Russia! Just one exclusive distributor!”
You will surely be very surprised but in Russia distribution as a business dies out steadily each year. Perhaps the reason for this is embargo which has been placed on Russia for the last 4 years. But all clients, all good clients (and you are looking only for them) prefer to work directly with manufacturers rather than distributors.90% of requests I get are about finding clients in Russia. They all begin with the phrase “we need a distributor.” All over the world it is obvious that when you enter a new market, at the beginning you are look for a distributors. For the Russian food market this rule does not work. In Russia, buyers do not respect distributors; in Russia, everyone tries to work directly with a manufacturer or exporter to get better prices and better conditions. Russians are very good at counting money.
Food distribution was popular in Russia 20-25 years ago. When there were no major federal grocery food chains. By nowadays consumer preferences have changed in Russia. If everyone used to go to a grocery store near their homes after work, now it is normal that Russians spend their day off on a trip to a hypermarket like Auchan or Metro. In cities where there are no such stores, people will go shopping to federal grocery stores like Magnit or Pyaterochka. These federal networks are so large and powerful that they can buy food products at such a discount that no other store can negotiate. Therefore, in a federal food chain store food products are always cheaper and of the same quality as in regular stores.
Even if a distributor approaches such a food federal network, in 95% of cases they will refuse to work with it provided it is possible to sign a contract directly with a manufacturer. Besides price and quality, stable food deliveries are very important for federal food chains, and this availability of goods in stock is best provided only by a manufacturer.
If you work through a distributor, it tells your clients that you are such a huge company that your products can be found in all 1,113 cities of Russia. Of course to ensure savings in logistics it is better to attract a distributor but you can count such huge companies in the food industry of Russia on the fingers of one hand. I once managed such a company.
If you are not Coca Cola or Mars, then working through a distributor in Russia will be perceived by your potential Russian clients as a weakness of your company and management. That will mean that either you do not know how or do not want to do business and develop their food products in the Russian market. This tells your buyers that you yourself do not respect your food product since you trust another company to sell it in Russia.
All major global companies realized that long time ago and got an official office or an official representative in Russia to sell their products directly to their clients. Under this post there will be a link to step № 49 in which I share how to open your business in Russia remotely and fully control it. It is much easier than it seems.
I want to mention that even among distributors that there are exceptions. There are very strong Russian distributors but they include into their product range only products that are comparable to Unilever, Mars or Heinz. To start working with such a distributor you will need several months of negotiations and 2-3 months of information preparation before that. And even this will not give you a 100% guarantee.
Food distributors in Russia are intermediaries, that is why there is a negative attitude towards them as compared to manufacturers or importers. I recommend reading about that in step 3. The link to this step will be under this post.
Some companies that contact me write that they are looking for only one distributor. As I said above, there are such strong distributors in the food industry of Russia and they can be counted on the fingers of one hand. However, if you are reading my article at these words, you are definitely not from Coca Cola or Pepsi.
The territory of Russia is very large, you will need to fly 11 hours continuously to cross it from the west to the east. Russia has 9 time zones. When a working day begins in Moscow, in Kamchatka it is already ending. There are 85 regions and 1,113 cities in Russia. Do you really think that one distributor can sell all over Russia? Of course not. One company just cannot handle it. Even those Russian distributor monsters attract smaller distributors for partnership in the most distant regions of Russia. They certainly will never tell you about it not to lose face. You will be very surprised when you see products of your company on shelves of small Russian stores at a price 5-6 times higher than you sell them to your Russian distributor.
In Russia, distributors are divided into those that work
1) with small retail (individual shops, family stores, stalls)
2) with large retail (there are large stores, for example, in shopping centers where food selling is not the main business, or the food segment occupies a very small share in sales. These stores can work with a distributor so that it can immediately supply a large assortment)
3) with HoReCa. I think it is not necessary to explain that the margin in this segment is 300-600%, so they can afford to work with distributors. Moreover, not every manufacturer can supply every day and in small batches, which is the main need of HoReCa.
4) as wholesale companies. These are, as I said before, companies that do not sell in retail, but in small wholesale.
Basically, each distributor in Russia has its own segment and its own client type. In rare cases, two options are combined. For example, orientation on with small retail and HoReCa.
1. If you are still planning to start working with a distributor in Russia, first select which market segment in Russia is the most interesting for you, then look for partners (distributors) in this segment.
2. It is reasonable to work with a distributor when you have a perishable product and you need to supply it to buyers as soon as possible. For example, you have fresh fruit or berries with a short shelf life.
3. Most importantly, do not think that someone in Russia will sell your food products better than you. No single distributor will not do better than you. Even if you do not know the Russian language, in negotiations with Russian companies this will only be you advantage since it is very important for Russians to work with manufacturers, especially foreign ones. This will always guarantee a stable quality and the best price.
4. If you are already working with a distributor in Russia or just planning to start, agree on the rules of full control over their work. You should receive sales reports at the end of each week. It is very good to have personal video calls with sales representatives to receive feedback from customers every week and to know how your product development is progressing.
Only full control from your side will ensure that your Russian distributor works with good quality and in your interests. Use your distributor only as your extra “legs and arms”. Leave all decisions on tactics and strategies of sales development for yourself. If you do not know what strategy to choose, hire an independent adviser from the food industry of Russia who will work for you and in your interests only.
Otherwise, you will get the same bad experience of so many foreign companies that are writing to me with this phrase, “Alexander, we have been supplying our products to Russia for several years but the sales are not growing. We cannot understand why?” There is only one reason – lack of control of the sales processes carried out by Russian partners. There is no one to blame except yourself. And only you can fix it. Is it possible to fix it? Of course! It is manageable!
P\s If after reading this step, you still want to work in Russia with a food distributor. I recommend reading Step № 46, where I explain how to find a food distributor in Russia for free. Do not spend money on unnecessary intermediaries and various marketing and consulting agencies.
Business Adviser in the Russian Food Industry
Please read the same my other steps: