Last updated on December 7th, 2021 at 10:48 am
In the global market, Russia is assumed to be a supplier of raw materials, but the country is increasingly exporting food products and industrial goods, including high-tech products. This is part of a new national strategy aimed at increasing non-resource and non-energy exports by at least 70% in ten years.
Foreign partners are sometimes wary of Russian goods because of the existing stereotypes, so exporters have to find ways to stand out.
The pandemic hurt trade around the globe. While this trend affected Russia, the raw materials sector declined only slightly and non-resource exports to foreign markets went up 4%. Moscow-based companies contributed significantly to this growth, with local non-resource and non-energy exports – primarily in the high-tech sector – increasing 31% to almost USD 40 billion in 2020.
Even so, not everyone in the global market is used to the idea of Russia as a source of innovation. Alexander Mozgovoy, director of development and marketing at the electronics manufacturer Incotex Group, says that when potential partners see the company’s products, they say things like “We thought Russians only made Kalashnikovs!” Naturally, this makes exporters wonder whether they should hide their Russian roots when positioning brands abroad.
Moscow as an Export Center
There is no one right answer to the question since it depends on the country and the products exported. China, for example, perceives exports from Moscow positively. The Chinese market generally sees imports as being of higher quality than local options, and buyers lean toward Moscow for certain categories of goods, including environmentally friendly products, dairy-alternative milk, and chocolate. Furs – an export historically associated with Russia – are popular in China, as well.
In this context, it makes no sense to hide the origin of Moscow’s imports in China. When the poultry producer Resource Group started exporting to China, it used visual elements of Russian culture for its packaging, naming, and marketing strategy. They called their Chinese brand URUSSA, used the Russian flag and traditional Russian designs on packages, and even launched a page in WeChat introducing local consumers to Russian culture. The company also uses its WeChat page to show how its products can be used in traditional Chinese cuisine. Resource Group’s WeChat page is maintained by a Chinese agency that understands local consumers knows what kind of content they want to see. This approach is much more effective than communicating from Russia.
Asian countries are less attached to stereotypes about Russia. Which TechnoNICOL, a Moscow-based producer of building materials and systems, decided to open an office in India, all it did was hire a local lawyer. The company works with customers in India and New Zealand and, according to CEO Anton Belyakov, has yet to encounter stereotypes about Russians.
In the United States, Russian products associated with complex finance are well received. This is part of a historical trend associated with the global demand for engineers and mathematicians from Russia. A company offering trading algorithms for hedge funds would do well in the United States. In a real-life example, a Russian company developed a model for making fast deliveries that is now successfully deployed in London, Berlin, and New York.
Bypassing stereotypes
Not every product from Moscow will be well received in foreign markets, however, and there are nuances that companies need to be aware of. Selling cybersecurity products in the United States would be difficult, given that more than half of all cyberattacks in the world originate in CIS countries. The few exceptions — such as digital forensics provider Belkasoft, which sells to police forces in the United States and Canada — merely prove the rule.
A company’s ability to bypass stereotypes when entering a new market depends largely on its choice of partners, both potential counterparties and customers. This is already one of the most complex aspects of overseas exports, and preconceived ideas can make it even harder. For this reason, many exporters turn for help to export-oriented organizations for help with more than just finding buyers: supporting organizations can also show a company how to best showcase its products to potential buyers and organize negotiations in such a way as to increase confidence in the Russian manufacturer.
In Moscow, companies access these services at the MospromExport Support Center, whose specialists find prospective partners, verify them, organize negotiations, and support the local exporter through contract signing or even final delivery of goods. Mosprom’s buyer program is based on two key elements: business missions in different regions of the world and participation in international exhibitions. In the first ten months of 2021, the Center’s specialists conducted 13 business missions for 86 local manufacturing companies and helped 29 exporters participate in eight international exhibitions.
Logistical problems
Aside from stereotypes, Russian manufacturers sometimes encounter objective logistical snags that complicate expansion into global markets. For example, the oil and gas industry uses a strict system of equipment certification. The certificates are expensive, take a long time to obtain, and have to be repurchased each year.
On top of this system, many global oil and gas and engineering companies have their own procedures for allowing suppliers to participate in tenders. Under Shell’sType Acceptance Test system, its specialists must certify each item manufactured by a Russian enterprise.
Russia’s government helps industrial exporters surmount these difficulties in a number of ways, including through subsidies that reimburse companies for their costs and provide funding for scaling their businesses. This policy is possible because Russian heavy machines have been a top export since the 1960s and 70s, and buyers hold them in high esteem.
The role of research
Preliminary research helps local companies understand exactly how to position their products abroad and whether or not a specific market is worth the effort. Research includes studying cultural characteristics, patterns of consumer behaviour, the competitive field, barriers to entry, the share of imports in the industry, and much more. Market studies can be purchased from research companies, but the Mosprom Center offers Moscow-based exporters custom research tailored to their needs.
The Center’s experts study target markets to identify demand for specific products, assess the client company’s readiness to export its goods and the countries where they would be in demand, prepare industry reports, and help adapt presentation materials and create an export strategy. Research is the foundation on which manufacturers build their export successes. Only by carefully studying the markets can you understand which markets want your product and which markets will ignore it (whether due to stereotypes or for other reasons). In many cases, it is easier to launch products in a country that already welcomes Russian products as the first step to building an international brand and expanding into more complex markets.
