Market Research
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Summary: The restaurant business in Moscow is one of the fastest growing segments of the city's fast growing economy. A reviving middle class is creating a solid customer base, with the result that numerous restaurants and cafes are opening or expanding, and purchasing equipment and supplies. The restaurant sector has become one of the most attractive areas of investment for successful Russian businessmen seeking to diversify, a trend which some analysts believe this is likely to continue for another 5 to 10 years. International cuisine is increasingly popular, driving demand for foreign foods. The range of fast food options is becoming more varied, with eateries offering variations on traditional Russian fare emerging to compete with the numerous hamburger restaurants. There is a growing need for advanced and efficient restaurant equipment, to enable these establishments to raise quality and control expenses in order to remain competitive. End Summary. Current Market Trends: Moscow is experiencing a boom in the restaurant business, which is beating the records of pre-crisis 1997. Currently, there are slightly over 4,000 restaurants, cafes, and eateries in Moscow, a city of 9 million, and the wealthiest city in Russia. The industry has significant room for growth if it is to reach the levels of Paris (14,000 restaurants), and New York (17,000 restaurants). The restaurant business in Moscow, has emerged as one of the most prosperous segments for the city economy. While the 1998 financial crisis caused an abrupt halt in the rapid growth of the mid-1990s, by 2000, restaurant attendance had returned to pre-crisis levels, and in that year restaurant procurement increased by 40%. This revival has been spurred by a relatively healthy and continuing rate of economic growth in Russia over the last three years, the impact of which has been most felt in the capital. Currently, the restaurant sector turnover in Moscow is estimated at hundreds of million of dollars. Despite their low levels of disposable incomes by European standards, Moscovites appear willing to pay to enjoy a wide variety of good quality foods, a pleasure which in Russia has still not lost its novelty value. New restaurant and cafe openings are becoming a weekly occurance in many Moscow neighborhoods. While the number of restaurants is increasing, so too is the quality of service and the variety of options available - from expensive and exclusive clubs to fast food outlets. Moreover, industry insiders report growing interest from Russia's regional cities in purchasing franchises for successful Moscow-based businesses, including the increasingly popular Japanese restaurants, coffee shops, and beer restaurants. Mr. Rostislav Ordovsky-Tanaevsky Blanko, the owner of the large and successful RosInteris restaurant chain, considers the nature of the business as another important growth factor - "the stomach is a reliable, if somewhat capricious partner." International cuisine: Ethnic cuisine is becoming increasingly popular with Muscovites, eager to add to their gastronomic experiences. The number of Asian restaurants, especially Japanese sushi bars, are rapidly increasing, to add to the more traditional Georgian or Uzbek offerings. Mexican-style cuisine is also establishing itself on the market, and new Spanish and French restaurants are reappearing. The availability of a widening range of foreign or ethnic cuisine is also spurring demand for imported food products, as many types of food are not produced locally. Sushi bars, for example, are driving the demand for certain sea products, and the popularity of Mexican-style cuisine has resulted in nachos and salsa appearing on supermarket shelves. Fast food chains and cafes: Among the most promising prospects for U.S. companies are fast food restaurants and eateries. This is a rapidly growing market segment, with five fast food outlets opening for each traditional restaurant. McDonald's continue to be extremely popular, and Canadian Bredo Pizza, Sbarro, Pizza Hut and KFC are successful and continuing to expand. Well established entrepreneurs are seeking to attract the more famous names from the West, and to invest in branding. Local Russian fast food companies are also very active in this market, as are Russian cuisine restaurants, cafes, and numerous street food stands, and coffee booths. In total, there are around 30 fast-food chains operating in Moscow. Restaurant Chains: To cater to a variety of tastes, many restaurants are merging and forming chains. The process is driven by the desire to build upon successful restaurant formulae, and to achieve efficiencies of scale. Different paths have been taken to establish successful chains. The Yolki-Palki chain, for example, represents a group of restaurants, owned by one person and specializing in Russian cuisine. Restaurants within the group (Yolki-Palki, Tsarskaya Okhota) cater to different pocketbooks.. RosInter operates its own Italian-style pizzerias, Japanese and Spanish restaurants and other ethnic cuisine eateries, and is a franchiser for its Pattio Pizza, Spanish Corner, and Rostick's brands. Another company, Romashka, also owns a variety of ethnic restaurants and operates several pubs (World of Pizza, John Bull's Pub, China-City). Several restaurants are also branching out into other services such as catering and take-out. Middle range restaurants: The most promising market segment is those restaurants catering to Moscow's growing middle class, that is, customers whose monthly salaries ranging between US$ 500-3,000. On average, these customers are willing to spend US$ 30-40 per person for a meal. Rather than competing on price, restaurants within this group seek to offer higher quality, and to increase their margins by higher operational efficiency. A relatively new phenomenon is the popularity of coffee shops and beer restaurants. In the last two years, several coffee shops chains and numerous "independent" coffee shops have opened in Moscow, and announced their plans to expand further. These coffee shops, some of which are aping the Starbucks formula, are becoming increasingly popular and attract customers of different income levels. The tab in such coffee shops is typically in the US$3-8 range. According to the owner of the popular Zen Coffee Shops chain, Russians' coffee consumption habits differ from that in the West, and the peak hour at Moscow's coffee shops is from 7 to 8 in the evening. The increasing popularity of beer restaurants is another remarkable feature of Moscow's restaurant scene. Moscow boasts over 1,000 such beer restaurants and pubs. Initially, Irish-style beer restaurants scored some success in Moscow in the early 90s, which was quickly followed by the opening of other similar European formats. However, the majority are located in central Moscow, and the phenomenon has yet to spread to Moscow's densely inhabited suburbs. Opportunities for U.S. companies: There are indications that some cash-rich, Moscow-based businesses, in unrelated sectors, are seeking to diversify their investments by moving into the restaurant business. They are receptive to partnership proposals from established Western restaurant chains. However, rapidly-rising real estate prices are raising the cost of entry. According to Mr. Arkady Novikov, the owner of a popular restaurant chain in Moscow, regional markets are also attractive, as real estate as rental prices are significantly lower than in Moscow. He believes some provincial cities are underserved, and would welcome wider choice of restaurants. There are opportunities for U.S. companies in supplying equipment and accessories to restaurants. The rising cost of all inputs in Moscow has created a need for equipment which is energy, space, and labor-efficient. There is a market for high quality equipment in establishments where income is assured, such as rsestaurants within hotel complexes. Moscow has several equipment trading companies, which can be effective partners for U.S. equipment suppliers seeking to establish presence on this market. Such companies as Russian Project, Trade Design, Praktika, New Line, and Perfic are experienced in handling certification and other issues related to importing equipment, and can offer advice on promotional strategy. Sales of certain food products, such as lobsters, salmon, trout, tuna, and ethnic ingredients to restaurants are also among best prospects for U.S. exports. For more information on exports of food products, please contact the U.S. Agricultural Trade Office or access www.fas.usda.gov VAT and Customs Duties. Value Added Tax (VAT) is a flat 20 percent rate across the board, customs duties vary depending on the type of equipment. For example, refrigeration equipment is subject to 20 percent duty, while the rate for heating equipment, such as ovens and stoves, is 10 percent. |
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