1. How structurally attractive is the Russian ice cream market? How is it likely to evolve?
Analyzing from using five force model we can conclude that the structurally attractiveness of Russian ice cream market is quite low due to several reasons. Firstly, the crisis in 1998 had greatly reduced the consumption ability of ice cream market and increased the imported ingredients for producers. Secondly, Centralize planning system that is used in Russia caused the Russian managers to have little knowledge and experience on channels. Therefore, they had to heavily depend on distributors to reach the end customers. Together with distributor’s strong ability to integrate upward, this endowed the distributor strong bargaining power. Thirdly, consumer had very little switching cost since the whole market’s revenue generated from spontaneous, impulsive purchases.
Fourthly, there are so many substitute in the market; such as beer, soft drink and confectionary product was grabbing ice cream’s market by heavily investing on advertisement. Lastly, there were almost no entry barriers, new regional producers rushed into the industry. With strong ambition to gain market share, the regional producers leveraged their cost advantage to compete with low price. Therefore, in 2001, the producing capacity already exceeded the market demand. However, Russian ice cream market had a high potential. Compared with 16 Kg consumed in the United States, 17Kg in France, and 18 Kg in Canada, Russian consumed only 2.5 kilograms of ice cream per capita. This is showing the sign of improvement. Also the fact that Exhibition 1 shows that the consumption of ice cream is growing consistently every year also supports the statement. The market just need more emphasize from producers such as more advertisement.