Nestlé SA, the world’s biggest food company, expects the downturn in the Russian consumer market may ease by next year.
"We hope that the recovery will start already in the second part of this year," Maurizio Patarnello, head of the Nespresso maker’s business in Russia and Eurasia, said in an interview Thursday. While this year is set to remain challenging, volume may stop declining next year. "Going back to the volumes that we had in 2013 will take time, probably two or three years."
Russia is going through its longest recession in two decades. Gross domestic product shrank 3.7 per cent last year and is expected to drop another 1.5 per cent this year, according to analysts surveyed by Bloomberg. Household consumption plunged 9 per cent last year and may decline a further 1.5 per cent this year. For 2017, analysts are expecting growth in both GDP and consumption.
The KitKat maker’s sales growth in Russia and Eurasia accelerated to 18 per cent last year as the Swiss food company jacked up prices to keep up with an inflation rate that averaged at 16 per cent. Revenue reached 102 billion rubles ($1.5 billion), a fraction of Nestlé’s total sales of 89 billion francs ($91 billion).
"Nestlé’s forecast looks realistic," said Vladimir Tikhomirov, chief economist at BCS Financial Group. "We are seeing stabilizing and growing oil prices. This means a stronger ruble, lower inflation and potential rebound in consumption."
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