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Russian Food Exporters Go Online to Expand Mainland Market Share

For Russian companies keen to get beyond China's Northeast, cross-border e-commerce may be the solution.

Photo: Russian dolls: Traditional symbols that are now synonymous with the Dakaitaowa e-commerce site.
Russian dolls: Traditional symbols that are now synonymous with the Dakaitaowa e-commerce site.
Photo: Russian dolls: Traditional symbols that are now synonymous with the Dakaitaowa e-commerce site.
Russian dolls: Traditional symbols that are now synonymous with the Dakaitaowa e-commerce site.

With Russian food producers now keen to make ever-deeper inroads into the mainland, cross-border e-commerce is seen as one of the preferred channels for getting beyond the geographically proximate northeastern market. Given the growing value of the trade between the two countries, it is no surprise that a number of e-commerce platforms specialising in the Sino-Russian food and beverages import/export sector have now emerged.

Since China became Russia's principal trading partner in 2010, the commercial relationship between the two has continued to evolve. On the mainland side, this has been driven by growing levels of disposable income, while Russia's contribution has been shaped by its desire to reduce economic reliance on its natural resources.

The prevailing geopolitical situation, with the EU/US sanctions against Russia still very much in place, as are the country's corresponding counter-sanctions, has further nurtured the relationship between the two. In particular, the lack of access to EU agricultural exports has seen Russia's domestic sector flourish, with the country now one of the world's leading producers of wheat, poultry and sunflower oil, products it is already successfully exporting to the Middle East and Asia.

In 2016, Russia's food exports to China were valued at US$1.5 billion, a 25% increase on the previous year. In terms of product sectors, demand was particularly strong for confectionery and ice cream, with the Urals and Western Siberia taking the lead in chocolate, while the Amur Region was the primary ice cream exporter.

Overall, though, seafood represents Russia's primary export to China, accounting for 66.5% of the total. This is followed by soy beans (11.6%), animal and vegetable fats (10.7%) confectionery and bakery (5.7%), grains and flour (both 0.9%) and beer (0.5%). In terms of next year, hopes are high for salmon, shrimps and ice cream from Russia's far east, and mushrooms and chocolate from Siberia.

A number of factors are seen as having contributed to the success of Russia's food exports. Most notably, the country has relatively high environmental standards, with genetically modified foodstuffs completely banned. On top of that, the devalued ruble has made Russian exports comparatively cheap.

In geographical terms, the country's proximity to China's north-eastern provinces has given it ready access to that particular region. By that same token, however, Russian food products are almost entirely unknown in China's central and southern provinces. The challenge now is for exporters to build their distribution and profile in a number of strategic markets, most notably Beijing, Shanghai, Hong Kong, Guangzhou, Macau and Hainan.

Given its surge in popularity across China, cross-border e-commerce is being seen as the ideal channel for Russian producers and distributors to build awareness and drive sales in the less-directly accessible mainland regions. In response to this perceived demand, a number of Sino-Russian e-commerce platforms with a particular focus on the food-and-beverages sector have already begun operating.

By far the most prominent is Dakaitaowa.com, a 100% Russian-backed trading platform. The site is wholly owned by the Russian Export Group, a business that specialises in sourcing products from across Russia seen as suitable for exporting to China. Another subsidiary of the business, mainland-registered FRC International Trading, then handles all of the required certifications and customs clearances, as well as arranging distribution to supermarkets across China.

Another popular option is Epinduo.com, a site originally established to raise capital and source technology/equipment for Russian manufacturers and suppliers already exporting to China. For many Russian companies, it is a means of gaining experience of the export and branding requirements necessary for mainland success. It has also helped users with diversifying their distribution channels, communicating with China's immigration and food hygiene authorities and accessing its most popular social media sales channels.

As to the future, Epinduo is now looking to set up 300 off-line stores in China as a way of refining and extending its O2O sales mode. It is also planning to expand beyond the food-and-beverages sector, which has been its core offering since its launch three years ago.

In the initial stages of looking at the opportunities on the mainland market, many companies also enlist the services of VectorTrade, a St Petersburg O2O business that specialises in pairing Russian businesses with mainland distributors and importers. As well as its matchmaking facility, the company also provides access to Chinese social media channels and a local search engine optimisation service. In terms of its offline offer, it manages trade-show promotions as well as having its own mainland showrooms, warehouses and wholesale distribution centres.

Interested parties from either Russia or China can register on the platform free of charge before uploading their contact information and details of their specialisation and particular interests. This information is then translated into Russian or Chinese, as required, in order to maximise the effectiveness of the overall matchmaking process.

Leonid Orlov, Moscow Consultant

Content provided by Picture: HKTDC Research
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