Fruit business in Russia: opportunities and difficulties
Russia seems to be a land of opportunity for many suppliers because of its vast territory and small domestic fruit production. However, some suppliers do not make money but go broke working with Russian buyers. How to ensure a good income, reduce risks, and simplify your work in the Russian market, you will learn in the article.
Working with wholesalers
There are two categories of customers that buy fruits and vegetables directly from fruit producers: wholesalers and retail chains.
Wholesalers sell goods to retail stores in the wholesale market, such as Food city in Moscow.
There are several dangers in dealing with them:
- Wholesalers often cheat suppliers to make extra money. As they sell interchangeable products at the same place, their clients choose goods primarily for the price. Wholesalers have to sell perishable goods already brought to Russia quickly, so they cannot set a high mark-up. That’s why wholesalers are looking for ways to profit from the supplier, even in dishonest practices.
- Wholesalers often insist on dropping the price after selling delivered goods, even if the price is already negotiated and specified in the contract. When the deadline for payment comes, the haggle begins: the country’s situation is complicated, the goods are of poor quality, etc.
- Debts of a wholesaler can go unpaid if he declares himself bankrupt because banks do not insure their operations.
To avoid risks, we recommend you work with retail chains and supermarkets.
Working with nationwide retail chains
Over the past 15 years, Russian retail chains received a significant inflow of investments and grew by 20% every year. Now the growth has slowed down, and the period of consolidation has begun. Russian retail chains are observing the market and looking for effective points of sale.
Retail chains operate at auctions. They also aim to buy goods at the lowest cost, but they compete with chains worldwide. It means that the market is incomparably broader, and the price is advantageous for the supplier.
Benefits of working with retail chains
The first and foremost is solvency. The retail chains have financing and a constant flow of money because they resell goods to the end consumer straight away.
- Transactions of retail chains are insured. Retail chains are public systemically important companies. Their shares are traded on the stock, so information about them is disclosed and regularly monitored. Banks and insurance companies trust them, so there is no credit risk for the supplier.
- The contract with retail chains is clear and completely official. Wholesalers can make a deal through third parties or a broker with no assets, and in case of problems with payment, they cannot be received even in court.
Accurate demand forecasting
Unlike wholesalers, retail chains have professional instruments for measuring purchasing performance, customers’ needs, and sales forecasting. They have incomparably more buyers, so the demand for goods is way less volatile. It means that they won’t overestimate the required product quantity, and they won’t search for flaws in the quality to reject a batch.
Fixed Price Policy
The price is stated before loading, and it won’t change. Terms and conditions are fixed on paper and signed by contractors.
Nationwide retail chains are not affected by currency volatility, the country’s situation, or a drop-in demand: they have a large-scale infrastructure for stable sales and financial instruments to protect themselves from currency risks.
When dealing with retail chains, the price may change only due to quality problems discovered at quality control. However, its process and acceptance decision are clear and transparent. If the product matches the quality passport, it is accepted; if not, the chain rejects it or claim the price reduction.
The process of quality acceptance became significantly more professional: there are brokers, forwarders, infrastructure, chains’ warehouses in ports, where they can open a container and check goods.
Facilitating dealing with supermarkets
The main difficulty in dealing with retail chains is their need for only top-class fruits ready for display. The retail chain cannot send products of insufficient quality to supermarkets or accept the “non-standard” or “small calibre” category.
It means that the supplier must provide almost perfect products or promptly solve quality issues in Russia. Collaboration with chains cannot be reckless or ill-considered. If the quantity of defective goods exceeds 5% of the batch, the supermarket has the right to reject the whole container. You have to be ready because there might be rejections. After all, it is impossible to ship products regularly and never make mistakes. The supplier must be able to manage returns quickly, re-sort, and repack the goods.
We help in batch acceptance. Our quality control department represents the interests of a foreign supplier when opening a container. We guarantee that quality control is performed correctly, without errors. It helps to avoid unfounded claims from the retail chains. We also pass on feedback from retail chains to the supplier, indicating what to look for, which allows the supplier to understand customers’ needs better and take them into account in the next delivery.
We manage rejections. In the port or close to the chain’s warehouse, we sort out the batch, secure the boxes at pallets, re-pick the pallets, and, if possible, take them back to the retail chain. It allows to remove defects from the batch and sell the goods profitably.
We sell the remaining goods. If the retail chain’s transfer of the sorted goods is not possible, we collect goods and sell them to the wholesalers. Our primary role, in this case, is to save the exporter’s money. We sell the goods, pay taxes, convert profits into the exporter’s currency, and transfer the due amount to the client’s account.
We provide suppliers with some additional services:
- Claims settlement;
- Promotion and sales;
- Help with document flow;
- Customs clearance, preparation of stickers;
- Accounting for mutual payments with the chains;
- Legal representation – consulting and representation in court.
Trade safely with a reliable partner in Russia
The Russian market provides fruit suppliers opportunities; however, exporters need to have a partner to solve all issues quickly. It must be a reliable, responsive company with real operational capabilities.
As soon as a supplier has such a partner in Russia, he can focus on producing the product, not on the possible risks in trading.