With a population of 143 million, the largest country in the world remains a major potential market. Russia ended 2003 with its fifth straight year of growth, the national deficit is in decline, personal incomes are on the way up, and communication systems such as internet and email are constantly improving. Increased international presence in the form of hotel groups and low labour costs add further to the country's potential.
Nonetheless, the attractiveness of Russia as an emerging market for hospitality operators remains marred by a weak banking system, a poor business climate that discourages both domestic and foreign investors, corruption, local and regional government intervention in the courts, and widespread distrust in institutions. Add to this the fact that 25% of the population still lives below the poverty line (as of January 2003), and potential operators are wary.
"Russia is a big potential market but the economic climate and political situation mean that operators have to consider the cost and benefit aspects of the situation," says John Lake, pubs and restaurants researcher at Deutsche Bank.
This has not stopped the development of the food service sector in the country, however. Historically, independent operators dominated, but chain restaurants are gradually gaining a foothold.
Research by Euromonitor shows that in 2003 the number of chain restaurants reached 246, amounting to just 3% of the total. The sales value of the sector, however, reached US$184m (96m), which amounts to 5% of all sales. While it may seem small fry, the sector is on the up. Moscow's fast-food market alone is estimated at $400-$700m (208-365m) per year with annual growth of 20%. Between 1999 and 2003, the number of chain units almost doubled, while sales value grew by 140%.