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Marketing in today’s fast-changing Russia

The magical allure of “Imported” is quickly losing its sparkle in Russia.

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Fickle are the ways of the world. In Russia not that very long ago, all you had to do was bring in something “imported” and it was bought almost sight unseen. No marketing needed at all.  It didn’t test the imagination that such eager acceptance of anything foreign-made was understandably in response to years of scarcity and mono-choice products.

When first visiting the then USSR in the late 1970’s, no matter where you went, it seemed to my western eyes there was only one brand of milk for sale, and was intriguingly branded and marketed as “Milk” in shops fetchingly named “Products” or “Groceries”.

The Soviets took generic branding to an entirely new level. In the Soviet era, a much-heard term in shops when looking to purchase just about anything was “it is in deficit”. Countries, culture, politics and times do change, some as in the case of Russia by 180 degrees.

Russian consumers are by nature forgiving, they do not hold grudges as a rule, yet the rules of marketing and production of things are changing. Today you could probably successfully sell “designer” items with brands such as “Boris Johnson Baby Diapers”, “John Bolton’s Moustache Wax”, or even “Theresa May Mouthwash” – as long as they were mostly produced or assembled in Russia. This is a significant, rather recent shift in consumer perception.

The other day I was shopping for shampoo and watched two well turned out ladies examining the cosmetics they were looking to buy, making sure they weren’t imported, but either made under license in Russia, or simply made in Russia. This trend, for those who know Russia, is a significant change in mindset especially as imported goods for decades have been promoted as being better than anything Russia could make.

While on the topic of beauty, personal care and things hygienic – since 2014, when new sanctions were first imposed on Russia, and the mirrored responses to them by Russia, the country’s personal care market has contracted to some degree. Strong undercurrents seem to be driving long-term changes to the sector, notably an increasing preference for locally produced less costly products by sometimes hard-pressed consumers.

The increase in the grocery-basket of prices over the past four years has played a role, as consumers will always prioritize groceries over all but the most basic of toiletries. Within the beauty and personal care industry, this is seen in consumers looking for local price advantages even if it means giving up the ephemeral social prestige seen in some brand associations.

Not very long ago it was seen as “fashionable” for trendy Russians to look like advertising signboards for Moschino, Gucci, D&G and so on – less so today. The “nouveau” has gone out of the “riche”, and price:quality is reasserting primacy. The idea of “foreign” is steadily losing out if the Russian equivalent meets similar basic criteria, and the change has its own cachet.

The devaluation of the Russian ruble has led to high unit price hikes, as many international personal care and beauty brands and their ingredients are still largely imported, therefore far above even the upper middle-income ranges today.

Despite the sanctions, ruble devaluation and the follow-on lukewarm performance of the beauty and personal care market, Russia remains the largest market for cosmetics in Eastern Europe and accounts for 50% of the retail cosmetics market of the CEE. Russia alone is considered Europe’s largest market with a population of over a 143 million, and yet foreign companies historically have had trouble accessing the full purchasing power of Russian consumers.

Cultural sensitivity and understanding of trending realities are one key to effective marketing. The specifics of a nation, its beliefs, and its idiosyncrasies can make or break a business. Marketing in Russia needs a strong cultural adaptation. The basis of the culture and certainly language is different from Western cultures, in daily life as in business.

Russians are a patient but deeply proud people. They are patriotic and strong defenders of the reputation of their country. They accept that their lives are difficult when measured by climate, distances and geography, and take pride on being able to flourish in conditions that others could not.

Today, intra-market competition and the digital world have launched marketing, from basic retail to online e-commerce and social media marketing (SMM) onto undreamed of heights throughout Russia.

As of this writing a tad more than 75% of the Russian population are Internet users. Those remaining outside include the “older” generation (70+ years) as well as those living in very small or remote villages and settlements. As for the young and middle-aged living in cities, Internet use reaches 100%. In terms of marketing to Russian’s it means using the Internet and SMM resources to promote inside Russia is no longer optional, it is a necessity. It is the most efficient promotion channel today in Russia for most goods and services.

In 2017 Russia’s e-commerce reached the ruble equivalent of US$18 billion, growing at a rate of 13% pa and beating out bricks & mortar retail which grew by low single digits (3-5%).

Today, social networks reach over seventy-five percent of the population, and many users have developed multiple site familiarity. Female audiences form a majority in all six popular Russian social networks: the percent of female users on both Instagram and Odnoklassniki is about 70%; MoiMir 60%; Facebook and Vkontakte there is a small majority of female over male users; and on Twitter, there is no appreciable difference.

The same tools as anywhere are in the Russian Internet: Search Engine Optimization, Contextual Advertising, Banner Advertising, Social Media and Blog Advertising, E-mail Marketing, Cost-Per-Action Mechanisms. That said and this being Russia, it is mostly Russian companies that are the undisputed leaders on the internet of things. One example is Yandex, being the most popular search engine in Russia and not the Google’s of this world. Besides, there are some specific behavior differences in a Russian Internet audience.

Transitioning a business internationally is more than simply costs and procedures. It has more to do with cultural alignment and social linguistics than the skillful arrangement of numbers. It is making your product or service fit the desires and unique markers that characterize the users’ in country.

Domestic marketing of any business is challenging, doing it at a distance and in another culture is the Olympics of marketing. Countries may be becoming a bit more similar thanks to the worldwide web, but each country at its cultural core will rarely budge for anything: their sensitivities, traditions, humor, dialogues, myths and protocols are essentially unchanging and can be most stubbornly unaccommodating.

What keeps non-Russian corporations out can seem a little mysterious, given the new, globalized marketplace. The Russian language for one is incredibly rich with plenty of terms and descriptors that have six or seven synonyms in English, or simply defy translation altogether.

As for Russian consumers, translation is a bottom line necessity, as vast majorities of them do not speak a second European language. Russians will not be able to appreciate and respond to marketing material that has not been completely and carefully translated into their own language.

Despite being a fully globalized country with widespread internet access, infrastructure and one of the highest literacy rates on Earth, Russian consumers are a unique group in how they have resisted certain aspects of the globalizing age.

A common perception is that local Russian companies today, especially small businesses, are more trustworthy and cheaper than foreign equivalents. Any foreign corporation trying to appeal to Russians will have to pro-actively fight such perceptions.  It also makes a real positive difference to fully localize a company or brand web presence in Russia. Getting a “.ru” domain assists in appearing more acceptably native.

A number of American companies have understood this trend and the “hints” and have set up local production inside Russia, becoming “made in Russia”. Here are just a few: Pfizer, Forever 21, Boeing, Crate & Barrel, Ford-Sollers, Pepsico, Procter & Gamble, Philip Morris, Mondelez, GM, J&J, GE, Cargill, Alcoa, Archer Daniels Midland, McDonalds, even Starbucks has opened its 100th Russian store, with Krispy Kreme snapping at its heels with five shops.

At the end of the day, it does make a significant difference if the product being marketed can factually be labelled made, compounded, or assembled in Russia. I think it was Joe Chernov who first said “Good marketing makes a company look smart. Great marketing makes the customer feel smart.” That in a nutshell is the sort of sensitivity and approach which keeps paying dividends for years to come.

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Russia’s Lukoil Halts Oil Swaps In Venezuela After U.S. Sanctions

Under the new wide-ranging U.S. sanctions, Venezuela will not be able to import U.S. naphtha which it has typically used to dilute its heavy crude grades.

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Via Oilprice.com


Litasco, the international trading arm of Russia’s second-biggest oil producer Lukoil, stopped its oil swaps deals with Venezuela immediately after the U.S. imposed sanctions on Venezuela’s oil industry and state oil firm PDVSA, Lukoil’s chief executive Vagit Alekperov said at an investment forum in Russia.

Russia, which stands by Nicolas Maduro in the ongoing Venezuelan political crisis, has vowed to defend its interests in Venezuela—including oil interests—within the international law using “all mechanisms available to us.”

Because of Moscow’s support for Maduro, the international community and market analysts are closely watching the relationship of Russian oil companies with Venezuela.

“Litasco does not work with Venezuela. Before the restrictions were imposed, Litasco had operations to deliver oil products and to sell oil. There were swap operations. Today there are none, since the sanctions were imposed,” Lukoil’s Alekperov said at the Russian Investment Forum in the Black Sea resort of Sochi.

Another Russian oil producer, Gazprom Neft, however, does not see major risks for its oil business in Venezuela, the company’s chief executive officer Alexander Dyukov said at the same event.

Gazprom Neft has not supplied and does not supply oil products to Venezuela needed to dilute the thick heavy Venezuelan oil, Dyukov said, noting that the Latin American country hadn’t approached Gazprom Neft for possible supply of oil products for diluents.

Under the new wide-ranging U.S. sanctions, Venezuela will not be able to import U.S. naphtha which it has typically used to dilute its heavy crude grades. Analysts expect that a shortage of diluents could accelerate beginning this month the already steadily declining Venezuelan oil production and exports.

Venezuela’s crude oil production plunged by another 59,000 bpd from December 2018 to stand at just 1.106 million bpd in January 2019, OPEC’s secondary sources figures showed in the cartel’s closely watched Monthly Oil Market Report (MOMR) this week.

By Tsvetana Paraskova for Oilprice.com

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Germany Pulls Rank on Macron and American Energy Blackmail

Why France’s Macron, at the last minute, attempted to undermine the project by placing stiffer regulations is a curious question.

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Authored by Finian Cunningham via The Strategic Culture Foundation:


It was billed politely as a Franco-German “compromise” when the EU balked at adopting a Gas Directive which would have undermined the Nord Stream 2 project with Russia.

Nevertheless, diplomatic rhetoric aside, Berlin’s blocking last week of a bid by French President Emmanuel Macron to impose tougher regulations on the Nord Stream 2 gas project was without doubt a firm rebuff to Paris.

Macron wanted to give the EU administration in Brussels greater control over the new pipeline running from Russia to Germany. But in the end the so-called “compromise” was a rejection of Macron’s proposal, reaffirming Germany in the lead role of implementing the Nord Stream 2 route, along with Russia.

The $11-billion, 1,200 kilometer pipeline is due to become operational at the end of this year. Stretching from Russian mainland under the Baltic Sea, it will double the natural gas supply from Russia to Germany. The Berlin government and German industry view the project as a vital boost to the country’s ever-robust economy. Gas supplies will also be distributed from Germany to other European states. Consumers stand to gain from lower prices for heating homes and businesses.

Thus Macron’s belated bizarre meddling was rebuffed by Berlin. A rebuff was given too to the stepped-up pressure from Washington for the Nord Stream 2 project to be cancelled. Last week, US ambassador to Germany Richard Grenell and two other American envoys wrote an op-ed for Deutsche Welle in which they accused Russia of trying to use “energy blackmail” over Europe’s geopolitics.

Why France’s Macron, at the last minute, attempted to undermine the project by placing stiffer regulations is a curious question. Those extra regulations if they had been imposed would have potentially made the Russian gas supply more expensive. As it turns out, the project will now go-ahead without onerous restrictions.

In short, Macron and the spoiling tactics of Washington, along with EU states hostile to Russia, Poland and the Baltic countries, have been put in their place by Germany and its assertion of national interests of securing economical and abundant gas supply from Russia. Other EU member states that backed Berlin over Nord Stream 2 were Austria, Belgium, Cyprus, Greece and the Netherlands.

Washington’s claims that Nord Stream 2 would give Russia leverage of Europe’s security have been echoed by Poland and the Baltic states. Poland, and non-EU Ukraine, stand to lose out billions of dollars-worth of transit fees. Such a move, however, is the prerogative of Germany and Russia to find a more economical mode of supply. Besides, what right has Ukraine to make demands on a bilateral matter that is none of its business? Kiev’s previous bad faith over not paying gas bills to Russia disbars it from reasonable opinion.

Another factor is the inherent Russophobia of Polish and Baltic politicians who view everything concerning Russia through a prism of paranoia.

For the Americans, it is obviously a blatant case of seeking to sell their own much more expensive natural gas to Europe’s giant energy market – in place of Russia’s product. Based on objective market figures, Russia is the most competitive supplier to Europe. The Americans are therefore trying to snatch a strategic business through foul means of propaganda and political pressure. Ironically, the US German ambassador Richard Grenell and the other American envoys wrote in their recent oped: “Europe must retain control of its energy security.”

Last month, Grenell threatened German and European firms involved in the construction of Nord Stream 2 that they could face punitive American sanctions in the future. Evidently, it is the US side that is using “blackmail” to coerce others into submission, not Russia.

Back to Macron. What was he up to in his belated spoiling tactics over Nord Stream 2 and in particular the attempted problems being leveled for Germany if the extra regulations had been imposed?

It seems implausible that Macron was suddenly finding a concern for Poland and the Baltic states in their paranoia over alleged Russian invasion.

Was Macron trying to garner favors from the Trump administration? His initial obsequious rapport with Trump has since faded from the early days of Macron’s presidency in 2017. By doing Washington’s bidding to undermine the Nord Stream 2 project was Macron trying to ingratiate himself again?

The contradictions regarding Macron are replete. He is supposed to be a champion of “ecological causes”. A major factor in Germany’s desire for the Nord Stream 2 project is that the increased gas supply will reduce the European powerhouse’s dependence on dirty fuels of coal, oil and nuclear power. By throwing up regulatory barriers, Macron is making it harder for Germany and Europe to move to cleaner sources of energy that the Russian natural gas represents.

Also, if Macron had succeeded in imposing tougher regulations on the Nord Stream 2 project it would have inevitably increased the costs to consumers for gas bills. This is at a time when his government is being assailed by nationwide Yellow Vest protests over soaring living costs, in particular fuel-price hikes.

A possible factor in Macron’s sabotage bid in Germany’s Nord Stream 2 plans was his chagrin over Berlin’s rejection of his much-vaunted reform agenda for the Eurozone bloc within the EU. Despite Macron’s very public amity with Chancellor Angela Merkel, Berlin has continually knocked back the French leader’s ambitions for reform.

It’s hard to discern what are the real objectives of Macron’s reforms. But they seem to constitute a “banker’s charter”. Many eminent German economists have lambasted his plans, which they say will give more taxpayer-funded bailouts to insolvent banks. They say Macron is trying to move the EU further away from the social-market economy than the bloc already has moved.

What Macron, an ex-Rothschild banker, appears to be striving for is a replication of his pro-rich, anti-worker policies that he is imposing on France, and for these policies to be extended across the Eurozone. Berlin is not buying it, realizing such policies will further erode the social fabric. This could be the main reason why Macron tried to use the Nord Stream 2 project as leverage over Berlin.

In the end, Macron and Washington – albeit working for different objectives – were defeated in their attempts to sabotage the emerging energy trade between Germany, Europe and Russia. Nord Stream 2, as with Russia’s Turk Stream to the south of Europe, seems inevitable by sheer force of natural partnership.

On this note, the Hungarian government’s comments this week were apt. Budapest accused some European leaders and the US of “huge hypocrisy” in decrying association with Russia over energy trade. Macron has previously attended an economics forum in St Petersburg, and yet lately has sought to “blackmail” and disrupt Germany over its trade plans with Russia.

As for the Americans, their arrant hypocrisy is beyond words. As well as trying to dictate to Europe about “market principles” and “energy security”, it was reported this week that Washington is similarly demanding Iraq to end its import of natural gas from neighboring Iran.

Iraq is crippled by electricity and power shortages because of the criminal war that the US waged on that country from 2003-2011 which destroyed much of the country’s infrastructure. Iraq critically needs Iranian gas supplies to keep the lights and fans running. Yet, here we have the US now dictating to Iraq to end its lifeline import of Iranian fuel in order to comply with the Trump administration’s sanctions against Tehran. Iraq is furious at the latest bullying interference by Washington in its sovereign affairs.

The hypocrisy of Washington and elitist politicians like Emmanuel Macron has become too much to stomach. Maybe Germany and others are finally realizing who the charlatans are.

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Russia Readies Own Web To Survive Global Internet Shutdown

Russia is simultaneously building a mass censorship system similar to that seen in China.

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Via Zerohedge


Russian authorities and major telecom operators are preparing to disconnect the country from the world wide web as part of an exercise to prepare for future cyber attacks, Russian news agency RosBiznesKonsalting (RBK) reported last week.

The purpose of the exercise is to develop a threat analysis and provide feedback to a proposed law introduced in the Russian Parliament last December.

The draft law, called the Digital Economy National Program, requires Russian internet service providers (ISP) to guarantee the independence of the Russian Internet (Runet) in the event of a foreign attack to sever the country’s internet from the world wide web.

Telecom operators (MegaFon, VimpelCom (Beeline brand), MTS, Rostelecom and others) will have to introduce the “technical means” to re-route all Russian internet traffic to exchange points approved by the Federal Service for Supervision of Communications, Information Technology and Mass Media (Roskomnadzor), Russia’s federal executive body responsible for censorship in media and telecommunications.

Roskomnazor will observe all internet traffic and make sure data between Russian users stays within the country’s borders, and is not re-routed abroad.

The exercise is expected to occur before April 1, as Russian authorities have not given exact dates.

The measures described in the law include Russia constructing its internet system, known as Domain Name System (DNS), so it can operate independently from the rest of the world.

Across the world, 12 companies oversee the root servers for DNS and none are located in Russia. However, there are copies of Russia’s core internet address book inside the country suggesting its internet could keep operating if the US cut it off.

Ultimately, the Russian government will require all domestic traffic to pass through government-controlled routing points. These hubs will filter traffic so that data sent between Russians internet users work seamlessly, but any data to foreign computers would be rejected.

Besides protecting its internet, Russia is simultaneously building a mass censorship system similar to that seen in China.

“What Russia wants to do is to bring those router points that handle data entering or exiting the country within its borders and under its control- so that it can then pull up the drawbridge, as it were, to external traffic if it’s under threat – or if it decides to censor what outside information people can access.

China’s firewall is probably the world’s best known censorship tool and it has become a sophisticated operation. It also polices its router points, using filters and blocks on keywords and certain websites and redirecting web traffic so that computers cannot connect to sites the state does not wish Chinese citizens to see,” said BBC.

The Russian government started preparations for creating its internet several years ago. Russian officials expect 95% of all internet traffic locally by next year.

As for Russia unplugging its internet from the rest of the world for an upcoming training exercise, well, this could potentially anger Washington because it is one less sanction that can keep Moscow contained.

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