Russia’s Branding Boom

Today the FT is carrying a report on Russia’s booming advertising market – speculated to be the seventh largest in the world.

A walk through central Moscow is proof that advertising is big business in Russia. Across the road from Ms Yudina’s house is a huge hoarding promoting a mobile phone company. On top of a building down the street, enormous neon letters spell out Pepsi. The advertising market in Russia is worth $6.5bn a year – not a massive sum by global standards, but the key is the growth. Since 1998, advertising spending has grown almost 30 per cent annually, and by 2012 is projected to reach $13.5bn. “That would rank it probably seventh in the world,” says Mark Tutssel, worldwide chief creative officer at Leo Burnett Worldwide. “In terms of potential, it’s colossal.” … The biggest driver of the industry’s growth is the economy. As it expands – and gross domestic product (GDP) has been growing at about 7 per cent a year for the past few years – consumers have more money for advertisers to chase. “The advertising market is an indicator and an accelerator of economic growth. And growth is booming,” says Mr Tutssel. But there is more to it than just GDP growth. Brands such as Procter & Gamble, Kellogg’s, Nestlé and Unilever – the biggest buyers of advertising – are racing to win the loyalty of Russia’s emerging middle classes. “I think it is very clear that brands want to reach this [market] and establish themselves as the economy is developing, so that people have brand awareness of their product before someone else gets into the market,” says Mary Kallaher, vice- president of Emerging Markets at Discovery Networks Europe. There is another peculiarity about the Russian advertising market. Average incomes are about $500 a month – paltry compared with many other markets. “But because of low income tax and subsidised housing and utilities, that means 70 per cent of Russian income is disposable,” says Mr Tutssel. “If you compare that to the western world … that [figure] is probably something like 40 per cent. So if you think of this disposable income now, it really is a great opportunity for brands to weave their way into the social fabric.”