Now is the time to think about the Russian market

Ever since the fall of the Iron Curtain, Russia has developed into one of the most important markets for European manufacturers of indoor climate, process cooling, and food cold chain technologies. Our industry has undertaken significant investments and efforts in the world’s largest country. European companies employ thousands of people in Russia, have set up domestic manufacturing and R&D units, and have been playing an important role in supporting the country’s modernisation since the early 1990s. Many Eurovent members were even active before and report a long tradition. A prime example is VEB Kühlautomat, which became part of Grasso (GEA Group) in 1994, and is still a widely known compressor brand in Russia today.

Aside from the high potential a market of close to 150 million people offers, it goes without saying that our industry had and still has to cope with various challenges: The Ruble crisis in 1998 led to currency devaluation and debt defaults. What followed was a long time of unprecedented growth. Ten years later, the storm of falling oil-prices and credit-markets did not leave Russia unaffected. However, it managed to recover reasonably quick. In 2013, the Ukraine crisis and economic sanctions left their scars, followed very recently by a diplomatic spat with Turkey. Yet, amidst all uncertainties, our industry should not bury its head in the sand, but think ahead and in the long-term.

Russia was and still is heavily dependent on imports in many industry sectors, including ‘HVACR’. While public investments in big infrastructure projects have been slowing down – especially due to low oil and gas prices – there still remain lots of opportunities. To name just a few examples: The 2018 FIFA World Cup is going to take place in Russia, accompanied by extensive infrastructure investments and modernisation initiatives. New pipelines are being built and existing ones extended, requiring, for instance, an increased gas cooling capacity. Hospitals are undergoing modernisation and continue to demand high quality ventilation and filtration equipment.

This might also explain why Climate World (1-4 March 2016, Moscow), the main exhibition for our industry in Russia and the CIS, again shows a slightly higher international participation rate. Despite the difficult market environment, non-domestic companies have been increasing space and investment into their presentation during this four-day event. At Eurovent, the official partner association of the exhibition, we are observing a renewed interest in the Russian market and our long-standing activities there. Our member association APIC (the Association of Professionals in the Industry of Climate) reports increasing membership levels. Why is this?

For most European manufacturers, the argument is simple: it is a must to stay in touch with local partners and clients - especially in tough times. A crisis is surely never positive, however it does often create a gateway to new chances and opportunities. The economic can be expected to improve at some stage. Based on past experiences, this could happen earlier than expected. The Russian market for indoor climate, process cooling, and food cold chain technologies is undergoing changes. Companies are restructuring and once the market is set for recovery, there will be a lot of catching up to do in, for example, the construction and energy sector.

In addition, recently introduced Russian laws force various parts of our industry to guarantee a minimum level of domestic production in order to be able to sell products in the Federation without punitive tariff duties. This, together with low Ruble rates, supports acquisitions and investments in domestic production to prepare for post-crisis times. Staying active and engaging with Russia can prove beneficial in the mid and long-term. In fact, now is the time to think about the Russian market.

To note: During the upcoming Climate World exhibition, Eurovent and its member association APIC are organising their traditional industry delegation, providing unique networking and business opportunities that go beyond the usual exhibition experience. Last year, more than 40 participants from 26 manufacturers attended. Registration for the 2016 Eurovent Delegation is going to be launched soon. Remember to follow the Eurovent LinkedIn page to be the first to read about the Delegation programme.

Publication Date: 
Monday, 7 December 2015
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