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Sales of Home-Produced Items Surge in Burgeoning Russian Toy Market

Purchases of domestically-sourced toys grew faster than their imported equivalents for the first time last year.

Photo: Fantasy Patrol: The Russia-owned animated property that is giving Disney a run for its money.
Fantasy Patrol: The Russia-owned animated property that is giving Disney a run for its money.
Photo: Fantasy Patrol: The Russia-owned animated property that is giving Disney a run for its money.
Fantasy Patrol: The Russia-owned animated property that is giving Disney a run for its money.

When first adopted in 2015, Russia's import substitution policy was intended to spur domestic production and drastically reduce the volume of goods and services sourced abroad. By general consent, with one or two exceptions, it has not been a huge success. Some sectors have maintained import levels while others have circumvented the directive by re-labelling items imported from the EU (a source specifically banned under the terms of the country's retaliatory sanctions against the West) as having originated from a fellow member of the Commonwealth of Independent States (CIS), a body exempt from such restrictions. This has led to running jokes among Russian consumers regarding items of such dubious provenance as "Belorussian oysters".

Despite this, there have been some successes, most notably in the agricultural sector, where the import ban, coupled with strategic state investment, has taken the country close to the point of food self-sufficiency after many years of heavy reliance on externally-sourced produce. Aside from agriculture, another – arguably more surprising – sector to have benefitted from the policy is the domestic toys and games industry.

Indeed, last year, to the surprise of many, sales of domestically-produced toys sales grew far faster than those of their imported counterparts. Overall, the total value of Russia's toy market grew by 8% in 2018, valuing the sector at US$3.2 billion according to figures released by the usually-dependable Russian Association of Children's Goods Industries Enterprises. Crucially, though, purchases of domestically-produced toys grew by 22% while the sales of imported toys grew by only 4% over the same period. Consequently, Russian toys now account for some 20% of the market, something of a high-water mark for local manufacturers.

According to a number of industry commentators, this switch in preference is at least partly down to the fact that Russian consumers are now far more frugal than they were in the past. Given that domestically-produced toys are 43% cheaper than their imported counterparts – with an average unit cost of $6.00 for Russian-made items compared to $11.00 for their overseas-sourced equivalents – there are clearly substantial savings to be had. The fact that many Russian manufacturers produce toys very similar to the best-selling international items, but with a considerably lower price tag, is also seen as having had an impact.

Another sign of the resurgence of the Russian toy sector is the soaring demand for toys made under licence from the country's domestic animation studios. Overall, sales in this sector grew by a massive 40% last year, with Moscow-based Parovoz Studio's Fantasy Patrol steaming ahead of Masha and the Bear (a property owned by Animacord, a fellow Moscow animation studio) to become the market leader.

According to Destky Mir, Russia's largest toys and games retail chain, sales of domestically-licensed products now account for 10% of its overall turnover, with Fantasy Patrol topping its 2018 bestsellers' list, followed by Three Cats and Mi-mi-mishki, a Russian take on the Gummy Bears. Inevitably, the majority of these toys are manufactured in China and tend to be less technologically-sophisticated than their global market-leading equivalents.

The growth of the domestic licensed sector is all the more impressive given the widespread availability of illicit, counterfeit items. In total, the Russian Association of Children's Goods Industries Enterprises estimates that up to 45% of the character-based toys bought in Russia have been produced on an unlicensed basis. It is an area, though, where Russian license holders and their overseas-counterparts have become increasingly litigious, a development seen as sure to stem the flow of counterfeit products over the long-term.

Given that many experts concur that Russian children have a far greater affinity with domestic licensed brands, largely as they are part of the same cultural continuum, it seems safe to assume that this sector will only grow in significance. This trend is likely to be given a further boost by the preference for digitally-sourced entertainment typical among many young Russian consumers, a medium where home-grown characters currently outperform those owned by Disney or any of the other global market leaders.

Leonid Orlov, Moscow Consultant

Content provided by Picture: HKTDC Research
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