Indigenous Irish exports doing well in Russia

“Focusing on goods shipments in the first quarter, it is very much apparent that a broad spread of trade categories is represented. Medical devices and pharmaceuticals make up only 12pc of total goods exports to Russia, compared to 50pc of the total going to other markets,” he says.

“One-tenth of exports to Russia are of meat and meat preparation products – a significant proportion – and 8pc of the total is coffee/tea/chocolate.”

He notes that Butlers Chocolates has been very successful in Russia, having prioritised the market since it started its overseas development programme two years ago.

On the services side, engineering, architecture and project management company PM Group has been doing well in Russia, having strategically targeted the market in advance of the collapse in the Irish construction industry.

“Several years ago PM Group decided to look into new markets as it saw opportunities drying up here. As a result it has been able to replace revenue losses here in Russia and other countries. It is now known in Russia as a great player to do business with,” says Gurdgiev.

Otherwise, industrial machinery makes up 9pc of Ireland’s exports to Russia. Gurdgiev says Irish agri-equipment producers have a strong competitive advantage.

“Agri-equipment manufacturers have discovered that they can get much larger orders in Russia compared to the rest of Europe because the farms there are so huge. They are comfortable operating in the market and word of mouth is spreading. Things like that are very encouraging.”

B2B a stronger performer

In terms of consumer goods, Russians don’t perceive foreign brands as being higher quality, so Gurdgiev says it’s a bit of an uphill battle. “Our primary trade with Russia is in high value-added business-to-business goods and services. The likes of Jameson, Kerrygold and Guinness are prominent but smaller consumer brands have not really penetrated the market yet.

“What is promising is that, unlike the Chinese market, the consumer market in Russia is more mature. Adjusting for price differences, GDP per capita was $15,600 in 2010 compared to $7,500 in China. Russia is one of the wealthiest GDP per capita countries in the world; it is expected to rise to $20,500 in 2015. The market is more sophisticated than other high-growth economies. Customers are more willing to listen to higher quality propositions at a premium price. For example, premium whiskey flies off the shelf in Russia and the higher the price the faster it will move.”

Minister of State Joe Costello TD led a trade mission to Russia from 18 to 22 June to help Irish exporters take advantage of the expansion in demand for education and training, agri-food and support technologies, software and ICT, nanotechnology and financial services.

This trade mission and a further one planned in the autumn are expected to result in Irish goods exports to Russia growing to €620m, double the level achieved in 2010.

They are also expected to lead to continued strong growth of services exports to €1.6bn — up 23pc on 2010 levels, according to the Irish Exporters Association (IEA).

Gurdgiev says one of the things that is important to note about Ireland’s trading relationship with Russia is the very strong surplus that exists. “The trade surplus in goods was €389m in 2011. The trade surplus with Brazil was around €101m and we have a trade deficit with China and India.

“This has been growing gradually from €150m in 2004 to €250m in 2007. In the Russian economy in 2009, the trade surplus went down to €160m. It then accelerated rapidly in 2010 and 2011, tenfold growth relative to Ireland’s overall trade surplus.

“From January to April 2010 goods exports rose by 49pc and for the same period this year they climbed 11.2pc. The Russian economy is coming strongly out of recession, having grown 4.3pc in 2010 and 2011, and is predicted to grow by 4pc this year in terms of GDP.”

Once a company enters the Russian market, Gurdgiev says it has very strong “staying potential”.

“Making the first commitment is crucial and Enterprise Ireland is really helpful in that respect. Trade missions are crucial. We are one of the few countries that have the direct engagement of our embassy with a development agency on the ground in Russia. Ambassadors are 100pc engaged with Enterprise Ireland and Irish companies, and Enterprise Ireland is exceptionally strong at building a strong connection with the Irish community in Russia.”