Flick through the pages of any international business magazine and you’ll find frequent reference to what the author claims is the best location for your company’s next venture. But with few exceptions, when we see the term ‘emerging markets’, most of us read China, India and South America.
Russia on the other hand, gets a lesser billing for its emerging market credentials or, for that matter, its international events. A strange situation for a country that, as Reed Elsevier Russia MD Gregory Zaraisky points out, “spans an area larger than the combined land masses of China and the US”.
But the column inches are increasing, thanks in part to the country’s successful tender for international events such as the Olympic Winter Games in Sochi in 2014 and the 2018 FIFA World Cup. Factor in the development of new venues and Russia’s exhibition industry is experiencing something of a renaissance.
Two key trends have emerged to shape the present-day situation in Russia: a downturn in oil prices, and significant capital outflow during the first six months of the year. These factors had a major impact on industrial production development rates in Russia.President of the Russian Union of Exhibitions and Fairs (RUEF), Sergey Alexeev, points out that in these economic conditions the exhibition sector “is critical to give a boost to home demand, and to promote the products of key national industries”.
“Global practices have shown that exhibition and congress activity may become a basic instrument to address these issues,” he comments.
According to the RUEF, the number of Russian exhibitions grew by 10 per cent in 2011 and the level of foreign participation by seven per cent. Few, if any, European countries can offer the same opportunities for business development – and certainly not while offering access to a market of the same scale as Russia.
A sleeping giant awakes
“In the context of the exhibition space sales we are 10 times behind the US, China and Germany,” says Alexeev. “The revenue of our exhibition industry is comparable to the sales of a large corporation. Our objective is definitely to meet positive growth
In 2011, RUEF members organised 1,059 events with space totalling two million sqm. More than 125,000 exhibitors attended from 119 countries, selling to 7.6 million visitors. New venues have been introduced in Ekaterinburg and Novosibirsk, and a large construction site is in development in St Petersburg that will deliver state-of-the-art exhibition and congress facilities near the Pulkovo Airport in 2014. Other congress centres are planned in Nizhny Novgorod, Kazan, Belgorod and Ufa.
Of course infrastructure is nothing without the quality that entices the big international organisers capable of filling the halls. Slaying that particular beast, namely quality, is integral to the development of Russia’s exhibition industry. Unlike its competitors in Asia, the Middle East and Europe, Russia is not known for its service and tourism industry, elements core to most successful business event destinations.
However, the winds of change are coming. In a recent RUEF survey, more than half of all Russian exhibition organisers say they plan to increase expenditure on advertising and press work, while 44 per cent of companies plan to increase expenditure associated with personnel training, up from 35 per cent in 2011. Forty five per cent will increase their acquisition of modern equipment and 35 per cent will update and expand their software systems.
“Based on the results of the survey conducted by the RUEF executive board,” says Alexeev, “the conclusion may be drawn that a growth trend in investment and activities revitalisation has formed in the areas that increase the efficiency of the industry. This new quality and attractiveness of the exhibition product for exhibitors and the public is key to success in the strategic development of the industry.”
A vast country, rich in regions
Moscow and St Petersburg are the country’s main exhibition and congress hubs and, respectively, the country’s most populous cities. According to recent RUEF research, between them they attract nearly 83 per cent of foreign companies actively exhibiting in Russia. Of the two it is Moscow that is the more popular destination for organisers. Participation of foreign companies at Moscow trade fairs increased by 4.6 per cent last year. In 2011 net exhibition space was 949,703sqm, up from 901,574sqm in 2010.
As the Russian capital, Moscow has the unique claim to being the country’s beating financial heart. The city controls not only the primary financial exchanges but also a substantial part of the increasing exchange of trade with other countries.
Two main venues dominate Moscow: the giant 266,000sqm Crocus Expo and Expocentre ZAO.
Sergey Bednov, the recently appointed general director of Expocentre ZAO, says that today, the Russian market is vibrant with high growth rates. “There is a high demand for up-to-date technologies and equipment. Russians are traditionally interested in foreign-made consumer goods, and our domestic market is huge and constantly developing.”
More than 700km north-west of Moscow lies St Petersburg, often dubbed the Venice of the north and built from the beginning as Russia’s window to Europe. In 2014 the city enters the exhibition destination major league with the new Expoforum venue, one of the largest exhibition and congress centres in Europe.
Major infrastructure redevelopment will accompany the development, allaying any concerns about restrictive Russian transport links, which have proven to be a negative issue in many Russian cities.
Much of St Petersburg’s success may be credited to the fact its core industry consists of more than 20,000 small enterprises as well as 700 large ones, predominantly in the shipbuilding, machine-building and electrotechnical sectors. Other important industries for the city include food processing, construction and restoration, chemical manufacturing, car manufacturing, and the pharmaceutical, biotech, machine-building, and metal-working clusters. The prevalence of smaller companies creates great potential for exhibitions and congresses as fostering international business collaboration in the city is a priority.
Nizhny Novgorod is one of the largest industrial centres in Russia. The city’s commercial potential is based around machine-building, which occupies 44 per cent of the total volume of industrial output. More engineering specialisation can be seen in the automotive sector, which provides more than 60 per cent of Russia’s production of trucks, 65 per cent of bus manufacturing and about five per cent of passenger cars.
As with St Petersburg, a significant contribution to the region’s economy is made by small and medium-sized businesses. Employment in this field accounts for more than 30 per cent of the total employment in the regional economy. Today, the region stands among the top 10 Russian regions in terms of small enterprise development rates. These companies tend to comprise the majority of exhibitors at international trade events.
In the south of Russia lies Novosibirsk, the third biggest city and capital of the Siberian Federal District. It is the business, scientific, industrial, transport and cultural centre of Siberia, home to nearly 1.5 million people; one third of the region’s population.
With the Trans-Siberian Railway, Tolmachevo International Airport and several major motorways, Novosibirsk is the main logistics hub east of the Urals, and the region’s primary centre of scientific research.
The Novosibirsk Expocentre claims to be the only venue of its kind in Siberia and the Russian Far East, placing it among a group of new venues capable of boosting business in Russia’s regions and neighbouring countries.
Important sectors for the region are pulp and paper, printing and publishing, food processing, metalworking, and the production of building materials, rubber and plastics.
Despite the venue’s seemingly remote location, people are beginning to travel to Novosibirsk for their events. International participation in ITE Group’s SibBuild grew by 58 per cent in 2012, while exhibition space taken up by companies from other countries increased by 250 per cent.
“The industry’s potential was somewhat stunted until not long ago,” says Elena Popova, MD of Novosibirsk-based ITE Siberian Fair. “The lack of international-standard, high-quality exhibition venues is a problem that has only begun to be addressed.”
More than 1,600km west of Novosibirsk, on the European side of the Urals, is Ekaterinburg. Today most of the exhibitions in Ekaterinburg are held in the Ekaterinburg-Expo centre. The largest exhibition is 50,000sqm Innoprom, one of Russia’s leading industrial shows. The Urals mark the geographical centre of Russia, the point at which Europe and Asia meet. Production is big business here, with Ural factories and plants both world leaders in their spheres. And while ‘remote’ might seems like an appropriately descriptive word for a place like Ekaterinburg, the presence of nearby Kolstovo international airport and the region’s rapid economic growth make the city a strong contender for international business events. To ensure this trend continues, the venue is forging partnerships with partners in Germany, Hungary and the US.
“We do not consider the development of the MICE market in Russia and in our region as separate from the world market,” says Maxim Zverkov, president of Formika Group, the operator behind Ekaterinburg-Expo. “Most of our foreign guests seriously consider the Urals as a new opportunity for business growth. That is why we have spoken with them to arrange mutually beneficial collaboration.”
Putting the right feet forward
What is clear is that for Russia to attract foreign investment, it needs to get the right pieces into place. Development of modern and international-standard venue space alone is not the problem Russia needs to overcome to play in the major league.
“Russia doesn’t need space. Crocus in Moscow is huge, yet it’s still difficult to get a slot,” says Reed’s Gregory Zaraisky. “It’s more important for organisers to plan their shows well in advance: three to four years otherwise it’s too late.”
Zaraisky claims Russia does suffer from restrictive customs and shipping laws, which “need to be amended for the exhibition industry”. He also points out that while most organisers don’t look, or need to look, beyond Russia’s borders, a presence in the country can lead to further business with its neighbours. “Russia has free-trade agreements with Kazakhstan and Belarus; people often forget this,” he explains. According to the World Bank, Kazakhstan’s GDP is US$186.2bn;
a sizeable market for energy event organisers.
“Exhibition organisers should understand that the GDP contribution from Russia’s small and medium-sized business is very small,” says Andrey Miroshkin, CEO of local organiser Groteck Business Media. As a result, the Russian exhibition industry presents a major opportunity for exhibitors on the books of international organisers, and those that are keen to enter the country.
“When you start a project together with Russian partners, exhibitors at your existing shows will already be interested – they want to do business on Russian soil.”
With more than 17 million sqm to explore, Russia may appear a wilderness to some. But advances in Russia’s venues, service offering and increased attention from state agencies mean exhibitors are now more likely to welcome a guiding hand.
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THE INTERNATIONAL VIEW: A WORD FROM THE ORGANISERS
Is there support for the exhibition industry sector in Russia?
"State agencies and local government are assisting with the development of infrastructure around the venues that have recently been, or are soon to be, constructed. Such was the situation in Novosibirsk in January this year when it opened the largest complex in the east of the country. The Novosibirsk Expocentre was developed with the active participation of local authorities. ITE’s acquisition and subsequent investment in the Novosibirsk-based Siberian Fair also added impetus to the development of the new centre in order to support commercial growth in the region. ITE is now the anchor tenant for the centre and has moved its entire Novosibirsk exhibition programme to the new venue.
In addition to infrastructure assistance, state authorities have substantially increased financial assistance for Russian companies, especially small and medium enterprises, to help them participate at reputable trade events.
A degree of consolidation is necessary to attract more business, creating events with a global impact that increase investment into regional economies. I would like to acknowledge the important initiative supported by the Russian Chamber of Commerce and RUEF to create a ranking of Russian exhibitions based on the results of independent audits. This will allow customers to objectively evaluate the events relevant to their business"
– Alexander Shtalenkov, general director, ITE Russia.
As an outsider, is it easy to work with the associations in Russia?
"We work with industry associations in accordance with our trade fair sectors. Moreover we closely cooperate with business associations such as AEB and AHK. We’ve noticed positive changes in the organisation of the working processes with the associations. We try to learn from each other and to share our experience.
The Russian exhibition market is still young and in the process of developing. The similar themes of exhibitions makes the trade show market more complicated. Nevertheless the market is growing and these sectors and niches are becoming consolidated. The leading exhibitions are expanding in various directions and market globalisation is the result. Furthermore the Russian trade fair market conditions reflect the situation of the Russian economy nowadays.
We have been active in the Russian market since 1995 but our subsidiary in Moscow started its development in 2001. If we, and our international audience, see substantial growth potential in the regions, then there won’t be any difficulty for us to enter these regional markets.
At the moment we have an established relationship with Ukraine. Messe Frankfurt’s representative in Ukraine is our long-term partner attracting Ukrainian exhibitors and visitors to take part in the trade fairs in Frankfurt-am-Main and worldwide. Our Moscow office coordinates these activities."
– Eugen Alles, managing director of Messe Frankfurt RUS.
This was first published in Issue 3-2012 of EW. Any comments? Email exhibitionworld@mashmedia.net
