As Russia''s Economy Improves, China, Turkey, Korea Benefit
April 26, 2002
Opinion piece by Gil Tavares, northeast regional sales manager, Quaker Fabric Corporation
Moscow - It is clear that the Russian market has changed dramatically over the past five years and the Russian economy is now poised to bounce back from the collapse of the ruble three years ago. The current exchange rate has now stabilized at 31 rubles to the U.S. dollar. Stability in the country is now at a benchmark level. As a result, Russian upholstery mills are beginning a slow but steady re-awakening in their manufacturing base.
Many Russian businesses continue to look to foreign investors for capital as a typical Russian business loan obtained from a Russian bank generally incurs an 18% interest rate with 40% to 50% collateral required, thereby making it virtually unrealistic for any conventional business loan to be considered for expansion purposes.
The emergence of Turkish goods coupled with their relatively short delivery time (approximately one week) have had a dramatic impact on capturing market share in Russia. The continued proliferation of Chinese goods being converted by virtually every Russian distributor makes this a difficult market to expand at the mid to lower price point levels by European and American mills.
The Russian furniture market has changed substantially from my first visit five years ago. Initially the primary fabric suppliers were Belgians (Algemene and Brugetex), Americans (Culp, Quaker, Mastercraft) and a few German velvet suppliers. Today we see an entirely different landscape in the fabric supply chain to Russia.
Primarily, inexpensive Turkish chenille comprises 45% of the market.
Chinese goods account for 15% to 18% of the market but are growing steadily due mainly to their efforts to converting their own designs, using Modi-com CAD systems.
Russian goods, especially inexpensive tapestries, account for 10% to 15% of the market. This segment of the supply chain is also growing due to the stabilized ruble.
Belgian and Italian high-end chenilles and tapestries make up around 8% of the market.
Three-week deliveries to Russia benefit these manufacturers'''' ability to sell into this market.
Polish, Czechoslovakian and Lithuania goods account for approximately 8% of the market.
American goods (woven, non-flocked product) 4% to 7% of current market. (Quaker and Culp are the only remaining American woven suppliers in Russia today.)
For the first time, Korean goods were also displayed at the Moscow Furniture Expo. They are distributed through a company called Instroy and are primarily plain chenille.
Today nearly every Russian distributor is converting product in China. Amethist, Zouz-M, Arben, Instroy and Leathertouch all display Chinese woven goods in their showrooms. A typical chenille/tapestry construction is priced at $3.15-$3.85 per meter. One wholesaler is also buying solid rayon chenille from China at $3.95 per meter. The same construction in olefin is $2.15 per meter.
I was also able to learn something about the Polish market at this Moscow Fair. In Poland 85% of manufactured furniture is being sold into the German market.
Most Polish furniture manufacturers will not buy Chinese or Korean fabrics as they prefer to buy Turkish goods for the lower end of the market with Italian and Belgian suppliers filling in the gap at the upper end. This is primarily due to the obstacle of large container size orders that the Chinese and Korean manufacturers typically require. F&FI
Moscow - It is clear that the Russian market has changed dramatically over the past five years and the Russian economy is now poised to bounce back from the collapse of the ruble three years ago. The current exchange rate has now stabilized at 31 rubles to the U.S. dollar. Stability in the country is now at a benchmark level. As a result, Russian upholstery mills are beginning a slow but steady re-awakening in their manufacturing base.
Many Russian businesses continue to look to foreign investors for capital as a typical Russian business loan obtained from a Russian bank generally incurs an 18% interest rate with 40% to 50% collateral required, thereby making it virtually unrealistic for any conventional business loan to be considered for expansion purposes.
The emergence of Turkish goods coupled with their relatively short delivery time (approximately one week) have had a dramatic impact on capturing market share in Russia. The continued proliferation of Chinese goods being converted by virtually every Russian distributor makes this a difficult market to expand at the mid to lower price point levels by European and American mills.
The Russian furniture market has changed substantially from my first visit five years ago. Initially the primary fabric suppliers were Belgians (Algemene and Brugetex), Americans (Culp, Quaker, Mastercraft) and a few German velvet suppliers. Today we see an entirely different landscape in the fabric supply chain to Russia.
Primarily, inexpensive Turkish chenille comprises 45% of the market.
Chinese goods account for 15% to 18% of the market but are growing steadily due mainly to their efforts to converting their own designs, using Modi-com CAD systems.
Russian goods, especially inexpensive tapestries, account for 10% to 15% of the market. This segment of the supply chain is also growing due to the stabilized ruble.
Belgian and Italian high-end chenilles and tapestries make up around 8% of the market.
Three-week deliveries to Russia benefit these manufacturers'''' ability to sell into this market.
Polish, Czechoslovakian and Lithuania goods account for approximately 8% of the market.
American goods (woven, non-flocked product) 4% to 7% of current market. (Quaker and Culp are the only remaining American woven suppliers in Russia today.)
For the first time, Korean goods were also displayed at the Moscow Furniture Expo. They are distributed through a company called Instroy and are primarily plain chenille.
Today nearly every Russian distributor is converting product in China. Amethist, Zouz-M, Arben, Instroy and Leathertouch all display Chinese woven goods in their showrooms. A typical chenille/tapestry construction is priced at $3.15-$3.85 per meter. One wholesaler is also buying solid rayon chenille from China at $3.95 per meter. The same construction in olefin is $2.15 per meter.
I was also able to learn something about the Polish market at this Moscow Fair. In Poland 85% of manufactured furniture is being sold into the German market.
Most Polish furniture manufacturers will not buy Chinese or Korean fabrics as they prefer to buy Turkish goods for the lower end of the market with Italian and Belgian suppliers filling in the gap at the upper end. This is primarily due to the obstacle of large container size orders that the Chinese and Korean manufacturers typically require. F&FI
