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Beyond the Bale : December 2011
12 OFF-FARM December 2011 BEYOND THE BALE FAST FACTS l AWI has been investigating opportunities for Australian wool in emerging markets, including Russia. l Russia is emerging as a potentially major retail market, due to its increased wealth, large population and cold weather. l The affluent Russians, in particular, will continue driving up the demand for luxury goods and a growing middle-class will stimulate the overall economy. AWI has been investigating new retail and processing markets for Australian wool. Apart from the obvious benefit of potentially increasing demand for wool products, there is also a risk management element to this strategy. Australia is currently very reliant on China as the major buyer of Australian greasy wool, plus our traditional (western) retail markets continue to be at risk from recession. Australian woolgrowers will no doubt be familiar with Russia. Prior to 1991 when the USSR broke up, the USSR was the largest buyer of Australian wool. Most of it was used for clothing for high ranking military officials and communist party members. Following the break-up of the USSR, demand fell almost completely away. Russia is emerging now as a potentially major retail market, due to its increased wealth, large population (143 million) and extreme weather. AWI analysis conducted to assess growth opportunities for Australian wool shows that the potential for the countries of the former USSR is second only to China. Russia's economy is booming, driven by the resources sector. In the past five years, Russia has grown from being the world's eleventh largest economy to be the seventh largest economy. Russia's disposable income, or its comparative real purchasing power, is more than countries such as the US, Germany and the UK. Absence of debt and low taxes make Russia's emerging middle class well positioned for the future. Real per capita disposable income is expected to grow at an average rate of 6.5 per cent per year. AWI general manager of product development and commercialisation Jimmy TO RUSSIA WITH WOOL! Russia is a potentially major market for wool, partly due to its cold weather! Jackson has recently returned from an investigative visit with AWI Chairman Wal Merriman to Russia and says Australian wool is well placed to make an impact in the country. "Russians like to buy the best," Jimmy says. "It's in their heritage from the Tsar's time. They experienced 74 years where they couldn't buy anything of quality; but now with growing affluence and a burgeoning middle class, they want some luxury. "Russians are very knowledgeable and discerning shoppers that study and inspect a lot. They like to dress up, and they are one of the most brand conscious countries in the world. "Plus Russia is very cold! Moscow's average temperature is less than 10°c for seven to eight months of the year. So wool's insulating properties should be in big demand. Coats, scarves, shawls, hats and gloves are all necessities, not accessories." As well as new retail markets for Australian wool, AWI has also been exploring new processing markets. This is necessary to mitigate too much reliance "WOOL'S INSULATING PROPERTIES SHOULD BE IN BIG DEMAND. COATS, SCARVES, SHAWLS, HATS AND GLOVES ARE ALL NECESSITIES, NOT ACCESSORIES" JIMMY JACKSON, AWI