Japanese vending machines in Russia
What a surprise!
I remember when I first came to Tokyo in 2012, I was so amazed by the atomization of the street commerce. Every corner I turned, I found a vending machine. For instance: on the street, in the park, at the train station, near the dormitory, and even on the top of the mt.Fuji! It was so convenient and so easy to get used to. When I returned to Moscow, Russia later the next year, I felt like something was missing. I had a very difficult time finding a vending machine that would offer me a variety of drinks, especially in the middle of the stuffy subway platform.
This does not mean that Russia didn’t any vending machines at all. It simply means that they were far more popular in Japan. Normally, the only place it was possible to find them were inside schools, universities, and offices. But you would have been hard-pressed to find one outside. That is, until 2014!
In January 2014 DyDo Group Holdings, one of the biggest manufacturer and seller of beverages in Japan, established a subsidiary in Moscow. According to sources, by the end of 2014 the number of DyDo machines in Moscow reached approximately 500, with different locations both indoor and outdoor.
While in Moscow in late 2014, I saw a DyDo vending machine for the first time. It was in Detsky Mir, which is the largest children’s goods retailer in Russia. It took me a minute to realize that it was a vending machine produced by DyDo, and had Japanese drinks inside.
During my short stay in Moscow in September 2016, I saw vending machines spread all around Moscow, in parks, shopping malls, pedestrian bridges, and underpasses. I was very excited to see this change!
Is it big?A topic such requires thorough research, and could even be an entire master’s diploma thesis. However, I would rather show you a brief glimpse of the market size and the growth potentials.
*The numbers presented on the chart are approximate.
The Vending market in Russia is approximately 55,000 machines and 4 billion rubles (7 billion yen) of annual turnover as of 2015. Currently, there are around 15,000 vending machines in Moscow. Although vending machines are on the rise in Russia, there are still very few when compared to other countries.
The penetration of vending machines in various countries is well observed by the number of vending machines per capita. The leading countries are Japan and US – 1 machine to 23 and 25 people accordingly (as of 2013). In Europe, this index is 1/110 people, in Russia – 1/2500 people, which is almost 100 times smaller than in Japan or US.
However, it is not a total catastrophe. It would be more appropriate to place our focus on the European markets, rather than that of Japan or United States. The numbers from 2015 show that the vending share of retail in Russia is less than 1%, when in Europe – around 5%. Thus, there is a 5-times growth potential for the Russian vending business, which can be reached by an annual 1% change of the Russian market. This translates to an increasing vending machine business in Russia!
The numbers mentioned above, pertain to the whole number of vending machines despite what they sell; beverage, food, lenses or other daily necessities.
Aliens in the city
Russians saw the first Japanese vending machines as a bit odd, as they lit empty pedestrian underpasses, full of foreign drinks. It was not such a strange thing for me because I knew Japanese, but for an ordinary Russian, it was something extraordinary. However, as the old saying goes, “it just takes some getting used to”.
As I mentioned earlier, DyDo Group Holdings established its 100% subsidiary DyDo DRINCO RUS, LLC in 2014. By the end of 2014, the number of DyDo machines reached approximately 500 machines. According to the data of official website of the Russian subsidiary, the company is estimated to grow the number to 10,000 machine by 2018, and revenue – to 5 billion yen by 2018.
Management and operation over vending machines are conducted with collaboration with Russian investment group Avalon. DyDo DRINCO RUS, LLC itself is responsible for control, marketing and distribution of drinks.
The machines are being set in the parks, in universities, offices, shopping malls, subway, railway stations, pedestrian underpasses etc. The average price is 100 rubles (190 yen). The menu consists of different drinks including hot/cold tea and coffee, juices and sparkling waters. Overall, there are over 30 varieties of drinks that are delivered straight from Japan.
Currently, machines only accept cash. However, there is progress being made in Japan that will provide multiple options for payment. Helping push forth a cashless society, GMO Financial Gate Inc., the subsidiary of GMO Payment Gateway, Inc., has started a big project on embedding terminal of next generation into vending machines. New terminals can accept not only cash, but also IC credit cards and other payment methods, including WeChat. Although this method of payment was first introduced to vending machines in Japan, I have hope that Russia and other countries will get them as well.
As you can see, to reduce the level of shock of Russian people, they put tags with the description of the drink in Russian.
DyDo machines have advantages that are attractive for businessmen and consumers.
- Consumers can buy both hot and cold drinks. Before it was possible to get only hot coffee or tea.
- They are very mobile, do not take much space, look very stylish and original. There were many stalls on the Moscow street that were eliminated, because they block the view of the city.
- They are ecological and consume little power, and work in any weather.
- They provide an easy and convenient way of getting high quality drinks.
- They offers a wide range of different drinks (around 30 drinks from different categories including tea, coffee, cocoa, sparkling water, mineral water and juices)
The Russian subsidiary of DyDo built a user friendly website (http://dydo.ru/) where Russian consumers can get familiar with the menu of available Japanese drinks. See the name and Russian translation, check the content and precautions, storage conditions and date of productions by clicking on the picture of a drink.
On the website you can check a commercial of the vending machine showing how easy it can be used even without understanding Japanese.
Currently the priority region for DyDo DRINCO RUS is Moscow. However, as demand on DyDo production is increasing, they plan to expand into the regional market of Russian Federation.
I hope DyDo will reach their expectations, help vending business to grow in Russia and thus motivate domestic companies to the competition. But on the other side, consumers also need to participate. As getting used to new form of street commercial, they will hopefully start using vending machines in their daily life.