Business in Ukraine

The growing sophistication of Ukrainian businesses is propelling demand for detailed market information and specialized studies. This means booming business for market research firms. With annual revenue growth of 25 to 30 percent, this segment of the economy is one of the fastest­growing in Europe, according to the Ukrainian Association of Marketing.

“Although, if we would consider 17 percent inflation, then the real growth would be 13 percent,” cautioned Dmitri Rodenko, director of International Marketing Group Ukraine.

The structure of the market has evolved since the late 1990s when it was dominated by large international firms. “Now we are talking about many medium­sized market research businesses entering the market,” says Alexander Fedorishin, director of GfK Ukraine. “Today, 60 percent of the market is controlled by international outfits, the remainder by domestic firms.”

The industry restructured because Ukrainian companies are becoming market savvy and require specialized research. It’s the smaller companies that provide the tailored services. “Ukrainian research companies are filling the new narrowly defined niches,” says Rodenko. The examples of niches new in the Ukrainian market are automotive lubricants, construction materials, entertainment and leisure research. “The companies in these niches use sophisticated methods such as price elasticity studies and customer satisfaction indexes (CSI),” said Tatyana Zheltomyrska, managing partner at TouchPoll Research.

That doesn’t mean the firms focusing on traditional market sectors are suffering. Large market leaders are flourishing with the rising demand for research in traditional sectors such as fast­moving consumer goods and media, both of which are experiencing tremendous growth.

The market is still dominated by a handful of firms, which control nearly 75 percent of the market. “Today, 25 percent Ukraine’s market is controlled by GfK, 14 percent belongs to The Nelson Company retail research specialist, and UP and TNS control 13 and 12 percent respectively,” Fedorishin said.

The possible merger of international giants GfK and TNS will have little impact on the local market, said Fedorishin, although it will strengthen his company’s hold on the market here and make GfK “overall, the number one research company in the world.”

But the merger remains merely a possibility. WPP, one of the largest market research firms in the world, held up GfK’s TNS buyout by offering to purchase the company for almost $2.1 billion. Since then, TNS has been courting other potential buyers. At this point, Fedorishin says “we definitely will not merge with TNS, but someone will buy TNS,” adding, “whether it will be us or WPP will be determined through negotiations.”

Experts forecast that intensifying competition and the growing number of research firms will only benefit industry clients. Over time, companies will implement more modern techniques that allow yet more tailored research. “Of course, Ukraine will follow the international trend of using online surveys and internet panels,” said Olena Zhytnyk, marketing director at InMind market research agency.

Insiders see only more robust growth ahead. “In 2009, we can expect 30-­35 percent growth,” said Serhiy Golub, head of analytics department at Kanzas Research Company. Demand from real estate, pharmaceutical and automotive sectors “will be the leading trend for research companies in Ukraine over the next three to five years,” Rodenko said.

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