AIR CONDITIONER UNIT (ACU) IS AMONG CONSUMER GOODS NOW 2002 was the third year in a row when the Russian ACU market demonstrated fantastic growth rates, which even exceeded those ones it had at the early stage of its development in 1994-1997. As a result living behind Thailand, Malaysia, Hong Kong, Australia and Greece Russia reached the 11 place in the world by ACU consumption and approached to Italy, Spain and India. With this sale dynamics the Russian market has a chance to become the biggest ACU consumer in Europe. Such impressive increase in ACU sales can be explained by two reasons. First, stable economic development favored 4,5% growth of Gross Domestic Product (GDP). Moreover, this season summer was hotter the previous one. Nevertheless, any economist knows that discontinuous jump in sales of a well-known product is possible only for young unsaturated markets. Second reason may be appearance of new market segments. That was the case in Russia. Sharp fall in retail prices for ACUs in combination with 15% growth of populations' incomes favored drastic increase in private customers demand. ACU sales to individuals have grown by 9 times for the last 3 years! The following Figures 1 and 2 present the Russian ACU market development from 1994. FIGURE 1 FIGURE 2 The Russian ACU market history can be divided into three stages. 1. Up to 1997 it was the first stage of the Russian ACU market saturation. These were big corporate customers, first of all banks, who consumed the bulk of ACUs at the early stage of this market development. It is interesting to note that their share in ACU sales was gradually decreasing from 90% in 1994 to 80% in 1997. As to private customers market, the dominating position was taken by owners of elite apartments up to 1998 since even middle class individuals could not afford an ACU. Climate equipment prices were not of critical importance for well-to-do people. That is why most popularity was gained by Splits and Mobile ACUs. At the same time Window ACUs of lower prices were not popular at all. 2. In 1998 the Russian ACU market situation changed dramatically. Big business presented mostly by banks started loosing its positions. On the other hand, introduction of inexpensive Window ACUs made in Korea favored a rapid upsurge of individual customers market segment in the south regions of Russia. As a result there was an explosion in demand for this type equipment. It was the first year when an ACU left the group of luxury items and became a consumer product. At the same time the most well-to-do representatives of middle class, especially in Moscow and S-Petersburg, could afford Splits. As a result it was the first year when share of ACUs consumed by individuals exceeded 30%. At the same time corporate customers market remained practically at the same level. The finance crisis of 1998 forced many corporate customers to postpone the purchase of climate equipment till better times. 3. The finance crisis made the crucial changes in ACU market structure. In 1999 there was an abrupt fall in population's paying capacity. As a result a share of equipment consumed by individuals returned to the level of 1997. It is interesting to note that 1/3 of this market was taken by owners of elite apartments. Equipment consumed by owners of standard apartments was mainly presented by Window ACUs, which were in great demand in the south region of Russia . In 1999 there was a sharp fall in Window ACU prices in the south federal okrug. As a result many customers could afford them. Along with recession in living standards there was a noticeable revival of economy and improvements in production. ACU market managed to escape collapse mainly due to increase in corporate customers demand. These are oil-and-gas, telecommunication, transport and production businesses who became the key consumers of ACUs. At the same time a share of oligarchic bank structures in ACU sales has drastically fallen. Starting from 2000 there was an explosion in private customers demand, especially in the hottest regions of Russia. It was favored by simultaneous fall in prices for climate equipment and population incomes growth. It is worth noting that from 2001 Splits gained popularity among owners of standard apartments. At the same time corporate customers market was developing rather steadily – from 20% to 35% per year. This can be explained by dynamical development of such economy sectors as trade, transport, telecommunication and gas-and-oil producing industry. As practice shows corporate market development depends rather on the state of economy than on the climate. Though, the climate also has a direct impact on ACU sales. The point is that climate equipment sales do not increase under bad weather conditions while they can rise by 30-40% under favourable weather conditions. So steady development of the Russian ACU market in 1994-1998 can be explained exactly by the dominating position of corporate customers market segment. Unlike corporate customers market, private customers market depends exclusively on the weather. In case of cold summer sales to individuals can fall significantly. That is why it is difficult to forecast private customers demand. So, the rapid growth of the Russian ACU market in 2001-2002 can be mainly explained by the fact that many people incomes have grown and they could afford climate equipment. At the same time hot summer also favored a sharp increase in demand. © Georgy Litvinchuk | 
