For the foreign manufacturer of consumer goods, Russia is no longer virgin territory. Since the break up of the Soviet Union in 1991, multinationals have been satisfying Russians’ hunger for products that were in scarce supply in the old centrally planned economy. Some Western brands have already become household names. Today’s true pioneers, then, are not those trying to enter the Russian market, but those intent on building market share in the face of fierce competition and realizing decent returns in what remains a perilous environment.

To succeed in Russia, companies will need to have commitment to long-term rewards, flexibility in adapting to local conditions, which might mean overturning what is accepted wisdom at home, and excellent local management skills. But these things are not enough. Companies that thrive here will quickly seize opportunities to position themselves, and then prepare for keener competition. By actually driving the restructuring process in Russia, foreign manufacturers can help secure their own future. For consumer goods companies, that means controlling critical links in the emerging industry chain—distribution in particular.

Mapping demand

Few doubt the potential rewards in a market of 150 million consumers. Greater...