Apple’s Higher iPhone Tariff May Spur More Russian Price Rises

Apple Inc.’s (AAPL) decision to boost Russian iPhone prices shows that brands that have been avoiding tariff increases may not be able to do so for much longer.

Apple yesterday added 25 percent to the cost of an iPhone in Russia, ending its resistance to the ruble’s four-month slump against the dollar. The majority of companies that have so far held down prices to keep shoppers spending are likely to follow after the New Year holiday, according to Ivan Fedyakov, general director of St.Petersburg-based researcher INFOLine.

“Other global brands may also increase prices once they get rid of earlier stocks, but probably to a smaller extent, sacrificing part of their margins for volumes,” Fedyakov said.

Russia has been a sore spot for international consumer brands this year, weighing on forecasts of companies from Adidas AG to brewer Carlsberg A/S, (CARLB) which gets about a third of its profit from the country. The ruble’s slump since the start of August has only compounded the difficulties, giving brands the choice of holding prices down at a cost to profitability, or increasing tariffs at the risk of losing sales.

“Mainly, companies are sacrificing profitability to achieve sales volumes,” Anastasia Goncharova, an analyst at researcher Euromonitor International, said by e-mail.

Adidas, which gets 13 percent of sales from Russia and the surrounding region, hasn’t raised prices in the country this fall, while the cost of Lego sets hasn’t increased since the ruble started plummeting in August. Samsung Electronics Co. (005930) televisions also cost no more than they did, while in a move to boost holiday sales the South Korean company this week cut the price of the S5 Galaxy smartphone by 11 percent to 24,990 rubles, according to its Moscow press office.

iPhone Price

Until yesterday, Apple too had refrained from putting up prices, meaning that the Russian price for an iPhone had been Europe’s lowest at about $700, prompting tourists from other countries to buy iPhones in Moscow.

An iPhone 6 with 16 gigabytes of storage now costs 39,990 rubles ($859) compared with a previous price of 31,990 rubles, according to Apple’s online store in the country.

In a country where rising interest rates and the fastest inflation since July 2011 caused retail sales growth to stagnate last month, that may not sit happily with shoppers.

“There is anxiety about tomorrow,” said Svetlana Alekseeva, 28, a housewife living in Moscow’s suburbs. “What will happen? Would food, clothes or electronics get more expensive? Nobody is adjusting our salary for this.”