Author Archives: CrispConsulting

Russian Retailers Ready for Further Expansion

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In March 2011 Russia’s 90 largest retail chains added 49 shops to the total number, which has grown by 111 since the beginning of the year. Discounter format is still leading in the market, but  hypermarkets are also gathering pace. In Q1 2011 Magnit opened 222 shops, among which 211 discounters and 11 hypermarkets. Enhancement of competition within the branch will contribute to further consolidation, and in the 2nd HY 2011there will be more new shops opened.

At the same time X5 Retail Group is less ambitious and only planning to open 500 discounters, up to 25 supermarkets and 10 hypermarkets. The company is also working on new formats. During January – March X5 opened 80 new discounters and 2 supermarkets.

Source: www.retail.ru

Foreign Retail Chains Fail to Seize Control over Russian Retail Market

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Foreign retail chains in Russia haven’t succeeded in replacing domestic retailers yet. According to INFOLine agency, in 2010 the share of national retail chains was as large as 77.5%. Western retailers occupied the DIY segment, where Castorama, OBI, Leroy Merlin, K-Rauta and others control almost 73% of the market. International food retail chains couldn’t raise their share in the Russian market. Among other reasons experts mention Carrefour’s and Walmart’s misadventures in Russia. Domestic retail survived due to the rapid growth of the largest food retail operators like Magnit and X5.

Source: www.retail.ru

Only 25% of Russian Apple Juice is Produced from Domestic Apples

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The average Russian consumes about 20 liters of juice annually; 10 years ago it was only 5 liters. According to the Russian union of juice producers the volume of domestic fresh produce is far from being sufficient for juice production. There are not even enough apples, which are traditionally grown and consumed in huge amounts. As a result only 25% of juice is produced using domestic fruit and vegetables. The rest is based on foreign concentrates. It is only the federal target programme which could help to support industrial horticulture. Apple gardens should be enlarged at least fourfold, and technology needs modernization.

Source: www.fruitnews.ru

Business Representatives Submit Amendments to the Federal Trade Law

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Within the Cross-industry Council of  Experts retailers and suppliers submitted their amendments to the Tax Code and the federal law “On the Principles of State Regulation of Trading Activity in the Russian Federation”, which came into force on 1 February 2010.
The consolidated list of amendments will be first sent to the corresponding ministries and then to the State Duma. The market players suggest that calculation of transportation expenses should be changed and the allowed market share for retail chains in small towns should be increased from 25% to 35%. They also want to obtain permit to charge off thefts.

Source: www.foodnewsweek.ru

Russian Q1 GDP Below Expectations

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Russia’s gross domestic product in Q1 2011 grew 4.1% from a year earlier, the Federal Statistics Service said Monday, below both the Economy Ministry’s estimate and the banks’ consensus. Both the ministry, which had expected a 4.5% growth, and analysts, who had expected on average a 4.2% growth, noted that the country’s GDP grew amid low investment demand in the whole economy. “We were anticipating an even lower figure, as we expected the robust growth in retail sales to have supported imports,” Sanna Kurronen from Danske Bank said. The more detailed figures will be available mid-June.

Source: www.freshplaza.com

2011 Russian Food Ingredients Market to Grow by 10%

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Estimations of Russia’s food ingredients market volume, made by the branch experts and market players, vary a lot. Russian food ingredients market is estimated at RUR 1.5 – 3 bn. According to RBC. Research the volume of Russian food ingredients market is more than RUR 2bn.
The main consumer of food ingredients in Russia is meat processing industry, which is growing by 15% annually.
Due to the demand of the domestic food industry the food ingredients market has recovered promptly after the recessions and is expected to increase by 10% in 2011. 2010 the growth pace reached 5%.

Source: www.marketing.rbc.ru

The Moscovites Spend EUR 7.619 a Year on Shopping

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According to experts of Cushman & Wakefield the Moscovites spend EUR 7.619 a year on retail purchases. Real incomes in Moscow are the highest in Russia: ca. USD 1.532 in 2010 vs. Russia’s average USD 620. 68% of their income the Moscovites spend on buying goods and services, which is the highest rate in Europe, according to Jones Lang LaSalle. Rosstat reports that the average Russian citizen earns USD 8.330 and spends USD 4.941 a year. The Londoners spend ca. EUR 5.760 and the Germans EUR 5.600 a year.

Source: www.retail.ru

Demand for Shares of Magnit Retail Chain

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According to experts’ opinion, their index will be restored due to the expansion of sales areas and increase of net sales. In Q1 2011 Magnit opened 134 stores, among which 126 convenience stores, 6 hypermarkets and 2 drugstores. The company’s sales area grew by 36%, from 1,092.6 sq.m in Q1 2010 to 1,485.72 sq.m in Q1 2011. The total number of the chain’s stores is 4,189. Today the retailer’s shares top the favorites list. In the middle of trading the company’s quotations grow by 4.577% up to RUB 3,879.8, whereas the MICEX index added 0.744% to 1,690.62 points.

Source: www.retailer.ru

Federal Retail Chains Dominate the Market

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Aggressive expansion policy of the largest retailers has reached its aim: 5 largest chains account for 70% of retail areas augmentation in 2010.

The INFOLine analytical agency reports, that 2010 Russia’s ninety largest retail chains added ca. 1m sq.m of new sales areas, of which 55% fell on two largest market players – Magnit and X5 Retail Group. 2009 they had a 48.2% share in the total volume of newly opened sales areas. Top five food retailers, including Auchan, Metro Cash & Carry and Okey, accounted for 72.3% of the areas augmentation). The rest 27.7% were shared among 47 other retail chains.

Source: www.fruitnews.ru

Magnit’s Profit to Drop

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Magnit retail chain, one of Russia’s largest retail operators, has reported a worse-than-expected drop in profit for its fiscal first quarter by 5.5% y-o-y to USD 61.01m according to IFRS. In RUB terms the company’s net profit dropped by 7.5% and made RUB 1.786bn. The company’s income within the fiscal period grew by 56.5% and reached USD 2.564bn. In RUB terms the income went up by 53.14% and reached RUB 75.052bn. The income growth is due to the sales area expansion and growth of the like-for-like sales by 20.15% (VAT exclusive). The retailer’s EBITDA in USD terms grew by 30% to USD 161.97m, in RUB terms – by 27.25% to RUB 4.741bn.

CEO Sergei Galitsky noted: “We liked sales growth in the first quarter and did not transfer additional expenditures through increase of fuel costs and social tax to the customer which resulted in lower EBITDA versus consensus. But from the second quarter we have started to gradually transfer increased costs to the customer, at that we are confident in fulfilling EBITDA margin and sales plan provided earlier.”

Source: www.retail.ru, www.freshplaza.com