Author Archives: CrispConsulting

Retail development in 2015

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Most leading retail companies have already announced their plans for the current year. Magnit presented the most ambitious program of the development. Initially, the retailer planned to open 1,100 convenience stores, 80 hypermarkets and Magnit Semejnij stores and 300-350 cosmetic stores, now they are planning to launch 1,200, 90 and 800 stores respectively.

Auchan plans to open 7-8 stores, investing 10 billion rubles into the development of business in Russia this year. Metro Cash & Carry is going to open the same amount of stores this year as they did the last year (in 2014 they opened seven stores). Neither Metro nor Auchan have not change the plan of developmet for the year.

Lenta is going to launch at least 10 hypermarkets during the first half of 2015 . This is more than in the first half of last year, when the company opened five hypermarkets and four supermarkets. Their plan to double the retail space in three years (from the end of 2013 to the end of 2016) remains in force.

Dixy did not report that their development plans would change this year. Last year, in November, Ilya Yakubson, Dixie president, spoke about the opening about 500 stores in 2015.

In the end of the last year, Tony Maher, head of Okey company, spoke of plans to open more than 12 hypermarkets and to launch new project – about 40 discounters “Da!” in 2015. The start was scheduled for the spring. For this projects the retailer was going to use debt funds in the amount of 8 billion rubles. Today, the retailer intends to continue developing, but at a pace that “would be sustainable for the business and does not require significant new credits at the current rates,” – as it was stated in the report on the results of 2014.

The only company who has not announced its development plans for the year is X5 Retail Group.

www.retailer.ru

Retail trade turnover to be reduced by 8.2%

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In 2015 retail trade turnover will be reduced by 8.2%, according to the forecast of the Ministry of Economic Development. Even during the 90-s and the crisis of 2009, the trade was not reduced so much. The main reason is that the government has no anticrisis plan that would stimulate consumer demand. Authorities are not planning to increase the budget expenditures, and the Central Bank is not going to stimulate bank loans for citizens.
The reduce of trade turnover by 8.2% is one of the main factors of the projected GDP decrease by 3% this year, as the share of retail trade in the GDP is about 15%. According to the Russian Federal Statistics Service, in the last 25 years in Russia trade turnover decreased five times – in 1991, 1995, 1998-1999 and 2009. The biggest drop was recorded in 1995 (6.2%). In the crisis of 2009, the decline was 5.1%. All the other years there was a growth that exceeded the growth rate of GDP. In the past year, according to the preliminary data, GDP increased by 0.6% and retail trade turnover increased by 2.5%.
According to the forecast, the wages in nominal terms in the private sector will not be increased this year, and as the inflation rate is expected to be 15.8%, the real wages will decrease. Also, the government is going to reduce budget expenditures by 10% this year, in 2016-2017 – by 5%.
The officials say that consumer demand ceased to be a driver of the economic growth, and therefore, they do not try to support it.
Elvira Nabiullina, the head of the Central Bank, said in 2013 that consumer demand, driven by increases in incomes and consumer credits, was the driver of the economy in 2011-2012, but not now.
“Attempts to stimulate consumer demand led to an increase in imports, increase of consumer credits and, in fact, to fueling the inflation,” – she said. According to the head of the Central Bank, the new driver of economic growth should be investments, but investments decraesed last year and will decrease in the current year. According to Alexei Ulyukayev, Minister of Economic Development, investments in 2015 will be reduced by 13.7%.

www.retailer.ru

EU extends sanctions for Russia

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The European ministers of Foreign Affairs have reached an agreement on extending the sanctions against Russia. There was some uncertainty on the Greek point of view beforehand, but in the end the Greek minister acceded. The government leaders still need to have their say on the agreement. Moldova, meanwhile, is negotiating with Russia about resuming the apple export. And Serbia and Russia want to work together to combat illegal export.

Various countries are interested in establishing a free trade zone with the EEU, the economic union of a number of former Soviet republics, including Russia, Kazakhstan and Belarus. Israel is also interested in such an agreement. The negotiations are still running.

At the same time, Belarusian president Lukashenko is threatening to leave the EEU if the agreements within the union aren’t honoured. According to the president, it’s unacceptable for a trade war to arise between members, referring to disagreements between Russia and Belarus on food import and export. According to Lukashenko, the union is purely economic, and that this is also Kazakhstan’s point of view. By saying this, he suggests that Putin wants to use the union for political purposes.

www.freshplaza.com

Russia opens border to Dutch and German seedlings

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After the Russian phytosanitary service announced that the borders would open up for Finnish seedlings earlier this months, export of seed potatoes from the Netherlands and Germany is now also allowed. The inspection service examined samples of the seedlings in December of last year, but found no objections. The borders will now open for 12,847 tonnes from the Netherlands and 18,092 tonnes from Germany.

www.freshplaza.com

Russian government passed a proposal to ban the cultivation of GMO crops

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The Russian government has passed a proposal to ban the cultivation of GMO crops. The proposal states that no GMO crops are allowed to be cultivated on Russian soil, except for scientific research. The import of these crops will also be limited. All the importers all will have to pass the special registration. With this proposal, which will be put to vote later, Russia is a step closer to a complete ban on GMO products. At the moment, the import of 18 GMO products is allowed.

www.freshplaza.com, www.ria.ru

EU pork exports to Russia may soon resume

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Some pork product exports may soon resume from the European Union (EU) to Russia. That announcement came after a recent meeting between the EU Commission in charge of the veterinary and Sanitary and Phytosanitary (SPS) issues and Russian counterparts in Berlin. The Russian embargo was implemented in August.

The European Livestock and Meat Trades Union (UECBV), welcomes these outcomes, a result of months of dialogue, as the first concrete agreement between the EU and Russia on improving their trade relationship in the livestock sector. They have the potential to restore confidence between the two regions and to provide support to the EU pork market.

Thanks to this constructive dialogue the EU pig farmers and pork industry may restore up to around 40% of the exports to Russia. EU Member States will now start working on the technical specifications for a resumption of the export of some specific products.

Russia will import pork from Italy, Germany, Denmark, France, Hungary and Netherlands, clarified Rosselkhoznadzor Spokeswoman Yulia Trofimova.

Since January 2014, EU Member States have not been allowed to certify live pigs and the products thereof for export to Russia due to a technical issue regarding the veterinary certificate caused by the occurrence of African swine fever in certain Member States (Baltic States, Poland). The EU pig farmers and pork industry lost revenue and turnover because of SPS barriers for export to Russia that, in 2013, absorbed around 25% of the EU pork sector exports or 3% of the EU pork production.

www.nationalhogfarmer.com, www.vestnikkavkaza.net

X5 Retail Group’s revenue increased by 18.6%

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In 2014, one of the largest retailers in Russia, X5 Retail Group, increased its revenue by 18.6% up to 631.93$ billion rubles. In the fourth quarter of the last year, revenue growth was 20.8%. According to the company report, in October-December X5 retail networks “Pyaterochka”, “Karusel”, “Perekrestok”, “Express” and online retailer E5.RU gained 181.23 billion rubles.

“Pyaterochka” showed the highest revenue growth, it increased by a quarter – from 348.39 billion rubles up to 435.82 billion rubles. At the same time, in chains “Perekrestok” and “Karusel” the outflow of customers traffic could be seen.

The worst was the result of online retailer E5.RU – its revenue for the year fell by more than a third, from 1.431 billion rubles to 950 million rubles. And as X5 could not find a partner for this project or sell it, they had to close it in January 2015.

In 2014, the amount of an average receipt in X5 retail chains increased by 7.7% – from 317.6 rubles to 342.2 rubles. The number of purchases increased by 10.2% – up to 2.114 billion purchases.

Earlier, the retailer “Magnit” reported that in 2014 its ruble revenues increased by 31.61% and reached the level of 762.72 billion rubles.

X5 Retail Group operates several retail chains: discounter “Pyaterochka”, supermarkets  “Perekrestok”, hypermarkets “Karusel”, stores “Express” (“Perekrestok Express” and “Kopeika”).

On December 31, 2014 there were 5,483 stores, including 4,789 stores “Pyaterochka”, 403 supermarkets “Perekrestok”, 82 hypermarkets “Karusel” and 209 stores “Express”. In 2014, the number of discounters “Pyaterochka” increased by 907 stores (+ 23.4%), the number of supermarkets “Perekrestok” has increased by 13 stores (+ 3.3%) and the number of stores “Express” – by 20 stores (10,6%). In 2014, the X5 closed 46 stores “Pyaterochka”, 22 stores “Perekrestok”, two stores “Karusel” and 45 stores “Express”, the results of which were not  as good as it had been expected. Also, the company sold 12 supermarkets “Perekrestok” in Ukraine.

www.top.rbc.ru

Russia’s PM announces import substitution efforts in food industry to continue

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The prime minister of the Russian Federation, Dmitry Medvedev, said, during the Gaidar Forum 2015, that plans for import substitution in various production industries will be adopted by mid-2015.

“By the end of the first half of the year, plans for import substitution in the production industry should take effect,” Medvedev said. He drew special attention to the large number of exports, including non-commodities.

The agriculture production, including Vegetable production, will be the one of the most important directions for developing Russia’s agro-industrial complex, the prime minister said. He also confirmed new changes to state programs, including speeding up the development of the agricultural complex. Fruits and Vegetables producers are to receive additional support.

“I’m adding that Russian agrarians have already made significant progress,” he said.

The Gaidar Forum 2015 was an event that gathered leading scientists, politicians and representatives of global financial and business elites to discuss the global issues, according to the forum’s website. The forum also provides international participants with information regarding the key trends in Russia’s social and political development, state of business environment and investment climate.

www.fruitnews.info

Ministry of Economic Development forecasts inflation peak in March-April

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Ministry of Economic Development of the Russian Federation forecasts inflation peak in March-April, when it can reach 15-17% in annual terms, said Alexei Vedev, Deputy Minister of Economic Development, on Wednesday, January 14.

“The peak of inflation will be in March-April, yoy inflation in this period may reach 15-17%,” – said the deputy minister. He also said that by the end of 2015, inflation is expected to be double-digit”. Vedev added that this number will be affected by the dynamics of imports and the ruble exchange rate fluctuations.

January 12, Russian Federal Statistics Service confirmed that inflation rate in the country in 2014 was 11.4%, that is the highest rate since 2008. Then, consumer prices rose by 13.3%. In December 2014, consumer prices rose by 2.6% – food products rose by 3.3%, non-food products – by 2.3%. As for 2013 inflation rate, according to the Federal Statistics Service, it was 6.5%.

The official forecast for inflation rate in 2015 made by Ministry of Economic Development in the beginning of December was 7.5%. In the end of December Alexei Ulyukayev, head of the Ministry of Economic Development, announced that accordu=ing to the new forecast of the Ministry, inflation will be 10% in 2015.

www.forexpf.ru

Russian importers hopeful low volume will boost prices

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For exporters outside of the European Union, Russia had the potential as a lucrative market because of the ban on European products there limited competition. But the falling value of the Russian ruble has made it difficult for shippers sending fresh produce to Russia to get much of a return this year. Russian importers, who are looking to boost shipments from non-European countries, are also feeling the effects of a falling currency value. But Russia’s importers believe that good times are still ahead once they get out of the current situation.

According to Mohammed Mohammedli of Akhmed Fruit Company in Russia, the Russian ban on European goods cut 20 percent of what Akhmed Fruit usually imports. He noted that although a significant amount of what his company imports every year is now gone, the absence of that much product can be compensated by looking to other countries, like China, Turkey, Egypt, Pakistan and Morocco to send more fresh produce.

“We’ve explained to the exporters we work with that they can see better results if they decrease the volume of what they’re currently shipping,” said Mohammedli. “With decreased volume we can get prices back to normal, but we could see bigger losses if that doesn’t happen.” Depending on the commodity, Mohammedli thinks a cut in volume between 50 and 80 percent is warranted, though for staples, like onions and potatoes, that kind of cut is not necessary to boost prices.

“Products like cherry tomatoes, some salads, strawberries and grapes – could be limited because consumers don’t find them essential,” said Mohammedli. Up until this months, Russian importers would have normally taken more essential products, like vegetables from Europe. With the ban, they’ve been relying on  Egypt, Turkey, China and India to supply mainly vegetables, and Argentine and Chilean exporters have provided mainly fruits like apples and pears, grapes.

While solutions to the economic problems Russia faces and the political problems it has with Europe and the United States will take some time, Mohammedli believes that the Russian fresh produce sector will come out stronger after things have settled. He hopes the value of the local currency will improve over the first three months of 2015, and the contacts he and other importers are making outside of Europe will give them more options once the market is again open to Europe. In fact, the longer Russian importers have to make do without European products, the harder, Mohammedli believes, it will be for European exporters to sell their products in Russia once the ban is lifted.

“The countries Russians are working with are making contracts in rubles, and once the currency situation is resolved, Russian importers will become comfortable working contracts this way,” said Mohammedli. “Both Europeans and Russians are losing money, and there will be some companies that go bankrupt, but some will survive and continue their business like always. New agreements are being made with countries outside of Europe, so it will be very difficult to go back to European goods after the ban is lifted”.

www.freshplaza.com