Market News

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

Federal Retail Chains to Change Development Strategy

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Federal grocery chains in the North-Western Federal district were traditionally fighting for consumers in St. Petersburg. Since 2009 the battle has been gradually moving towards the periphery. Retailers are ready to reconsider their development strategy and enter small towns in province with population less than 10.000 people, which have been interesting for only one retail chain – Magnit. Magnit occupied this niche and built the largest retail chain in Russia. Retailers who will be the first to enter towns and villages, which are not yet occupied by Magnit, will win the race and occupy the share of the regional market.

Source: www.retailer.ru

Customs Union Ready to Cooperate with the EU

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Russian Prime-minister Vladimir Putin confirmed that Customs Union of Russia, Belarus and Kazakhstan is open to new members and ready for tighter cooperation with the EU. He remarked that the results of the integration are already tangible. 2010 commodity turnover of the countries members of the Customs Union grew by 28%, formation of the unified economic space is under way at full speed.

Source: www.foodnewsweek.ru

Organic Products Gain Popularity Remaining in a High-Price Segment

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According to experts’ opinion the farm products market in Russia is still at the initial stage of the development.  The share of farm products is tiny as consumer’s demand tends to grow. Food retail chains started to cooperate with private farms only 5 years ago. Today such retail chains as Azbuka Vkusa have meat, poultry, dairy products, seasonal fruit and vegetables from private farms in their assortment. These products  are twice as expensive as their analogues from factory farms due to the high transportation and logistics expenses, but shoppers are ready to overpay for organic high-quality food items.

Source: www.retail.ru