Metro Cash & Carry

Russian Retail Market 2016

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In 2016, large retail chains grew: Russia’s largest retailers Magnit and X5 Retail Group each opened about 2,000 new stores. Some smaller chains, such as Novosibirsk grocery chain Avoska, Petersburg chain of farm products Girlanda and others, left the market.

A number of companies changed the top management. Alexander Barsukov was appointed a new CEO of Tander (Magnit). Sergei Belyakov replaced Elijah Yakubson as a new president of Dixi retailer, but then a few months later he was replaced by Pedro Manuel Pereira da Silva.

There are reports that Vernij retail chain is selling some of its stores. Although the company denies it, it turned out that a few shops were actually sold to X5 Retail Group.

Meanwhile, retailers explored new markets. For example, many federal companies were interested in opening stores in Grozny, and in February 2016 Lenta retailer opened the first supermarket in the Chechen Republic.

Globus announced that it was going to invest 9 billion rubles in the construction of a retail park near Moscow. Estimated construction period is 2015 – 2020.

Metro Cash&Carry presented a new concept of shops Fasol Express, located at gas stations. The company plans to double the amount of stores every year.

Finnish company Stockmann is leaving the Russian market and closing ten Lindex stores. According to company estimates, the losses amounted to about 78 million euros. Executive Director of the Stockmann was going to resign after the sale of the business in Russia.

In June, Igor Shekhterman, Executive Director of X5 Retail Group, told about the plans of chain development: two most important regions for X5 are Siberia, where it is planned to open 150 stores over the next two years, and South Russia . The first stores are located in Novosibirsk in the stores, previously belonged to Avoska, which was forced to withdraw from the market. The network consisted of 12 stores.

In order to start supplying products to new regions X5 will build new distribution centers. “We have opened 35 distribution centers so far, and we are planning to open around 27 more in five years” – said X5 Retail Group CEO.

In September, premium retail chain Azbuka Vkusa launched a project of biometric payments, now customers can pay by placing a finger on the scanner.

In September, Forbes magazine published the rating of the largest private companies in Russia. Magnit took the first place, followed by X5 Retail Group.

In late October, Kesko Food Russia Holding announced that it would sell 11 K-Ruoka stores in St. Petersburg and Leningrad region to Lenta retailer for 11 billion rubles.

Auchan announced that Atak stores would be rebranded into Auchan store in the next 1,5 year. Also, Auchan in Moscow intends to build the largest distribution center in Europe. The venue will strengthen the retailer’s position in the Central region. In 2017, Auchan plans to increase its investment by almost half – up to 30 billion rubles.

Okey owners, Dmitry Korzhev, Dmitry Troitsky and Boris Volchek, who owned 78.97% of the company, decided to sell their shares. Among the main buyers there are Auchan, Lenta and, according to unconfirmed reports, Magnit.

In December, one of the leading Russian retailer Dixie bought 12 stores from 7th Continent.

www.retail.ru

Syrian fruit and veg arrive on Russian retailer shelves

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The first shipments of Syrian fruits and vegetables, bound, in part, to replace the Turkish products covered by the import ban, have started arriving to Russia, as reported by the importer Adyg-Jurak to the newspaper Kommersant.

“Syrian fruits and Vegetables are already being delivered by Adyg-Jurak to the wholesale and retail firm Food City. Talks are also underway with other large Russian retailers,” informs the magazine.

CEO Aslan Panesz said that last week marked the arrival to the port of Novorossiysk of the second batch of oranges, lemons, grapefruit, tomatoes and cabbage, with a total weight of about 3 thousand tonnes.

During the delivery of the first batch, some problems occurred, as about 1.2 thousand tonnes of food stayed in the port for more than 10 days because of issues in the customs documents, with the result that some of the products spoiled. During the unloading of the second batch, these problems have been solved.

Currently, products are on the shelves of Moscow’s wholesale-retail center Food City and several wholesale centre in the south of Russia.

Russian retailers are also beginning to purchase Syrian fruit and vegetables. In April, Metro Cash&Carry is going to sell Syrian pomegranates (2 MT), cauliflower (4MT), pepper (20 MT), eggplants (10 MT) and eggplants. Since this is the first shipment of fruits and vegetables from Syria, the company imported small volumes for analysis of the demand for these products. According to Metro Cash & Carry representative, the retailer sell 300 MT of fruits and vegetables per day on average.

According to the Ministry of Agriculture, since the beginning of the year to March 13, food import from Syria to Russia  amounted to $ 2,389, the total amount of deliveries – about 5,000 MT. Food export from Syria to Russia rose by almost 3 times during one year.

www.freshplaza.com, www.retailer.ru

Metro AG to retrench and refocus on Europe

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German retailer Metro AG’s global reach across 30 countries was supposed to insulate it from market swings. Instead, turmoil around the world has battered the company, forcing the chain to retrench and refocus on Europe.

With a retail empire of more than 2,000 wholesale, food retail, consumer-electronics stores in Europe, Asia and Africa, Metro has a big presence in emerging markets. But crises in many of these countries, including Russia, Greece, Egypt, over the past few years have hurt its results.

The Russian market has been the key market to Metro AG. In 2013, almost 90% of income came from this region. Up to 2014 the share of the Russian division accounted for a quarter of total operating income of the group. However, after the imposition of sanctions by the European Union and the beginning of the economic crisis in Russia, the situation changed dramatically. After the introduction of the food embargo, Russia Metro could quickly replace some banned products with Russian goods, but because of the collapse of the ruble, Metro’s loss was about €1 billion.

According to Olaf Koch, Metro AG CEO, in 2016 a priority market for the company will be Germany, which last year accounted for 38% of group revenues. In Germany, from January to November 2015 Metro sales grew by 2.8% – that is the maximum growth since 1994.

Money from the sale of assets (Galeria Kaufhof, units in Vietnam, Denmark and Greece) will go to the development of online trading according to Koch.

www.retailer.ru, www.wsj.com

Retailers firm prices for socially important products

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Retail chain Metro Cash & Carry firmed prices for socially important goods – milk, bread, cereals and macaroni till mid-April. Previously, retail chain Dixy declared the price freeze until March 9. It concerned buckwheat, rice, millet, macaroni, sunflower oil and butter, flour, dumplings and frozen fish. In addition, the company maintains a minimum trading margin on some items like sugar, salt, cereals, oil, eggs.

Retail network “Okay” firmed prices for some socially important goods at the end of November last year.

www.echo.msk.ru

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

Supplies to retail chains frozen because of the collapse of the ruble

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Prices in shops cannot follow ruble devaluation: before retailers dictated terms to suppliers, now wholesalers lay down terms to retailers. If retailer do not want to increase purchase prices, deliveries of products may be suspended.

Maria Kurnosova, representative of the hypermarket chain Auchan, reported that part of the suppliers, both food and non-food categories, sent a letter that they would stop the shipment of goods, if the retailer did not increase purchase prices.

Some producers reported that a similar situation occured with Metro Cash & Carry: part of their suppliers stopped shipments or warned about this.

Anastasia Orlova, representative of the retail group “Dixy”, said that there were no breakdowns in the supplies, although some suppliers sent requests to increase purchase prices, they also refused to participate in the discount promotions.

Despite the penalties (up to 50% of the contract value), many suppliers suspended work. Small companies, unlike large multinational companies, cannot supply at a loss for so long. About 70% of the suppliers are in the process of negotiations, and if after a day or two retail chains refuse to accept reasonable prices, deliveries may stop at all, according to the head of the association “Roschaykofe” Ramaz Chanturia. “Empty shelves will cause panic among the population”, so retailers are likely to make concessions, he said.

Producer of fish and seafood “Agama” informed retailer about price increase in proportion to the increase of the dollar on Tuesday, said Yuri Alasheev, chair of the board of directors, they gave retailers a week for approval. He said, that most networks responded “quite calm”. “I think the situation will be clarified by Monday, when retailers will respond to our letter”, said Alashaev.

Wine importer Simple stopped selling wine for a while, it is not possible to order drinks on their website at the moment. Online assistance of the website confirmed that the sales were frozen because of the economic situation, and the problem would be resolved in a day or two. Anatoly Korneev, vice president and co-founder of the company, said that this was a “temporary measure”.

Andrew Agarkov, commercial director of the supplier Uvelka (buckwheat and rice) said that they continued supplies to retailers with the old purchase price and would raise prices in February according to the plan after the negotiations with retailers.

With the constantly growing currency rate there is no time for neg long negotiations on the revision of the price, although there is a rule that it should take 45 days, according to Dmitri Leonov, deputy chairman of the association “Rusprodsojuz”.

www.top.rbc.ru

Metro could restart Russia IPO preparations in September

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German retailer Metro could restart preparations in September for the stock market listing of a quarter of its Russian cash-and-carry wholesale operation that it postponed due to the Ukraine crisis, sources close to the matter said.

Company and financial sources said relaunching the initial public offering – which had been expected to fetch at least 1 billion euros – would depend on developments in Ukraine and the level of the Russian rouble.

Metro, which wants to use the proceeds to invest in the fast-growing Russian business and other emerging markets and pay down debt, decided in March to delay the stock market listing due to market turmoil over Ukraine.

Metro declined to comment but Chief Executive Olaf Koch has said in the past the planned IPO had been well received by investors and should still proceed if the turmoil on Russian markets abated.

Metro is Russia’s fourth-biggest retailer behind X5, Magnit and French chain Auchan. Its Russian unit made a quarter of Metro’s group operating profit in 2013 with sales of about $5 billion, some 9 percent of Metro’s total.

www.freshplaza.com

Metro IPO plans in doubt due to Ukraine crisis

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The stock valuation of German hypermarket chain Metro has taken a heavy hit over the past week, and the retailer’s plans to launch an initial-public-offering of its Russian unit has been thrown into doubt due to the fallout of the current situation in Ukraine.

Over the weekend, Metro shares fell by over 5% in early trading on the German mid-cap stock exchange to €28.50.

Metro had hoped to raise around €1 billion by selling 25% of its stake in its Russia cash-and-carry unit in a London listing but due to Russia’s involvement in the political chaos surrounding Ukraine, details of the group’s plans aren’t currently clear.

A Metro spokesperson said it would “monitor the situation in Ukraine closely” because market conditions need to be favourable in order to launch an IPO.

Metro planned to use the proceeds from the IPO to expand its cash-and-carry business in Russia, its most profitable unit and the country’s fourth-biggest retailer behind X5, Magnit (MGNTq.L) and French chain Auchan.

Metro operates 72 stores in Russia and achieved sales of 183 billion roubles in 2013.

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11% increase in revenue for Metro in 2013

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There was an 11.3% year-on-year increase in the Russian revenues of Metro Cash & Carry, the grocery retail division of the German Metro Group, to RUB 183.2bn (€3.68bn), in 2013. At the same time, the company’s like-for-like sales grew by 7.7%. The company disclosed its Russian financial results for the first time because it is considering an IPO for the Russian Metro Cash & Carry business. The Metro Group is planning to float 25% on the London Stock Exchange (LSE).

In addition, the company’s EBITDA rentability figure has reached 12.4%, which is a record among large grocery retailers in the country.

According to Metro’s quarterly report, at the end of 2013 it was operating 73 Metro Cash & Carry hypermarkets in Russia.

www.ceeretail.com

Metro to list 25% of Russian cash and carry

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Europe’s fourth biggest retailer, Germany’s Metro AG has confirmed speculation which surfaced in late 2013 that it is to list 25% of its Russian cash and carry business.

The retailer said yesterday that it plans to sell up to a quarter of its stake in the cash and carry unit in an initial public offering during the first half of this year on the London stock exchange.

Metro has been restructuring its large portfolio of cash and carries, supermarkets, department stores and electronics chains in order to cut debt and raise money.

www.freshplaza.com