Retail

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

Retail sales going down

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In September, the turnover of retail trade in Russia fell down by 10.4% to 2.3 trillion rubles, according to the Russian Federal Statistics Service (Rosstat). This is the maximum decline in the past 15 years. In the first nine months of 2015, this figure decreased by 8.5% to 19.9 trillion rubles.

The previous record was registered by Rosstat in April this year, when the decline was 9.6%.

In monthly terms, retail sales in September decreased by 3%, that is the first decline since April 2015. In April, sales declined 2.6%, in May, they increased by 2.4%, in June – by 0.2%, in July – by 3.3%.

www.retailer.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

Perekrestok To Drastically Change Appearance

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The network of chain stores Perekrestok is getting a new look, as reported by Vedomosti, quoting Janusz Lella, the general director of the company.

Lella said, according to the publication, that the need to change the way the company appeals to consumers came about because of its low financial performance.

In the future, Perekrestok is looking at changing the use of its staff, changing its logo and revising its pricing policy.

“The supermarkets are changing their logo and color scheme, reorganizing their assortment, it will be newly organized as well as the retail space in the stores, in addition to a revised personnel policy,” he said.

During the first quarter of this year, the network reached a revenue of 28.7 billion rubles ( about $833 million ), and the group of companies reached 144 billion rubles ( about $4,18 billion ). Perekrestok’s growth performance was at 4.4 percent.

“We deliver suppliers more. The growth of the purchase amount is due to buying more goods, therefore sometimes even lowering prices gives rise to an average bill,” he said.

From January to March of this year, the average customer check at Perekrestok amounted to 433.8 rubles ( about $13 ).

www.fruitnews.info

Magnit fined $581 for endangering consumer health

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Administrative sanctions have been brought against the Magnit supermarket chain, which is owned by Tander, for numerous violations threatening the health of consumers. Charges brought against the company for violations of sanitary regulations were found to be justified by the Arbitration Court of St. Petersburg and the Leningrad Region, Fonatank.ru reported on June 14.

Supermarkets in the Magnit chain were inspected in Autumn 2013 according to a schedule agreed upon by prosecutors. Federal Service for Supervision of Consumer Rights Protection and Human Well-Being inspectors in St. Petersburg found evidence that the chain was selling substandard product, including rotten cucumbers and fish. An examination of cranberries sold by Magnit revealed the presence of cesium-137 in levels of up to 320 becquerels per kilogram.

The company denies the charges. The director of the St. Petersburg branch of Tander Vladimir Dubinin argued that most of the health department violations had not been documented. He rejected the findings of the supervisory authority on the sale of substandard product. “The official documents do not conform to current legislation,” Dubinin told Fontanka.ru.

www.freshplaza.com

Azbuka Vkusa adds a new format

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The retailer Azbuka Vkusa announced launching new format of supermarkets – AV Market. As it has been known from Vedomosti newspaper Andrey Tkemaladze is going to be a director of the new chain of supermarkets.

According to the top manager, 5 hypermarkets, which Azbuka Vkusa gets as result of a deal with Spar, are going to be rebranded by the end of the year. Complimentary to rebranded Spar hypermarkets this year another 5 new hypermarkets will be opened: 3 – in Moscow, 2 – in Moscow region. The retailer is planning to open not less than 5 new AV Market hypermarkets per year.

When developing this new format supermarkets Azbuka Vkusa was deeply learning a background of USA supermarket networks such as Wegmans, Whole Foods, Trader Joe’s.

Target market of AV Market is going to be wider than usual Azbuka Vkusa has. The retailer wants to carry out a new format – a market inside a store, where customers can bargain and get a discount depending on goods’ amount.
An average bill will be around 1000 Rubles and that is 1.5 lower than in usual Azbuka Vkusa supermarkets, but higher than in other super- and hypermarkets.

A product assortment is going to consist of 15,000-20,000 names. Groceries will take 10-15% of the whole amount of product assortment. A share of fresh products will take 50% of whole assortment. It is planned to create few in-store cafes, but it will depend on store square.

AV Market is going to be an anchor renter in shopping malls: minimal selling area of AV Market will take 2000 square meters, maximal – up to 10,000 square meters.

www.retailer.ru

“Green” retailers

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Greenpeace made an annual rating called “Green supermarket” where Russian retailers are rated by the level of contribution in recycling problem solvation. First places were taken by “Auchan” and “Dixy”.

Experts were comparing and estimating 10 biggest supermarket networks – “Auchan”, “Dixy”, Х5 Retail Group, “Lenta”, “O’kay”, “Magnit”, “Holiday classic”, “Maria Ra”, “Sedmoy Continent” , and “Monyetka”. These retailers were estimated by 20 criteria such as receiving packaging for further recycling, reduction of packaging, a possibility of using own packaging for catchweight goods, a presence of goods with ecofriendly packaging.

“Auchan” took the first place due to the opening recycling centers in St. Petersburg and the possibility of buying catchweight goods. “Dixy” was also pointed out because of the presence of recycling centers in Moscow and the sale of original non-disposable bags.

“O’kay”, “Sedmoy Continent”, and “Monyetka” are turned to be at the end of the rating list.

“Unfortunately, even leaders of our list are far from being “green” retailers. However, most of them are changing their policy: refusing from free plastic bags, letting do weighting of fruit and vegetables without packaging, and even opening recycling centers. Directors of stores understand that such actions are attracting attention of new clients and making their stores more competitive on the market,” – Rashid Alimov, a coordinator of “Greenpeace Toxic Program”, said.

www.retailer.ru

Magnit plans an expansion in Siberia

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Experts made a forecast about a boost in development of supermarket network Magnit in Siberia. This forecast is based on a launch of a new distribution warehousing center with a total square of 20 000 m2 in Novosibirsk. In future it will help “Magnit” to increase profit and a number of salepoints in Siberia.

The positive reaction of investors is explained by new logistics capacity. It will help the company to extend its presence in Siberia and to accelerate the pace of development of the supermarket network itself. This will positively influence the dynamics of the company’s profit growth.

It is to be recalled that in the end of 2013 Magnit owned only one distribution warehousing center in Siberia – in Omsk Region. It is expected that Magnit is going to start an active expansion in Siberia after creating the necessary logistic structure in Novosibirsk Region.

According to the Magnit’s plan of expansion, 1500 new salepoints will be opened in 2014, which is more than in 2013 by 291 salepoints.

www.retail.ru

Magnit Named One of Europe’s 50 Most Valuable Brands

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Magnit, Russia’s largest food retailer, has been named one of the 50 most valuable brands in Europe.

The brand is worth $272 million, placing it 44th on the list just after The Body Shop and before such retailers as department store Debenhams and mobile phone retailer Carphone Warehouse, according to the report Best Retail Brands 2014 by brand consultancy Interbrand.

Magnit’s earnings rose 26 percent in 2013 to $18.2 billion with a net profit of $1.1 billion. By comparison, the company’s primary competitor X5 Retail Group, owner of supermarket chains Pyatyorochka, Perekryostok and Carousel, saw earnings of $16.8 billion and a net profit of $345 million.

Magnit had more than 8,000 stores across the country in late 2013, while X5 had about 4,500 locations.

Despite its strong position in the market, Magnit cut its full-year 2014 sales growth forecast from 25 percent down to between 22 and 24 percent to account for reduced consumer confidence stemming from Russia’s weak economic growth. The IMF has predicted that Russia’s gross domestic product will grow by a mere 1.4 percent in 2014, revised from an earlier forecast of 2 percent.

www.themoscowtimes.com

Russia: imported product prices increase by 15-20%

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Higher School of Economics (HSE) warns about a soon price increase on imported goods as well as on goods produced with imported raw materials. All details are reflected in a report called “About business climate condition in retail sector in first quarter of 2014…”.

“Retailers are expecting a further weakening of ruble. Imported goods which were bought at earlier exchange rates hold out only few more months”, – Georgy Ostapkovich, the author of the report and the director of HSE Centre of Market research, explained his predictions in the interview to RBC Daily.

Retailers are now seeking for a possibility to substitute imported products to domestic ones to neutralize the price increase.
By HSE estimates, Russia is strongly depending on imports: in average 33% of goods sold through both networked and non-networked retailers are imported. Moreover, the share of imported goods is pretty stable during the last few years, as Georgy Ostapkovich added. That means the prices on goods which can’t be replaced by domestic equivalents will increase by the end of the second quarter of 2014.

Ruble has started to weaken since the middle of February 2014, but expected price increase has not been recorded by Rosstat yet. A main rule for suppliers is that a supplier must inform a retailer about release price increase in a period of 30 days.

In fact, the price raising is step by step overtaking retail networks. For example, in “Dixie” a price increase on foreign fruit and vegetables is about 10-25%, on dairy products – 7-15%, sugar – about 8%. Meat products suppliers are going to raise prices by 10% or even more.

In “O’kay” a general price increase of 15-20% is detected. Retail prices on fish have grown up by 20%, on chocolate and nuts – by about 15%. The price increase on dairy products is the same as in “Dixie” – about 15%.
Furthermore, release prices on non-food range of products are also rising by 10%. Especially prices on cloths (90% of imported items), household appliances (80% of imported items), sport goods, office supplies and toys (70 % of imported items) are growing up dramatically.

According to Rosstat, the inflation in March was 1%, since the beginning of 2014 – 2.3%.

www.newsru.com