Russian retail market

X5 Retail Group buys Togliatti network “Mindal” (“Almond”)

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X5 Retail Group has announced this month the possible purchase of a regional network of grocery stores “Mindal” (“Almond”).

At the moment, the negotiations with the owner of Togliatti supermarkets are held, and the transaction for 600 million rubles can be concluded as early as in spring this year.

Currently, Togliatti is already included in the coverage of X5 Retail Group: the city has several discounters already – “Pyaterochka +” and two “Perekrestok” stores.

A few months earlier the trade press published information about purchase of  “Mindal” by retailer “Okay”, and named almost the same amount of transaction, 30 million USD. But last autumn, the network refused the purchase, citing the fact that “Mindal” has got only a hypermarket store, and this segment is not a priority for “Okay”.

Source: www.fruitnews.ru

Magnit sales increase 35%

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Magnit, Russia’s largest food retailer by market value, said December sales increased 35 percent because of new store openings and an increase in the average amount spent by each customer.

Sales were 51.8 billion rubles ($1.7 billion), the Krasnodar, Russia-based company said in a regulatory filing. Full-year revenue rose 34 percent to 448 billion rubles, outpacing a Russian retail market that grew 6 percent in the year through November, according to the state’s statistics service.

Magnit said it opened 407 stores in December, bringing its total to 6,884. The monthly increase is the biggest in the fast- growing company’s history, according to analysts at VTB Capital. Two-thirds of its shops are in small cities with a population of less than 500,000 as the company expands into under-developed parts of the Russian regions, the retailer said.

Source: www.freshplaza.com

All change at X5

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Russian retailer set to appoint new chief executive while announcing full-year revenue growth of 8.3 per cent for 2012

The X5 retail group has announced changes to its management, including the appointment of a new CEO, as well as revealing its results for the full-year of 2012.

Interim chief executive Stephen DuCharme has been nominated by the group to take the position permanently, X5 said, a move that is subject to X5 shareholder approval at the AGM to be held in April.

There are further changes at the top, the company noted, with chief financial officer Kieran Balfe replaced by Sergey Piven.

X5 said that, for 2012, revenue increased year-on-year by 8.3 per cent to R490.9bn (€12.2bn), down on the 32 per cent jump in revenue the group registered for 2011.

The slowdown came despite the addition of 800 new outlets in Russia throughout the year.

Source: www.fruitnet.com

Logistics key to retail expansion

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Thanks to relative political stability and strong oil and gas prices, Russia’s retail turnover more than quintupled from 2001 to 2011 and now exceeds US$600 billion annually. Data suggest that this sector is entering the steepest part of its growth curve. How will Russia’s retailers face the challenges of this critical period of expansion? Will foreign retailers manage to get a slice of this growing pie?

Russia’s enormous size and level of economic development mean that the retail market is currently divided among many players. While large retail chains dwarf the majority of competitors in market capitalization, their market share is relatively small. The X5 Retail Group, the largest food retailer, for example, controls only 5.6% of the market, and the top 10 food retailers comprise less than 20% of the market. This is in stark contrast to the developed markets of Western Europe, where leading food retailers hold a quarter of the market or more e.g., Tesco (30% market share) in the U.K. and Edeka (26% market share) in Germany.

This opportunity for consolidation is fueling a pitched battle among Russia’s retail chains to establish regional and national market share. Which chain prevails as top dog will depend on how well it can confront the logistical challenges of the country’s decaying infrastructure, responsibly manage expansion and successfully navigate an uncertain regulatory environment.

Russia’s road network stands at 610,000 miles, of which only 482,000 miles are paved. (In comparison, the U.S. has four million miles of roads, of which 2.7 million are paved.)

In addition, there is a lack of quality warehousing in the country. Colliers International reported that there are 81 million square feet of industrial space in all of Russia, while the Chicago market alone houses 537 million square feet, according to real estate service firm Newmark.

All the leaders in Russia’s retail sphere are rapidly modernizing their logistical operations. Retail chain Magnit is currently recognized as the cutting-edge logistics innovator. As a result, it is rapidly closing in on X5’s lead as Russia’s largest retailer in terms of revenues. Its profits more than doubled in the first half of 2012 compared to the previous year, while X5’s profits over the same period dropped 20.6%. X5 appears to be playing catch-up in logistics. During this period, its margins were hit by the high costs of opening a new distribution center and the set-up costs related to adopting a direct-import model.

Magnit’s main advantage over its competitors has been its effectiveness in bringing the supply chain completely in-house and cutting out the middle men who previously added costs and delays. Today, Magnit runs a fully independent supply chain, with over 3,900 of its own vehicles and a proprietary network of 15 distribution centers totaling close to 3.9 million square feet. It continues to expand this network, opening a new facility in late December 2012 to serve the Volga region and Ural region.

The Russian retail market is heavily saturated, and barriers to entry are high. The two foreign chains that have found success have one thing in common: They struck when the iron was hot. German retailer Metro and the French chain Auchan entered the Russian market in the early 2000s, before competitors became well-established. Of the top-10 leading food retailers, Metro and Auchan have been the only non-Russian firms to command a leading position in the retail sector.

Walmart is looking at a second attempt to access this market, having recently hired former X5 CEO Lev Khasis and appointing him senior vice president for international operations. Khasis was key in positioning X5 as the Russian market leader and grew the company to annual revenues of US$15 billion. He will likely be the strategic player for Walmart’s eventual entrance into the sector.

Source: www.freshplaza.com

New “Auchan” hypermarket in Kostroma

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French retailer “Auchan” opened in Russia fourth hypermarket “Nasha raduga”. The hypermarket is located in Kostroma, the total area of the hypermarket is 5000 square meters. Number of items is 12 000 SKU.

“Nasha Raduga Kostroma” became the 56th hypermarket of “Auchan” hypermarkets in Russia. Hypermarkets were opened in Moscow, St. Petersburg, Rostov-on-Don, Samara, Adygea, Krasnodar, Yekaterinburg, Nizhny Novgorod, Novosibirsk, Omsk, Voronezh, Ufa, Kazan, Chelyabinsk, Kaluga, Penza, Ryazan, Ulyanovsk, Yaroslavl and some cities of Moscow region – Podolsk and Orekhovo-Zuevo.

Source: www.retailer.ru

Magnit: November sales grew 35%

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Fast-growing Russian retailer Magnit said on Monday its November sales grew 35.1 percent, year-on-year, to 39 billion roubles ($1.27 billion) after a 36-percent increase in October.

The company opened 196 outlets last month, bringing its total number of stores to 6,477, compared to 5,023 a year ago, it said in a statement.

Magnit is targeting 30-32 percent sales growth in the whole of 2012.

Source: www.freshplaza.com

Top Five

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The market share of the five largest companies in the food retail will grow from the current 18% to 30% in 2015, but the change of the leader is not expected, said Natalia Kolupaeva, Raiffeisen bank customer analyst.

“At the end of 2015 we will approach more or less the average Europe rate; the major players – top 5 companies – will get about 30% of the market. And these companies are already known today, the changes are not expected, besides the relocation of X5 Retail Group and “Magnit”, – she said during the telephone conference on the forecast for the development of the consumer market in Russia.

According to the analyst, other major companies – besides X5 Retail Group and “Magnit” – will be “Auchan”, Metro, and “Dixy”, which will continue their aggressive campaign to promote and expand their networks.

The limit of beer sales in retail outlets less than 50 square meters (from January 1, 2013) and the law in draft proposed by Public Health Department, according to which tobacco products will not be sold in small retail stores, will also favor the expansion of retail networks, excluding small stores from the food market.

However, according to the forecast, the annual growth rate of the food retail market will be reduced from 9% to 8% in the period from 2013 to 2016 as Raiffeisen bank analysts said.

Source: www.retailer.ru

Auchan group development

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Last week, “Auchan” group announced the purchase of “Real” hypermarkets in Central and Eastern Europe, owned by Metro Group. Thanks to the deal for $ 1.1 billion, the amount of French retailer stores in this region will double. “Auchan” group got 91 “Real” in Poland, Romania, Russia and Ukraine, as well as 13 shopping malls in Russia and Romania. Now, there are 98 Auchan hypermarkets in this region.

Also, in 2013 Auchan group is planning to invest about 1 billion rubles in the opening of five discounter stores “Nasha Raduga”. The investment for the launch of one store is about 200 million rubles. In the future, the retailer plans to open 5-10 discounters “Nasha Raduga” per year. The company declined to say in which cities stores can be opened.

Source: www.retailer.ru

Retail growth slumps

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Russian retail sales growth unexpectedly slumped in October after unemployment increased for the first time since January and slower-than-estimated gains in wages and incomes curbed consumer purchasing power.

Receipts at merchants rose 3.8 per cent from a year earlier, the slowest pace since February 2010, after a 4.4 per cent increase in September, the Federal Statistics Service in Moscow said in an emailed statement on Tuesday.

The economic figures “can be linked to slower growth in incomes, wages and a relatively high level of the inflation rate,” Alexander Morozov, chief economist for Russia at HSBC Holdings Plc in Moscow.

Source: www.freshplaza.com

The owner of retail chain Sedmoy Continent was allowed to take complete control over the company

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The Moscow Arbitration Court invalidated the prohibition of the Federal Financial Markets Service (FFMS) issued to company Pakva in respect of the purchase of securities of the trading network “The Seventh Continent”. It was reported by RAPSI referring to a representative of the court.

In November 2011, the Federal Antimonopoly Service approved the petition of Pakva company to acquire 100 percent of shares of “The Seventh Continent”. The largest owner of securities of the trading network is Alexander Zanadvorov, and according to the media, he also controls the Cyprus company Pakva.

In spring of 2012, the Cyprus entities belonging to Zanadvorov consolidated the 96.25 percent of “The Seventh Continent” shares. Meanwhile, the majority of the shares were sold to Pakva by the companies controlled by the businessman. In May Pakva filed an offer for a compulsory redemption of the remaining 3.75 per cent of the securities from minority shareholders at $100 per share.

Soon after that the FFMS prohibited to Pakva to buy 3.75 percent of shares of “The Seventh Continent”. In response to that, the structures of Zanadvorov went to the arbitration court while continuing to buy up the securities of the trading network. In August, it was reported that the businessman had taken control of all 100% of the shares of “The Seventh Continent”.

It was announced on November the 15th that the Association for the Protection of Investor Rights was going to go to court because it considered the compulsory acquisition of securities from minority shareholders illegal.

“The Seventh Continent” is the eighth-largest grocery retailer in Russia, taking up about 0.6 percent of the market. The company owns 146 retail outlets, including the same-called stores and 11 hypermarkets “Nash”. In 2011, the revenue of distribution network was 50.9 billion rubles.

Source: www.fruitnews.ru