Russian retail market

Retail chain “Vernij”

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In 2013 retail chain “Vernij” (which means “Loyal” in Russian) will launch the option program – top-managers will be offered up to 5% of the share capital of the company as a reward for good work. This program may be the most generous on the Russian food retail market – usually that number is up to 2% of the share capital.

Andrei Rogachev, founder of retail chains “Pyaterochka” and “Karusel”, and former managers of X5 Retail Group, the former CEO of “Pyaterochka” Oleg Vysotsky and the former head of the Ural branch of X5 Alexei Vaganov now are investing in the development of retail chain “Vernij”.

According to the development plans, there will be up to 400 stores in Moscow and St. Petersburg in three years. Now there are more than 10 stores and another 25 stores will be opened by the end of the year.

Source: www.retailer.ru

Why don’t the retailers work directly with suppliers?

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Fruitnews.ru made a reseach why Russian retailers prefer working with dealers and middlemen to dealing directly with suppliers.

Several retailers leading their activities in Russia, organize their work in a way to exclude other companies from the supply chain of fruits and vegetables although this is certainly a real opportunity to get the best prices.  Certain retailers begin to interact directly with the growers, but then return to the established pattern, which includes dealers and middlemen.

There are certain reasons for that. It is the lack of modern storage facilities which has already become common in our country, lack of screening and treatment facilities, and poorly-organized supply chain:

– In cities where the producers have well-organized processes of logistics, training and storage of goods, we work directly with them. But if the grower does not comply with these requirements, we have to buy the product from the distributor, who is able to present the product, calibrate it and supply to supermarkets. For example, an onion grower from Rostov can only produce the product and put it in storage, – says Dmitry Agaltsov the Purchasing Director of the section “Fruits and Vegetables” of the “Lenta” retail chain.

The Divisional manager of the department “New Products” of the “Real – Hypermarket LLC” Christian Look also highlights the complexity of direct cooperation:

“Risk of the quality of the goods carried by the retailer. If a vendor supplies defective goods, the seller will have to spend time and money on sorting out and disposal, writing claims to the supplier. Meanwhile, this item will not appear in stores, so the seller also suffers damages due to reduced turnover. Also the retailer must go through all the procedures for customs clearance of goods, involving additional (and considerable) human resources, which are not always built into the company’s staff.
Then, too large amounts of supplies from manufacturers. Minimum order of goods of one type is, as a rule, not less than 20 tons. Usually, we do not need such a large volume. In addition, according to the quality standards applied in the “Real” chain, fruits and vegetables can not be stored in our warehouse for more than three days”.

Many experts also believe that, despite the willingness and desire of many retailers to pass to direct supplies one day, intermediaries will remain.

The reason is, many manufacturers are working on a prepaid basis, and quotas for shipments are counted in hundreds of tons. There are also air deliveries of exotic fruits and berries from Brazil, China, South Africa and other regions. This is a very expensive and risky way, which is, as retailers forecast, will long remain the responsibility of third parties.

Source: www.fruitnews.ru

Eighth Bahetle supermarket in Moscow

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Tatarstan retail chain “Bahetle” will open its eighth supermarket in Moscow on November 15, according to the official report of the retailer. Its area will be 2100 sq.m. In supermarkets “Bahetle” there are more than 40,000 items, including salads, ready meals, convenience foods, confectionery and baked goods of their own production.

The company “Bahetle” was created in 1991 as a wholesale company. The first supermarket was opened in December 1998. There are more than 20 supermarkets in Kazan, Moscow, Naberezhnye Chelny and Nizhnekamsk.

Source: www.retailer.ru

Magnit pledges to trim margins to retain market share

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Low-cost food retailer Magnit, Russia’s second-biggest by revenue, pledged to sacrifice profitability to retain market share as it posted third quarter earnings ahead of forecasts.

Magnit, which has been expanding its mostly discount store chain rapidly in Russian regions since 1998, has outperformed competitors in terms of sales growth and margins.

Third-quarter net profit almost doubled to $200 million, beating a $155 million market forecast, and earnings before interest, taxation, depreciation and amortisation (EBITDA) grew 60 percent to $383 million for an 11 percent margin.

Sergei Galitskiy, Magnit’s founder and chief executive, said the company was reaping the benefits of scale from its supply chain and enjoyed broadly the same purchasing terms as its bigger rival X5.

An EBITDA margin of 11 percent is untypical of the sector, where other publicly-listed players recently recorded margins of 6 to 8 percent.

Galitskiy said he expected it to decline in the future when competitors become more aggressive.

“If the market requires lower prices, we will give even lower prices. We will not hold on to EBITDA,” Galitskiy told analysts during a conference call, adding he saw no reason to be worried as long as the EBITDA margin stays above 6.5 percent.

He told Reuters in an interview this month he would stick to a winning formula of targeting low- to middle-income shoppers through mostly convenience stores.

Source: www.reuters.com

Rewe Austria sets sights on Russia

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Rewe Austria is looking to launch ten new outlets in Russia per year, and is also targeting the eastern European markets of Ukraine and Romania, according to Rewe International CEO Janusz Kulik.

Kulik said that Austrian supermarket chain Billa would continue its expansion program in Russia, adding to the 72 outlets that it already operates in the country, FriedlNews reported.

“The markets in central and eastern Europe are growth markets,” Kulik noted. “The growth potential is still enormous.”

Source: www.fruitnet.com

Magnit eyes Siberia as pushes deeper into regions

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Russia’s No.2 food retailer Magnit by sales, is targeting Siberia as it presses on with a rapid expansion into the country’s regions which it believes can deliver at least another four or five years of strong growth.

Sergei Galitskiy, who opened his first shop in 1998 and has built Magnit into a 6,000-store empire, told Reuters he would stick to a winning formula of targeting low- to middle-income shoppers through mostly convenience stores.

Magnit turned over $11.4 billion in 2011, compared with $15.5 billion at Russian grocery leader X5 Retail.

But it is currently growing three times as quickly as it opens three stores a day and as X5 struggles with its shift away from acquisition-led growth and underperforming hypermarkets.

Magnit expects revenue growth, which has run at an annual rate of around 40 percent in recent years, to slow to 30-32 percent this year and gave preliminary guidance last month that it would ease further to 25-27 percent in 2013.

Magnit is grabbing business in towns from outdoor markets, kiosks and independent shops. It plans to add 800-1,000 convenience stores, up to 60 hypermarkets and 500 cosmetic shops next year – similar to the expansion this year.

Source: www.reuters.com

X5 Sees Hypermarket Decline While Convenience Stores Format is Growing

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Russian retail group X5 has reported consolidated net retail sales growth of 10.4 per cent,X5 Retail Group Russia logo and a decline of 0.7 per cent in like-for-like sales for the three months to the end of September.

The group’s third quarter hypermarket sales decreased by 9.9 per cent year-on-year, which it attributed to the cancellation of the chain’s loyalty program in February and the negative impact of the format’s like-for-like sales, which dropped 12 per cent.

The convenience format performed well with sales up 74.3 per cent, and 11.6 per cent on a like-for-like basis. Supermarket sales were down 5.9 per cent, as its like-for-like sales declined by 2.7 per cent. X5’s soft discounter operations reported a 15.9 per cent sales increase, 2.6 per cent on a like-for-like basis.

The group increased its net sales space by 8 per cent in the first nine months of the year and added 174 stores in the third quarter, 157 soft discounters, nine supermarkets and 14 convenience stores, bringing its total to 3,472.

Source: www.esmmagazine.com

Magnit announces September sales growth

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Russian retailer, Magnit, has announced this week that its September sales grew by 36%, year on year, to 36.1 billion roubles ($1.16 billion US), after rising 34% in August.

Last month the company obtained 145 new outlets, bringing the total number of stores to 6,119.

Last month Magnit raised its full-year sales growth guidance for 2012 to 30-32 percent from 30 percent and said that it expected growth to slow to 25-27 percent next year.

Source: www.freshplaza.com

X5 reports third quarter results

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Russian retailer sees consolidated net sales climb, although like-for-like sales fall 0.7 per cent

In Russia, X5 Retail Group has announced that its consolidated net sales jumped 10.4 per cent through the third quarter of 2012, climbing to RUB116bn (€2.8bn), driven by sales growth at Pyaterochkas, organic store growth at supermarkets and ongoing promotional activities.

However, the company’s like-for-like sales for the quarter dropped 0.7 per cent, as customer traffic fell 2.5 per cent, although there was an increase in like-for-like sales at convenience stores of 11.6 per cent.

Indeed, small-store formats such as Perekrestok Express and Pyaterochka outperformed the larger outlets such as Perekrestok supermarkets and Karusel hypermarkets, the group noted.

Source: www.fruitnet.com

New discounter chain Plus in Russia in 2013

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In 2013 in Russia, a new chain of food discounters will be opened – this will be the chian of discounters under the brand Plus of German Tengelmann Group. The management of “Plus Discount” company confirmed that they are planning to launch the discount chain under the brand Plus, but the exact time of the opening of the first store was not named. Is is planned to develop the new network mainly in Moscow and Moscow region.

Network Plus was founded in 1972, In 2006, there were 1,200 stores in Germany, Austria, Netherlands, Czech Republic, Greece, Hungary, Bulgaria, Poland, Portugal, Romania and Spain. However, in 2007-2009, holding Tengelmann sold Plus stores to competitors – Edeka, Lidl, Spar, Carrefour and others, which belonged to the Edeka group and currently operate as Netto Marken-Discount.

Now, Tengelmann is developing the network DIY – hypermarket Obi, textile discounter chain KiK, clothes retail chain Woolworth, outlet network Kaiser’s in Europe, as well as a supermarket chain A&P in the USA.

Source: www.retailer.ru