Russian retail market

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

X5 Retail Group quits online retail channel

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X5 Retail Group, the second biggest Russian food retailer, announced the cessation of active commercial operations at its E5.RU, the Company’s online retail channel, effective 1 January 2015.

The Company continues to evaluate the role technology and innovation will play in complementing the value propositions of the current “brick-and-mortar” food retail business as well as delivering better services and value to customers.

E5 will cease taking online orders as of 10 December 2014 while the Company will continue to honor any obligations the online retailer has to customers. E5.RU was launched by X5 in February 2012. The online retailer recorded net Russian Rouble sales of 502 million and 1,431 million in 2012 and 2013, respectively, or 0.1% and 0.2% of the Company’s total net retail sales for the respective periods.

www.eprretailnews.com

 

Russian retail chains showing growth

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Global ratings agency Fitch Ratings has said that Russian food retail chains continue to demonstrate healthy sales growth, despite the food import ban imposed in August against the EU, US and certain other countries.

Most Russian food retailers analysed by Fitch Ratings have managed to adapt to the food import sanction by substituting the imported categories with food from other countries, keeping the mix of food products on the shelves little changed.

Based on financial results by Russia’s three large public food retailers – Magnit, X5 Retail Group, O’Key Group – operating margins are unaffected for now as retailers have been able to pass on the increased costs of some products to customers without altering the product mix materially.

Increasing prices for some food categories (fish, dairy products, fruits and vegetables) as a result of the food import ban are likely to cause customers to seek out lower price substitutes and, in turn, lower sales of non-essentials. These trends are also likely to be reinforced by the overall subdued consumer sentiment in Russia, Fitch said.

The latest quarterly results show LFL revenue growth ranging from nine per cent year-on-year for Lenta Group to 17 per cent year-on-year for Magnit, driven by strong average ticket and traffic growth. Larger store formats, such as hypermarkets and supermarkets, posted slower sales growth in September 2014 compared with smaller formats, as they witnessed some customers trading down to cheaper products and, in some chains, low or even negative traffic growth, Fitch Ratings said.

www.esmmagazine.com

X5 Retail Group launches new Perekrestok store concept

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X5 Retail Group has launched a new Perekrestok supermarket concept in Moscow and acquired a local chain in the Samara region.

New supermarket concept
After a successful relaunch of Pyaterochka discount store concept, X5 Retail Group has launched a new Perekrestok supermarket concept in Moscow. The store concept has a new outdoor design including an updated logo, improved store navigation and better use of sales area. The assortment has been expanded in product categories like bakery, fish, seafood and ready meals. X5 will develop the Perekrestok network in three subformats with sales area of 800, 1,000 and 1,500 square metres, located in shopping malls, residential areas and on high streets. The current network of 389 Perekrestok stores will be refurbished to the new concept in the next three to four years. 

Acquisition in Central Russia
X5 Retail Group has improved its market position in the Samara region (Central Russia) through the acquisition of Agrotorg-Samara chain. Argortorg-Samara, X5’s former franchisee, operates 116 stores with estimated revenue of RUB3 billion in the first half of 2014.

Our view (IGD)
The rebranding of Perekrestok supermarket to a new concept was a smart move to differentiate itself from rivals especially in Moscow, where the competition is already strong. The expansion of fresh product ranges proved successful at X5’s new Pyaterochka discount concept and its success may be replicated at Perekrestoks.

The acquisition of Agortorg-Samara could suggest a move back to X5 Retail Group’s strategy of store expansion via M&A. In the last couple of years, X5 has developed its store networks through organic expansion only.

www.freshplaza.com

Russian retailer Magnit to open agricultural distribution centre in Penza region

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Distribution centre of agricultural products is planned to be built in the Penza region. The total area of the centre will reach 40 thousand square metres. The investment for the project (i.e. 29 million Euro) is said to be provided by the JSC Tander, a management company of the retail network Magnit.

The centre is believed to improve the logistics system, and to supply the stores of the network with local goods, – said the Chairman of Penza Government Vyacheslav Orel.

Daily turnover of potatoes, vegetables and fruit is estimated at 70 million rubles (1.4 million Euro), the delivery radius is 200 – 400 km. The distribution centre will create about 1500 job positions.

According to the Minister of Agriculture in Penza region Andrey Burlakov, over the past few years the regional agriculture has demonstrated a dynamic growth of production. Moreover, retail chains in the region are keen to sign the contracts for the supply of local products to their stores.

www.freshplaza.com

Russia State Duma introduces quota to cap foreign products on domestic store shelves

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Deputies of the Moscow region initiated a project to introduce quotas on product imports in Russian stores. In the future, according to the deputies, the share of foreign goods at grocers is not exceed 50 percent. The law could affect all retailers.

Deputy of the regional Duma of the Moscow region Nikitai Chaplin, who is one of the authors of the amendments to the law on “trade”, also said that it was the repeated appeals from domestic producers, who said that they were being discriminated against by networks, that inspired the idea.

The countries of Belarus and Kazakhstan have also fallen under the category of “importing countries”.

“After the sanctions were implemented, trade networks are simply replacing some imported goods on their shelves with other (imported goods). For example, European and Brazilian goods. Russian producers are not winning as a result of the accepted government measures,” Chaplin said.

Andrey Karpov, executive director of The Retail Companies Association, said: “in Russia, there are not enough domestic producers that could ensure trade networks of the quality of their products as well as the security of supply, which often leaves much to be desired”.

The share of goods imported by premium-class supermarkets currently amounts to no less than 65 percent. For other trade outlets, the share of imported goods is about 50 percent.

www.fruitnews.info

New food retailer to open in Vologda region, 200 stores by 2018

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The Governor of the Vologda Oblast, Oleg Kuvshinnikov, announced plans for a new food retail network to appear in the region. The retail network will boast the brand name Nastoyashiy Volgogradskiy Produkt.

The number of stores across the area is to reach as much as 200.

“In the regions of the Vologda Oblast, there are already 15 of these stores opened under the brand name Nastoyashiy Volgogradskiy Produkt. By 2018, we have agreed that there will be more than 200 stores and they will open in each municipality. This is indicative of the growing grocery patriotism of Vologda. People understand that this is a guaranteed quality, it’s the environment, it’s the lack of preservatives and dyes.

Kuvshinikov also added that 52 companies and producers received certification to supply these trade points.

“The products under the label Nastoyashiy Volgogradskiy Produkt are currently supplied to 14 different countries and to more than 30 regions in Russia. We went to almost every major federal retail chain. A federal network such as the PiR Food and large supermarket Utkonos, we entered into a direct agreement for supplies,” the governor said.
www.fruitnews.info

New Magnit hypermarket in Russia

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Russia’s largest food retailer Magnit announced the opening of its 174th hypermarket in Russia. The new store is located in Samara, the Volga region.

The range of goods of the hypermarket consists of 19400 items, with food accounting for about 65% of the range. Trading space is equipped with 25 cashiers. Commercial property is owned by the Company.

As of October 1, 2014 the network Magnit has 7891 convenience stores, 174 hypermarkets, 66 Magnit Family shops and 886 drogeries, located in more than 1950 territorial subjects of the Russian Federation.

www.freshplaza.com, www.magnit-info.ru

Muscovites began to spend less money in restaurants

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Compared with August last year, Muscovites began to spend less money in restaurants. The average check dropped by 226 rubles. At the same time, now Muscovites spend 1,136 rubles more in the grocery stores than in August 2013. These data were received by VTB24, analyzing the information of POS-terminals in the biggest outlets (cafes and restaurants, grocery stores, electronics stores, clothing and footwear), where it is possible to pay by VTB24 credit card. The study was conducted in the period from August 2013 to August 2014 in retailers “Auchan”, “Magnit” and “Hyperglobus” and coffee shops “Chocolate”, “Coffeemania”.

www.the-village.ru

Retail news

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X5 Retail Group announces the launch of the first three stores “Pyaterochka” in the Volgograd region. By the end of 2014, the retailer plans to launch ten more “Pyatorochka” in Volgograd.

X5 Retail Group launched a distribution center with an area of 30,200 sq. m in the Rostov region. It will cover stores in Volgograd, Rostov and Saratov regions, Krasnodar and Stavropol regions. As of 30 June 2014, the network “Pyaterochka” numbered 4,128 supermarkets.

Finnish Corporation SOK opened the 18th store Prisma in St. Petersburg. Sales area of the new supermarket is more than 2,000 sq. m. The investments in the project totaled € 5,000,000. In October, the company is going to open one more hypermarket in St. Petersburg.

French retailer Leroy Merlin, specializing in the sale of goods for the construction and repair, launched its second hypermarket in Novosibirsk. In the spring 2014 Vincent Jeanty, CEO of the network in Russia, said that over the next three years the company would increase the number of stores in Russia almost in three times – from 28 to 80.

www.retailer.ru, www.retailer.ru, www.retailer.ru