EBRD Experience in Food Retail

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EBRD Experience in Food Retail

• Gilles Mettetal
• Bratislava 23 November 2005

2
Structure of Presentation

• Introduction to EBRD
• EBRD and Agribusiness
• Experience in Food retail
• Why Food Retail ?

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What is the EBRD?

• International financial institution, promotes
  transition to market economies in 27 countries
  from central Europe to central Asia
• Owned by 60 countries and two inter-governmental
  institutions
• Capital base of 20 billion

Cumulative commitments 26.9 billion
Unaudited June 2005
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A network of 32 offices in 27 countries
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EBRD Agribusiness
EBRD annual investments in Agribusiness (million
)

• To date EUR 4 bn invested in over 265 projects
• 27 Bankers
• Growing annual commitments

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EBRD and Agribusiness
Financing all stages of the food chain
Downstream
Upstream
Agricultural inputs production
Primary secondary processing
Retail Food Service
Packaging distribution
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EBRD Agribusiness Clients
Intermarché
Extensive experience of working with the most
demanding agribusiness and food FMCG companies
across the Food Chain, multinationals and local
leaders - many have more than one project with us.
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EBRD Examples of Retail Financing
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Show Case Kesko in the Baltics
Kesko - Finnish retail group with outlets in
Estonia and Latvia)

• EBRD investment will help to modernise Baltic
  retailing, which will be of benefit to producers
  of local goods and consumers alike
• Syndicated loan of 61.3 million (of which EBRD
  finances 50.4 million)

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Showcase Getro in Croatia

• Second largest retailer in Croatia.

• Two projects financed by EBRD
• 25 million (2002) 35 million (2004)

• Expanding retail outlets throughout Croatia.

• Cash and Carry retail format

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Showcase Cora in Hungary and Romania

• One of the Leading retailer in France and
  Belgium expanding in Hungary and Romania
• In Hungary refinancing of portfolio of 6
  hypermarkets and construction of 3 new
  hypermarkets.
• In Romania financing of the construction of 5
  hypermarkets.
• Financing Hungary EUR 160 million syndicated
  loan Romania EUR 50 million syndicated loan.

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Why Food Retail ?

• The Market
• The Transition Impact

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The Market Example Russia

• Russia has by far the largest retail market in
  CEE growth potential yet to be fully realized.
• Retail market is expected to grow by more than
  12 p.a. for the next five years.
• Modern retailing formats should grow even faster
  as they catch market share from traditional
  markets.

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The Market Example Russia (cont.)

• With rising incomes, demand for non-food products
  require larger retail formats.
• Comparison with CEE and Western Europe suggests
  that hypermarkets in Russia have strong growth
  potential.
• Until recently the market was dominated by local
  players but foreign players are gaining momentum.

Hypermarket retail outlets per 100,000
inhabitants.
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Transition Impact Increasing Competition

• Food retail is among the leaders in attracting
  foreign direct investment in many countries of
  our region.
• Introducing new formats Supermarkets,
  hypermarkets, hard discounts, cash and carry
• Improved price transparency and quality
  standards introduction of new products
• Consumers access to cheaper, better quality and
  wider variety of products

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Transition Impact Expanding Markets

• Modern retailers try to procure food products
  locally
• They offer reliable market opportunities for
  local food suppliers
• They promote improvement of food quality, food
  safety and packaging
• They also promote diversification of production
• They help suppliers structuring themselves
• In transition countries, theyll increasingly
  help promote exports

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Transition Impact Skill Transfers

• New technologies are being introduced at
  suppliers level to meet quality requirements
• Local retailers increasingly competing with
  international companies (example, Russia)
• New standards of corporate governance and
  business conduct are being introduced
• New approach to distribution

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Future Direction for Food Retail

• Demand still huge (Ukraine now rated more
  attractive market, ahead of Russia, India and
  China)
• Need to provide assistance at supplier level
  (credit, technology transfer)
• Need to control quality and food safety with
  appropriate policy dialogue
• Need to ensure competition not at the expense of
  business, social and environment standards

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Conclusion

• Modern retail has helped and will continue to
  help speeding up transition process
• In countries where supply is limited, modern
  retail promotes local production
• Important spill over effects throughout food
  chain
• Important social impact ensuring cheaper and
  better products to all classes of the society
• Despite no support from public sector (often
  public sector trying to prevent development)
• Need to ensure competition not at the expense of
  business, social and environment standards