Russian Retail Market

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Russian Retail Market

• Russian consumer market in 2002 is estimated
  270 bn
• 200 bn was expenditures on goods and the rest
  on services
• Russian food and beverage market is estimated at
  app. USD 90 bn (2002), or 45 of total retail
  expenditure
• In 2002, the Muscovites were spending 42 of
  their total retail expenditure on food and
  alcoholic beverages (15 bn), or US 121 per
  capita per month.
• Open markets share dropped down to 25.2 of
  total turnover (26 in 2001).
• In the 1st Quarter 2003, the share of food and
  beverage categories declined by 1 (down to 41),
  while non-food products' share increased up to
  59. Retail sales of food products increased by
  6.6, while non-food categories grew by 8.7.
• Total spending on white black goods (excl.
  computers and office equipment) in Moscow
  amounted to USD 1 bn in 2002, on clothes (incl.
  footwear, underwear and fabrics) app. USD 5-6 bn.
• The turnover of Moscow HoReCa market (including
  fast food and institutional catering) is
  estimated at app. USD 2 bn in 2002, and
  according to some estimates it is growing 25-30
  per annum. It is expected that in 2005 this
  sector will exceed a USD 4 bn mark.

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Russian Retail Universe
selling food products and mixed assortment (food
and some household categories )
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Russian Retail Universe

• Total Number of retail outlets in Russian cities
  reached 145 000

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Russian Retail Universe Structure

• Number of small retailers continue to dominate

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Russian Retail Universe

• 2 retail outlets per 1,000 inhabitants

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Russian Retail Universe Equipped with Scanners

• Only modern types of outlets are equipped with
  scanners

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Russian Retail Universe

• Approximately ½ Supermarkets in Russia do not
  belong to chains

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Moscow Chains Model for Development
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Moscow Chains Model for Development
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Major Players Food and Mixed Assortment
Food and mixed networks targeting

• Consumers in low-income brackets
• Pyaterochka
• Kopeika
• Deshevo / Kvartal (MDM-Viktoria, Kaliningrad)
• Penny (REWE, Germany)

• Consumers in medium- and high-income brackets
• Ramstore
• The Seventh Continent / Mosmart (Rosmart)
• Perekrestok
• Paterson
• Petrovsky (BIN)
• Metro CashCarry
• Real (Metro, Germany)
• Auchan
• SPAR International
• Marktkauf
• Norfa (Lithuania

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Major Players Food and Mixed Assortment
Food and mixed networks

• Network operators contemplating Russian market
  entry
• Carrefour (France)
• Casino (France)
• Kesko (Finland)
• MarksSpencer (Britain)
• Mercasa (Spain)
• System-U (France)
• Tesco (Britain)
• Vilniaus Prekyba (Lithuania)
• W al-Mart (USA)

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Major non-food networks
Major non-food networks

• DIY
• (DIY market in Russia, according to UFG
  estimates, amounted to US 5 billion in 2002 (up
  from USD 4.2 billion in 2001)
• Starik Khottabych
• OBI (Germany)
• Leroy Merlin (France)

• Drugstores
• According to available estimates, the
  pharmaceuticals market volume in Russia, which
  amounted to US 4.6 billion in 2002, should swell
  to US 5.8 billion by 2005..)
• Drugstore 36.6
• ICN
• Doktor Stoletiye (Metalloinvest)
• Rigla (Good Health)
• Chudo-Doktor
• Stary Lekar

• Household equipment and electronics
• The size of the Moscow household equipment and
  electronics market (net of computers and office
  hardware) in 2002 exceeded US 1 billion.)
• M. Video
• Eldorado
• MIR

• Others
• Sportmaster
• Arbat-Prestige

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Main drivers of market development Macroeconomic
Factors

• Development of all main macroeconomic parameters
  of the post-crisis period indicates a continuing
  improvement of general economic situation in
  Russia, which creates a solid background for
  further investment in retail trade sector.

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Main drivers of market development Macroeconomic
Factors
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Main drivers of market development Macroeconomic
Factors

• In 2002-2003 retail disposable income reached
  the pre-crisis level

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Main drivers of market development Social and
life style factors
Growing self-respect of the Russians based on
increasing material wealth, improving social and
political climate
People care more about general quality of their
life, including quality of food they eat, and
places where they buy their supplies
Increasing time pressure
Growing mobility of the population (400-420 cars
per 1,000 inhabitants in Moscow)
Improving housing conditions, including food
storage facilities (large volume refrigerators
and freezers, special storage rooms in city
apartments, etc.)
Spreading of Western values and life style
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Major Competition Factors
Possibility of various team-up options among the
bigger operators (from joint marketing programs
to mergers and acquisitions), with even stronger
players surfacing on the market.
Implementation of the Moscow Governments program
to establish the most extensive web (even if not
a chain proper) of convenience stores (up to
2,000 such outlets over the next three years)
Advent of major foreign operators many of which
have already unveiled plans to do business in
Russia (Wal-Mart, Carrefour, Tesco, Rewe, Real,
Aldi, Ahold, Intermarche)
First IPOs by major Russian operators
(Pyatyorochka, Perekrestok, and The Seventh
Continent), planned for the years 2005-06, which
should enable them to raise substantial
investment resources as required for further
advancement.
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Major Competition Factors
Retail Chains What is essential for successful
competition?

• Availability of considerable financial resources
  for investment purposes

• Ability to engage powerful administrative
  leverage in both Moscow and the regions

• Advanced technological, most notably,
  managerial, capability to pursue retail business

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Business Analytica

• The 2nd largest market research company in Russia
  and CIS

• Operates in Russia since 1992

• Retail audit and consumer research

• National Panel includes over 19,000 retail outlets

• Regular census of retailers in 200 Russian
  cities and 70 key cities in CIS

• Regular retail audit in all CIS countries
  national panels in Ukraine, Belarus, Kazakhstan,
  and Kyrgyzstan

• Database on more than 80 product categories

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Thank You
Business Analytica Tel [phone]Fax (095)
135 7858e-mail ba_at_businessanalytica.ru