business analytica retail russia: opportunities in the russian retail market usrcne october 29, 2003...

Business AnalyticaBusiness AnalyticaBusiness AnalyticaBusiness Analytica

Retail Russia: Opportunities in the Russian Retail MarketRetail Russia: Opportunities in the Russian Retail Market

USRCNE

October 29, 2003

USRCNE

October 29, 2003

© Business Analytica, 2003 2Overview of Russian Retail Market

Russian Retail MarketRussian Retail MarketRussian Retail MarketRussian 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.

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.


selling food products and mixed selling food products and mixed assortment (food and some household assortment (food and some household

categories )categories )

selling food products and mixed selling food products and mixed assortment (food and some household assortment (food and some household

categories )categories )

Russian Retail UniverseRussian Retail UniverseRussian Retail UniverseRussian Retail Universe


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

144,653

17,007

6,728

24,162 27,513

69,243

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

Total Moscow St.Petersburg A (Ex Mow & Spb) B (0.5-1.0 mn) C (0.1-0.5 mn)

Num

ber

of O

utle

ts

GeographySupermarket / Hypermarket Discounter Grocery Pavilion Kiosk Total

Moscow 328 204 5,045 2,434 8,996 17,007St.Petersburg 66 124 2,435 1,074 3,029 6,728A (Ex Mow & Spb) 221 110 9,196 5,166 9,469 24,162B (0.5-1.0 mn) 128 170 10,696 5,415 11,104 27,513C (0.1-0.5 mn) 317 328 32,477 9,804 26,317 69,243Total 1,060 936 59,849 23,893 58,915 144,653

GeographySupermarket / Hypermarket Discounter Grocery Pavilion Kiosk Total

Moscow 328 204 5,045 2,434 8,996 17,007St.Petersburg 66 124 2,435 1,074 3,029 6,728A (Ex Mow & Spb) 221 110 9,196 5,166 9,469 24,162B (0.5-1.0 mn) 128 170 10,696 5,415 11,104 27,513C (0.1-0.5 mn) 317 328 32,477 9,804 26,317 69,243Total 1,060 936 59,849 23,893 58,915 144,653

Russian Retail UniverseRussian Retail UniverseRussian Retail UniverseRussian Retail Universe


Number of small retailers continue to dominateNumber of small retailers continue to dominate Number of small retailers continue to dominateNumber of small retailers continue to dominate

41.2

52.945.0

39.2 40.4 38.0

16.9

14.3

16.021.4 19.7

14.2

40.529.7

36.2 38.1 38.946.9

0.7 1.2 1.8 0.5 0.6 0.50.0 0.0 0.0 0.0 0.00.00.8 0.50.50.91.9 1.0

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Moscow St.Petersburg A (Ex Mow &Spb)

B (0.5-1.0 mn) C (0.1-0.5 mn)

Perc

enta

ge b

y Co

unt

Kiosk Pavilion Grocery Discounter Hypermarket Supermarket

Russian Retail Universe StructureRussian Retail Universe StructureRussian Retail Universe StructureRussian Retail Universe Structure


2 retail outlets per 1,000 inhabitants2 retail outlets per 1,000 inhabitants 2 retail outlets per 1,000 inhabitants2 retail outlets per 1,000 inhabitants

2.1

1.9

1.4

1.7

2.2

2.4

0.0

0.3

0.6

0.9

1.2

1.5

1.8

2.1

2.4

2.7

TOTAL Moscow St.Petersburg A (Ex Mow & Spb) B (0.5-1.0 mn) C (0.1-0.5 mn)

Nu

mb

er

of O

utlets

per

1,0

00 in

hab

itan

tsRussian Retail UniverseRussian Retail UniverseRussian Retail UniverseRussian Retail Universe


Only modern types of outlets are equipped with scannersOnly modern types of outlets are equipped with scanners Only modern types of outlets are equipped with scannersOnly modern types of outlets are equipped with scanners

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Perc

enta

ge o

f Poi

nt w

ith S

cane

r

With Scanner Without Scanner

MoscowMoscow St.PetersburgSt.Petersburg A (Ex Mow & Spb)A (Ex Mow & Spb) B (0.5-1.0 mn)B (0.5-1.0 mn) C (0.1-0.5 mn)C (0.1-0.5 mn)

Russian Retail Universe Equipped with Russian Retail Universe Equipped with ScannersScanners

Russian Retail Universe Equipped with Russian Retail Universe Equipped with ScannersScanners


Approximately ½ Supermarkets in Russia do not belong to chainsApproximately ½ Supermarkets in Russia do not belong to chains Approximately ½ Supermarkets in Russia do not belong to chainsApproximately ½ Supermarkets in Russia do not belong to chains

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Per

cent

age

of C

hain

Poi

nt

Chain Outlet Regular Outlet

MoscowMoscow St.PetersburgSt.Petersburg A (Ex Mow & Spb)A (Ex Mow & Spb) B (0.5-1.0 mn)B (0.5-1.0 mn) C (0.1-0.5 mn)C (0.1-0.5 mn)

Russian Retail Universe Russian Retail Universe Russian Retail Universe Russian Retail Universe


Total number of outlets belonging to Total number of outlets belonging to the major retail chains was doubling in the major retail chains was doubling in 2001 and 2002. It is expected, that this 2001 and 2002. It is expected, that this growth will slow down in 2003 (+47%).growth will slow down in 2003 (+47%).

Number of outlets belonging to major retail chains retailers in Moscow

2000 2001 2002 2003 (LE)

Pyaterochka (Moscow) 15 55 70Perekrestok 28 38 46 60Kopeika 13 24 31 60Seventh Continent 14 21 29 50BIN/Petrovsky 18 22Ramstore 9 19 20Paterson 4 10 14 19Spar (incl. Marta) 2 6 15Metro 2 3 6Auchan 2 4Marktkauf 1

Total major chains 59 121 223 327

The total number of modern stores in Moscow The total number of modern stores in Moscow reach 1,000 in 2006, i.e.reach 1,000 in 2006, i.e. the number will doublethe number will double The total number of modern stores in Moscow The total number of modern stores in Moscow reach 1,000 in 2006, i.e.reach 1,000 in 2006, i.e. the number will doublethe number will double

700870

1,000

180360

550

80

2000 2001 2002 2003 2004 2005 2006

Moscow supermarket, hypermarket, discounter universe 2000-2006

700870

1,000

180360

550

80

2000 2001 2002 2003 2004 2005 2006

Moscow supermarket, hypermarket, discounter universe 2000-2006

Moscow Chains – Model for DevelopmentMoscow Chains – Model for DevelopmentMoscow Chains – Model for DevelopmentMoscow Chains – Model for Development


Total turnover of top 10 Total turnover of top 10 Moscow retail chains in Moscow retail chains in 2002 is estimated at app. 2002 is estimated at app. USD 1.9 bn, and USD 1.9 bn, and according to the latest according to the latest estimate is will increase estimate is will increase by 66% by the end of 2003 by 66% by the end of 2003 to reach a USD 3.1 bn to reach a USD 3.1 bn mark.mark.

Total turnover of top 10 Total turnover of top 10 Moscow retail chains in Moscow retail chains in 2002 is estimated at app. 2002 is estimated at app. USD 1.9 bn, and USD 1.9 bn, and according to the latest according to the latest estimate is will increase estimate is will increase by 66% by the end of 2003 by 66% by the end of 2003 to reach a USD 3.1 bn to reach a USD 3.1 bn mark.mark.

2000 2001 2002 2003 (LE) 2004 (f) 2005 (f)

Metro 160 200 385 700 1,300Auchan 25 250 600 1,200Seventh Continent 130 200 300 420 600 1,000Perekrestok 156 252 325 450 600 1,000Pyaterochka (Moscow) 65 300 420 550 750Ramstore 130 250 300 450 500 600Kopeika 60 115 200 300 400 500Marktkauf 50 200 400BIN/Petrovsky 100 120 150 250 350Paterson 17 40 85 130 220 340Spar (incl. Marta) 30 115 150 250

Total 493 1182 1885 3120 4770 7690

2000 2001 2002 2003 (LE) 2004 (f) 2005 (f)

Metro 160 200 385 700 1,300Auchan 25 250 600 1,200Seventh Continent 130 200 300 420 600 1,000Perekrestok 156 252 325 450 600 1,000Pyaterochka (Moscow) 65 300 420 550 750Ramstore 130 250 300 450 500 600Kopeika 60 115 200 300 400 500Marktkauf 50 200 400BIN/Petrovsky 100 120 150 250 350Paterson 17 40 85 130 220 340Spar (incl. Marta) 30 115 150 250

Total 493 1182 1885 3120 4770 7690

Total turnover of top Moscow retail chains (US$ mn)Total turnover of top Moscow retail chains (US$ mn)

according to estimates the share of retail chains in according to estimates the share of retail chains in food and beverage turnover will reach 33-40% ($7.5-food and beverage turnover will reach 33-40% ($7.5-9.0 bn) by 20069.0 bn) by 2006

according to estimates the share of retail chains in according to estimates the share of retail chains in food and beverage turnover will reach 33-40% ($7.5-food and beverage turnover will reach 33-40% ($7.5-9.0 bn) by 20069.0 bn) by 2006

Retail chains share of F&B turnover in Moscow

0%

20%

40%

60%

80%

100%

20

00

20

01

20

02

20

03

(LE

)

20

04

(f)

20

05

(f)

Retail chains share of F&B turnover in Moscow

0%

20%

40%

60%

80%

100%

20

00

20

01

20

02

20

03

(LE

)

20

04

(f)

20

05

(f)

Moscow Chains – Model for DevelopmentMoscow Chains – Model for DevelopmentMoscow Chains – Model for DevelopmentMoscow Chains – Model for Development


Major Players Food and Mixed AssortmentMajor Players Food and Mixed AssortmentMajor Players Food and Mixed AssortmentMajor Players Food and Mixed Assortment

Food and mixed networks targeting Food and mixed networks targeting

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

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 Cash&Carry Real (Metro, Germany) Auchan SPAR International Marktkauf Norfa (Lithuania

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


Major Players Food and Mixed AssortmentMajor Players Food and Mixed AssortmentMajor Players Food and Mixed AssortmentMajor Players Food and Mixed Assortment

Food and mixed networks Food and mixed networks

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

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


Major non-food networksMajor non-food networks Major non-food networksMajor non-food networks

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)

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)

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

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

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

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

Others: Sportmaster Arbat-Prestige

Others: Sportmaster Arbat-Prestige


GDP will increase by 22.6% in 2003 GDP will increase by 22.6% in 2003 compared to pre-crisis 1997, and will compared to pre-crisis 1997, and will continue growing in the next 3 years.continue growing in the next 3 years.

GDP will increase by 22.6% in 2003 GDP will increase by 22.6% in 2003 compared to pre-crisis 1997, and will compared to pre-crisis 1997, and will continue growing in the next 3 years.continue growing in the next 3 years.

GDP Index (1997=100%)

80%

100%

120%

140%

160%

1997 1998 1999 2000 2001 2002 2003(LE)

2004(f)

2005(f)

2006(f)

GDP Index (1997=100%)

80%

100%

120%

140%

160%

1997 1998 1999 2000 2001 2002 2003(LE)

2004(f)

2005(f)

2006(f)

Consumer Price Index (end of the year)

100%

110%

120%

130%

140%

150%

160%

170%

180%

190%

200%

1998 1999 2000 2001 2002 2003(LE)

2004(f)

2005(f)

2006(f)

Consumer Price Index (end of the year)

100%

110%

120%

130%

140%

150%

160%

170%

180%

190%

200%

1998 1999 2000 2001 2002 2003(LE)

2004(f)

2005(f)

2006(f)

Inflation rate has dropped down to 15% in 2002; Inflation rate has dropped down to 15% in 2002; a further slow down is expected this year (13%).a further slow down is expected this year (13%). Inflation rate has dropped down to 15% in 2002; Inflation rate has dropped down to 15% in 2002; a further slow down is expected this year (13%).a further slow down is expected this year (13%).

Main drivers of market developmentMain drivers of market development: : Macroeconomic FactorsMacroeconomic Factors


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

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


Unemployment will be 25% lower this year Unemployment will be 25% lower this year against 1997against 1997 Unemployment will be 25% lower this year Unemployment will be 25% lower this year against 1997against 1997

Unemployment Index (1997=100%)

60%

80%

100%

120%

1997 1998 1999 2000 2001 2002 2003(LE)

2004(f)

2005(f)

2006(f)

Unemployment Index (1997=100%)

60%

80%

100%

120%

1997 1998 1999 2000 2001 2002 2003(LE)

2004(f)

2005(f)

2006(f)

Retail Trade Turnover Index (1997=100%)

80%

100%

120%

140%

160%

1997 1998 1999 2000 2001 2002 2003(LE)

2004(f)

2005(f)

2006(f)

Retail Trade Turnover Index (1997=100%)

80%

100%

120%

140%

160%

1997 1998 1999 2000 2001 2002 2003(LE)

2004(f)

2005(f)

2006(f)

Retail trade turnover will grow this year by 29% Retail trade turnover will grow this year by 29% against 1997against 1997 Retail trade turnover will grow this year by 29% Retail trade turnover will grow this year by 29% against 1997against 1997




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

Russian Federation. Real Disposable Income Index (1997=100%)

60%

80%

100%

120%

140%

1997 1998 1999 2000 2001 2002 2003 (LE) 2004 (f) 2005 (f) 2006 (f)

Russian Federation. Real Disposable Income Index (1997=100%)

60%

80%

100%

120%

140%

1997 1998 1999 2000 2001 2002 2003 (LE) 2004 (f) 2005 (f) 2006 (f)




Growing mobility of the population (400-420 cars per 1,000 inhabitants in Moscow)Growing mobility of the population (400-420 cars per 1,000 inhabitants in Moscow)

Growing self-respect of the Russians based on increasing material wealth, improving social and political climate

Growing self-respect of the Russians based on increasing material wealth, improving social and political climate

Increasing time pressureIncreasing time pressure

Spreading of Western values and life styleSpreading of Western values and life style

People care more about general quality of their life, including quality of food they eat, and places where they buy their supplies

People care more about general quality of their life, including quality of food they eat, and places where they buy their supplies

Improving housing conditions, including food storage facilities (large volume refrigerators and freezers, special storage rooms in city apartments, etc.)

Improving housing conditions, including food storage facilities (large volume refrigerators and freezers, special storage rooms in city apartments, etc.)

Changing Changing consumer patterns consumer patterns and shopping habitsand shopping habits

Changing Changing consumer patterns consumer patterns and shopping habitsand shopping habits

Main drivers of market developmentMain drivers of market development: Social : Social and life style factorsand life style factors

Main drivers of market developmentMain drivers of market development: Social : Social and life style factorsand life style 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.

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 Government’s 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)

Implementation of the Moscow Government’s 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…)

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.

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.

IncreasingIncreasing

competition competition

IncreasingIncreasing

competition competition

Major Competition FactorsMajor Competition FactorsMajor Competition FactorsMajor Competition Factors


Availability of considerable financial resources for investment Availability of considerable financial resources for investment purposespurposes Availability of considerable financial resources for investment Availability of considerable financial resources for investment purposespurposes

Ability to engage powerful “administrative leverage” in both Ability to engage powerful “administrative leverage” in both Moscow and the regionsMoscow and the regions Ability to engage powerful “administrative leverage” in both Ability to engage powerful “administrative leverage” in both Moscow and the regionsMoscow and the regions

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

Retail Chains: Retail Chains: What is essential for successful What is essential for successful competition? competition?

Retail Chains: Retail Chains: What is essential for successful What is essential for successful competition? competition?

Major Competition FactorsMajor Competition FactorsMajor Competition FactorsMajor Competition Factors


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

Business AnalyticaBusiness AnalyticaBusiness AnalyticaBusiness Analytica

Operates in Russia since 1992 Operates in Russia since 1992

Retail audit and consumer research Retail audit and consumer research

National Panel includes over 19,000 retail outlets National Panel includes over 19,000 retail outlets

Regular retail audit in all CIS countries; national panels in Ukraine, Belarus,

Kazakhstan, and Kyrgyzstan

Regular retail audit in all CIS countries; national panels in Ukraine, Belarus,

Kazakhstan, and Kyrgyzstan

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

Database on more than 80 product categories Database on more than 80 product categories


Thank Thank YouYou

Thank Thank YouYou

BusinessBusiness AnalyticaAnalyticaTelTel: (095) 137 3800: (095) 137 3800FaxFax: (095) 135 7858: (095) 135 7858

e-mail: e-mail: ba@[email protected]

business analytica retail russia: opportunities in the russian retail market usrcne october 29, 2003...

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