Food Retail

Russia’s food retail continues to suffer from the consequences of the economic crisis but the companies adapted to the new reality and this sector is still performing despite the turbulent market environment during the last two years.


Russia Global Development index

Key findings

  • There are hundreds of retail-operators in Russia, this sector is very fragmented
  • The market share of modern trade channels (retail chains) makes about 60% of total sales volume in Russia (in currency terms).
  • 10 leading grocery retailers provide 33% of total Russian food retail sales.
  • 2 biggest product retail chains in Russia are:

– ‘Magnit’: 170 supermarkets, 228 hypermarkets and 9.902 convenience stores. The company revenue in 2016 took 17.000.000 euro, which is 12,8% more than in the year before. “Magnit” opened 1.970 new shops in 2016

– ‘X5’: The company revenue in 2016 was 16.300.000 euro, 27,5% more than the year before. “X5” opened 2.167 new shops in 2016.

  • 2/3 of all opened retail stores in Russia were discounters and mass markets, 34% were shops in middle  price segment and 0,66% in premium segment.
  • Retail met a few serious issues in 2015-2016: lower consumer demand (especially for premium European products), low Russian ruble exchange rate and rising distribution prices.
  • Due to the ban on import certain products, Russia  increased import from countries which were not included in the sanctioned list: Turkey, Colombia, Pakistan and Kazakhstan, and the growth of domestic production

Import

  • The chains are looking for balance between the purchasing and operational costs and  retail prices.  Consequently they prefer to import directly from foreign producers, avoiding the local distributors
  • The 10 biggest chains import 20% till 50% of assortment directly from the foreign producers
  • ‘Magnit’ reduced the number of suppliers by 12% (and works with the largest suppliers) but the share of direct purchase  from abroad decreased by only 1%.

russia-food-inflation 2016Private Label

  • Private label is still not as popular as in Europe: most of retail chains have not more than 10% of PL products in their assortment, but this is very fast growing trend.
  • The biggest retail chains (Magnit, Auchan and X5 retail group) have from 30% till 50% of PL products in their assortment

Promotion

  • Statistically the promotional activity of the retail chains in Russia is lower than of European chains.
  • Online retail is the smallest but the fastest growing sales channel in Russia.