Latest News
News Feature image

Joint ventures and partnerships by some of Russia’s leading ecommerce retailers is evolving the channel’s service levels. Alibaba and Yandex are forming partnerships with various companies to develop their online shopping offer and improve their services. Such a move is encouraging competing ecommerce retailers in Russia, such as Ozone, to enhance theirs too.

More News

Netherlands-based SPAR International reported sales rose 5.4% globally to €35.8bn. The organisation said entry into four new markets, the addition of 335 new stores and the continued focus on its ‘Better Together’ strategy had underpinned the pace of its growth.

2018 ‘an exceptionally strong year for SPAR’

Discussing the results, SPAR International’s managing director, Tobias Wasmuht, described the retailer’s performance as representing ‘another exceptionally strong year for SPAR’. Wasmuht went on to highlight the importance of the retailer’s ‘Better Together’ strategy, of which it was in the third year of five. The strategy is focused on ‘SPAR’s core ethos of uniting together the global scale and resources of the SPAR network so that all shall benefit’.

At the end of 2018, SPAR operated in 48 countries, with 13,112 stores under the brand accounting for 7,441,838 sq. m of selling space.

Continued strength across Europe

SPAR said sales grew by 4.1% to €22.1bn in Western Europe and by 15.8% in Central and Eastern Europe, to €5.8bn.

In Western Europe SPAR said its continued investment in its stores and the growing shopper trend of buying little, often and locally was benefiting its members, who operated neighbourhood-based stores. This trend was being accentuated by longer term trends, such as ‘smaller and single households, as well as aging populations and urbanisation’, which are likely to continue to benefit the retailer.

In Central and Eastern Europe SPAR gave more country-specific reasons for growth in the different markets where it operates. SPAR Hungary saw growth advance by 9.8%, SPAR Croatia by 15.3% and SPAR Slovenia by 4.1%. SPAR highlighted how its partners’ combined sales broke through the €2bn mark for the first time, with sales up by 27.8% in local currency terms.

Strong growth in Africa and the Middle East

Across the 15 countries where it operates, SPAR said sales rose by 8.2% to €5.9bn. South Africa continued to dominate its performance in the region, where it generated sales of €4.9bn, after growing sales by 5.7% at constant exchange rates. This was supported by fast paced growth in Botswana (+19.2%), Cameroon (+65.6%), Mozambique (+56.2%), Nigeria (+8%) and Zimbabwe (+39.1%).

There was continued good growth in the Middle East, where it said its partners had ‘been able to adapt and tailor their retail proposition in tune with modern consumers’.

SPAR approaches €2bn in sales in Asia

In its smallest region, SPAR said its seven countries’ operations generated sales of €1.96bn in 2018 from their 573 stores. China accounted for most sales, with its members generating sales worth €1.5bn in 2018 ‘with particularly strong growth in the Shandong and Guangzhou provinces’. It highlighted the importance of its members’ growing use of technology in-store, such as ‘facial recognition payment technology and engaging with customers instore through mobile applications, including scan & go solutions’.

Short term focus to remain on ‘Better Together’ strategy

SPAR said its performance in 2018, and over the last three years when it has generated a ‘compound annual growth of over 5%’ gave it the confidence to sustain its existing strategy. This will see it accelerate its international joint buying and procurement ‘ by further harnessing [its] international scale, pooling [its] global resources to reap economies of scale in all areas of [its] business and uniting [its] global partners to be and act better together’.

By region, SPAR said it expected to benefit from existing trends in Western Europe, expansion in Central and Eastern Europe, through the award of two new licence agreements in the region, with a similar reason given for its faith in driving growth in China. It noted that ‘plans are at an advanced stage for the expansion of SPAR in South and Central America’, which would see it enter the continent for the first time.

Retail Analysis weekly newsletter

Keep up-to-date with the latest retail developments shaping the industry.

Sign up for our newsletter »

Germany-based Metro said like-for-like sales rose by 1.2% in its second quarter, with total sales rising by 0.2% in the same period, at constant exchange rates, to €6.75bn. The company said the results were driven by a positive performance in Eastern Europe, excluding Russia, and Asia. Metro noted the impact of ‘the shift of the Easter business to April and thus to Q3’.

Delivery business increases share of total sales

Metro said in Germany like-for-like sales contracted by 3.1% in Q2, while total sales fell by 4.1%, due to the shift of Easter into Q3. Excluding the effect of Easter being later in the year, Metro said like-for-like sales would have been ‘almost flat’, with a contraction of only 0.1%. It highlighted the positive effect it was seeing amongst HoReCa customers in a pilot region, where sales have risen by 5% since the beginning of the 2018/19 financial year.

Metro said that sales through its delivery operations rose ‘by around’ 9%. The pace of development means that the delivery business accounts for 20% of Metro’s total sales. It highlighted how the ‘digitalisation of the core business is… progressing’, with a digital ordering process available in 17 countries. Metro said 40% of all orders are done online.

Performance differing by region

Metro reported that in Q2, by reporting segment, that:

  • Western Europe (excluding Germany): total sales fell by 0.3%, while like-for-like sales decreased by 0.3%, affected by Easter’s shift
  • Russia: total sales fell by 2.3%, in local currency terms, while like-for-like sales decreased by 4.0%. It said the initiatives it had implemented, including investment in price, were taking effect, but more slowly than expected
  • Eastern Europe (excluding Russia): total sales increased by 6.8%, in local currency terms, while like-for-like sales also rose by 6.8%
  • Asia: total sales rose by 4.7%, in local currency terms, while like-for-like sales grew by 3.6%

Metro entering exclusive talks on disposal of Real

In the results announcement Metro said like-for-like sales fell by 5.1% at its Real hypermarket division. Total sales contracted by 6.2% due to the closure of three stores and the temporary shutting of one more, while the overall performance was affected by the shift of Easter into Q3. Metro said the gross merchandise value of its online business rose 53% to €130m.

Separately Metro is entering exclusive negotiations that could lead to Real’s sale to a consortium lead by redos. It said the exclusivity would run until the end of July, with negotiations expected to be completed in the summer. The sale will see Metro retain a 24.9% stake in Real’s operating business, but its ‘liabilities will be assumed by the new owner’. Real’s sale will enable Metro to focus entirely on its wholesale operations.

Retail Analysis weekly newsletter

Keep up-to-date with the latest retail developments shaping the industry.

Sign up for our newsletter »

The three leading Russian retailers X5, Magnit and Lenta reported above market sales growth for the first quarter of 2019. Russia’s Ministry of Economic Development lowered its forecast growth of total national retail sales for 2019 from 1.7% to 1.6%. This is significant drop from the 2.8% growth rate reported in 2018. The three retailers continue to consolidate the market as they grow sales at three to 10 times the market rate.

Pyaterochka improved its shopper proposition and boosted footfall

X5’s year-on-year Q1 sales growth to reach RUB405,864 mn (US$6,088 mn) was slower than in the previous year, partly due to fewer store openings. However, it reported a dramatic increase in like-for-like growth, a key performance indicator it was struggling with in 2018. The improved performance was driven by the boost in traffic generated from an adaptable customer value proposition and assortment. Also due to improved customer services and roll out of personalised promotions.

 

X5 develops service offer at stores…

The retailer entered into a joint-venture with one of Russia’s leading online retailers, Ozon, to open 2,000 pick-up points and about 2,000 parcel lockers in Pyaterochka stores. The venture also includes the delivery of Ozon packages to these lockers via the subsidiary X5 Omni. To further support this strategy X5 will roll-out and operate 1,500 PickPoint lockers. Karusel, X5’s hypermarket format, also launched a Click & Collect service in Moscow and St Petersburg.

 

…and continues to grow with the help of small acquisitions

X5 completed the integration of 85 RITM-2000 stores it acquired in early 2019. The stores are in areas surrounding Moscow and St Petersburg and will be converted into 81 Pyaterochka and four Perekrestok stores. The retail group will continue to grow its network via a combination of organic store growth and tactical acquisitions.

 

Magnit in line with expectations

The retailer reported like-for-like growth for the second quarter in a row, in line with its expectations for the year. It opened more stores than in 2018, which supported its improved total sales growth to reach RUB289,700 mn (US$4,346 mn) in Q1 2019. However, profitability continues to be a struggle with margin dropping from 7.1% in Q1 2018 to 6% in Q1 2019. The retailer gave several reasons for the decline, which included lower revenues from new store openings and increased rent costs from more leased space.

 

Magnit rebrands under one single banner

In February 2019 the retailer rebranded four out five of its store formats. This includes its drugstore banner, Magnit Kosmetik. The rebranding also includes a new logo for the retailer under the slogan 'Let's bring families together!'. It will be used on the facades, signs in sales areas, private label product packaging and promotional materials.

As of March 2019, all new stores will be rolled out under the new brand. Magnit CEO, Olga Naumova, stated that “we are repositioning Magnit to truly serve every Russian family and so are creating a Magnit family of stores.” It also launched its cross-format loyalty programme at the end of Q1 2019.

Source: Magnit

Lower visit frequency and wholesale business slows Lenta sales growth

Lenta’s sales growth in Q1 2019 slowed down significantly when compared to 2018. This is due to a combination of factors. Much of that is due to a 61.5% drop in sales from its wholesale business, which is currently going through structural changes, and the closure four net stores in that period. Also its like-for-like sales performance was lower than the previous year because of lower frequency of visits, shoppers trading up and buying less in volume and food price deflation.

 

Utkonos owner on path to acquire Lenta

The owner of Russia’s largest pure online grocery retailer Utkonos, Severgroup, acquired a 42% interest in Lenta and has plans to acquire the remaining shares. This would make strategic sense as both retailers will be able to complement each other.

Both target similar shopper demographics, mostly middle to high income urban shoppers. The online retailer has a limited private label range, whereas Lenta can support it with learnings on developing its own brands or offer its own assortment to sell online. For suppliers this acquisition can widen the scope for collaboration from physical to online.

Subscribers can read the latest news about the Russian grocery retail market, here.

 Amin Alkhatib

Amin Alkhatib

Senior Retail Analyst - Central and Eastern Europe

Central and Eastern Europe is a region that illustrates great growth potential for both retailers and suppliers. In this report we illustrate key themes that help drive evolve the retail business model to widen their shopper base and draw more traffic to their stores.

This in-depth guide to Russia explores the key trends in grocery retail and the growth strategies of the leading retailers in the country.

See the latest industry news on Russia.

Presentations

19/06/2019
The Perekrestok dark store is one of three types of fulfilment solutions that deliver in Moscow and the wider region. The other two types of online fulfilment units are a regular store and a hybrid one. In comparison to the other two fulfilment formats, the dark store has the advantage of greater picking efficiency and speed. We visited the store to observe its operational effeciency.
10/06/2019
The X5 lab store is located just inside Moscow’s second ring. It shares the space with a Pyaterochka store where retail solutions are tested and their impact on shoppers’ experience is assessed. The concept store tests innovative retail solutions to assess their impact on sales and costs. These are conducted before deciding on whether to roll them out to the wider X5 network. We visited the store to observe the solutions being tested.
14/05/2019
We visited four of the latest concepts of Magnit stores. Two post office shop-in-shops, a new convenience concept and a pharmacy shop-in-shop. The difference in the format and in the operational set up illustrates the retailer’s strategic flexibility to boost shopper traffic and basket spend.
View all presentations

Key presentation

This in-depth guide to Russia explores the key trends in grocery retail and the growth strategies of the leading retailers in the country.

We've developed a single, universal methodology for calculating food and consumer goods retail data, supported by our programme of primary and secondary research. This makes Retail Analysis the most reliable and robust source available for data of this type. 

Get the latest industry news and insights straight to your inbox with our range of newsletters.

We've grouped all the latest Central & Eastern European retail news, store visits, retailer profiles and downloadable presentations together in one place.