Page 107 - RusRPTNov19

financing.Stadium beer sales were banned in 2005, with the exception of the 2018 FIFA World Cup last year. Coupled with favourable weather conditions, the event supported a 3% market recovery after declining in the previous eleven years at a blended rate of 3.4%. This year, volumes positively surprised, with a flattish trend from a challenging base, as the segment has enjoyed no new limitations on sales and promotions, while excises are unchanged for a third consecutive year. The return of beer to stadiums during football games could provide additional support to volumes and improve brand recognition in times of limited promotional options.
X5 Retail Group has announced plans to reformat some of its Karusel hypermarkets (91 stores as of now) over about two years. By early 2021, 34 Karusel stores (eight leased, 26 owned) are to become large supermarkets under the Perekrestok brand. Another 20 stores (all leased) will be closed by 2022. The other 37 (14 leased, 23 owned) will continue to operate as Karusel hypermarkets for a while, but then will be evaluated and either reformatted, sold or closed. The new large supermarkets will operate 1,500-3,000 m2 of selling space. They will have an enlarged area with fresh food, an expanded assortment of ready-to-eat and ready-to-cook meals, and a special area with healthy food. Some re-leased space will house additional services like "click and collect" and cafes, with the rest leased to partners with goods and services complementing Perekrestok. X5's pilot large supermarkets have already shown decent results - in particular, two large supermarkets were opened in April in St Petersburg and Stary Oskol (Belgorod Region), and their revenues have been 30% higher than the company expected and their average check higher than the format's average by 30-40%.
Russia’s largest retailer X5 Group on October 23 outlined its long-term strategy to investors during a Capital Markets Day in London, reiterating its focus on digital developments as the main source of growth. As reported by bne IntelliNews , after taking the market leadership from Magnit, X5 improved its investment case by focusing on digital innovation. Most recently the company also announced a refurbishing programme for the declining hypermarket format, which impaired its bottom line in 3Q19 . In 10 years, X5 hopes to reach ambitious 20% market share in Russia by 2029 from current 11.6%, putting a bet on online segment, ‘ready to eat’ food. The company sees the transformation as a three-part process over the next five years: strengthen the current business (1-2 years), 2 part is a digital transformation (1-3 years), 3 part is to become a leader in online and marketplaces (1-5 years). X5 will rely on data management, consisting of data collection, structuring, algorithms, decisions and predictive analytics based checks, coming from loyalty cards, which currently provide 14mn tickets per day. Previous reports also suggested that X5 could enter Big Data partnerships with other corporate, telecom and banking majors. “Overall impression is good, if all goals of long-term strategy are successfully achieved,” BCS Global Markets commented on October 24. As far as the traditional selling space is concerned, X5 reported that the quality of new openings have been improving last year. Cash return on new store opened was over 30% in 3Q19. Proximity store remains the key market for X5 and also serves as the basis for its online sales platform. X5 estimated that the size of Russian food retail market amounts to RUB17.6 trillion ($275bn) in 2019 and is expected to grow to RUB30.2 trillion by 2029. The share of online segment of food retail market may increase from 1.2% in 2019 to 7% in 2029. X5 Group rallied over 22% in June on strong first-quarter results, cementing its role as the innovation leader in the industry, but the rally has limited the 12-month upside, according to
107 RUSSIA Country Report November 2019 www.intellinews.o