Page 25 - bneMag Dec22

bne December 2022 Companies & Markets I 25
Eastnine and private equity investment fund East Capital Holding, as well as a group of individual investors, for RUB15.8bn. Sistema will finance the deal with its own and borrowed funds.
The deal is expected to close by the end of 2022 subject to further regulatory approvals and satisfaction of certain conditions. Melon Fashion Group is one of the largest and fastest-growing fashion retailers in Russia, according to Sistema’s press release. Its brands include Zarina, befree, Love Republic and Sela. It is engaged in the full cycle of fashion production, from modelling to sales distribution and promotion. Melon Fashion Group operated 845 stores in Russia and the CIS (Kazakhstan, Armenia and Belarus) as of the end of 2021. Online sales accounted for 32% revenue in 2021. Melon Fashion Group’s revenue in 2021 was at RUB37.5bn (+49% y/y), EBITDA was at RUB8.6bn (+38% y/y), net profit was RUB3.5bn. The company had no debt and cash and cash equivalents of RUB5.2bn at end 2021, reports BSC GM.
And Russia’s leading retail chain X5 group has made some opportunistic acquisitions to expand its coverage. It was given permission by the Federal Antimonopoly Services (FAS) to acquire 70% stakes in two Siberian chains, but with some restrictions.
Back in August, X5 Group announced that it would form
a "strategic alliance" with the Krasny Yar and Slata groups, which are among the leading food retailers in Eastern Siberia. X5 intended to take a 70% stake in both businesses, but FAS is worried by X5's already significant market power.
First, there will be limits to mark-ups (5-10%) for some socially important food items for both Krasny Yar and Slata. Thus both chains will join X5 Group's voluntary price caps. Second, the FAS has demanded that X5 and the two chains reduce their combined market share in one particular area
of the Krasnoyarsk Region to 35%. Their combined share in most regions would probably be below the thresholds set by the FAS, as X5 Group is not widely represented in the Siberian Federal District. This means that X5 should have some room to expand. In 2021, the group generated just 3.5% of its
total revenues there (RUB77bn), which was only 5% of food retail turnover in the district. In contrast, almost half of X5's revenues in 2021 came from the Central Federal District, in which the group accounted for 16% of food retail turnover.
According to BCS GM estimates, the combined revenues of Krasny Yar and Slata exceeded RUB67bn in 2021, while X5 Group generated a total of RUB2.2 trillion in revenues last year. BCS GM estimates that for the full year 2022, both chains will generate around 3% of X5 Group's revenues.
Fast food
Fast food has gone through similar huge changes like the other FMCG companies, and is another sector where the famous international brands were heavily invested but are now all rushing for the door.
The most dramatic departure is McDonald’s, which has given up its long-standing presence and handed over of its iconic flagship store on Pushkin’s Square that opened in the twilight years of the USSR. The new owner of the chain is a Russian operator Vkusno I Tochka (Russian for “Delicious and that’s it”) that re-launched the chain with identical products and almost identical branding for the presentation of the food. By all accounts, the burgers, fries and deserts taste identical to those produced by the American firm.
Russia's own KFC chain of 70 restaurants, owned by the American Yum! Brands, has also sold to a large franchisee from Izhevsk "Smart Service" that operates under the “Rostic’s” brand – another opportunistic investment by a large distributor.
KFC was slow to enter Russia. It had a single outlet on Kutuzovsky Prospect in central Moscow for years, while Rostic’s developed a nationwide network, clearly following the KFC model. In the midst of the 2008 crisis Yum! finally took the plunge and went into a joint venture with Rostic’s, which rebranded its outlets as KFC, including the flagship store on Tversakaya in the heart of Moscow. Now that process is being reversed, as the KFC outlets are rebranded back to Rostic’s stores.
Smart Service promised to rebrand all franchise establishments (not only its own) as Rostic’s, although the KFC brand will continue to operate for a while. According
to Kommersant, part of the transaction will be financed by borrowed funds, but no figures were given. Experts estimate the value of the deal at RUB1.3bn, although the value of network alone is estimated to be RUB10bn and pre-war it was worth RUB30bn, according to Kommersant. The revenue of Yum! Restaurants Russia last year reached RUB18bn and net profit was RUB2.4bn.
The new owner of the KFC fast food chain in Russia plans to stay as true to the legacy menu of the restaurant as possible, a source close to the Food Service company told TASS. "The legacy menu will remain as much as possible, recipes will not change. Nothing will disappear among favourites."
The rebranded logo of Vkusno I Tochka in Moscow, Russia.
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