Page 49 - bneMag Dec22

bne December 2022 Special Report I 49
Uzbekistan's organised retail sector is wide open and the race is on to create a nationwide supermarket franchise, but cultural differences make the change from shopping in the bazaar to visiting a convenience store go slowly. / bne IntelliNews
Xalq Retail, the people’s
The company hopes to emulate
the success of Russia’s leading supermarket chains that are at least twenty years ahead of Uzbekistan.
Early days of organised retail
The biggest retailers in Uzbekistan today are Havas, with 270 stores,
and Korzinka, with 110 stores,
but the latter earns more revenue than Havas. The multi-industry conglomerate Orient Group has also launched the Makro supermarket chain in 2010 that it typically includes as one of the anchor stores in its shopping mall developments.
The European Bank for Reconstruction and Development (EBRD) has supported Korzinka.uz's ambitious expansion plans with a $40mn investment,
which wants to expand to 140 stores by 2025, EastFruit reports.
A few local players are already established but with at most a few hundred outlets operating each, the Uzbek organised retail business remains wide open to new entrants.
“270 stores is nothing. Just one local chain in Siberia has more stores than that,” says Alibekov. “This market is still at ground zero.”
With a population of 34mn, Uzbekistan is already second in size to Russia in the Commonwealth of Independent States (CIS) and more populous than Ukraine if the pre-war economic migrants and war refugees are taken into account, although Ukraine’s official statistics puts it just ahead
of Uzbekistan. And with one of the highest fertility rates in Eurasia, where most of the other countries are in decline, Uzbekistan’s population is set to overtake Poland in the next three years before reaching 70mn by 2050.
Although Russia remains the biggest market, its population is also due to halve in the next two decades as a result of its demographic problems that have been exacerbated by the war in Ukraine. Uzbekistan currently offers by far the most exciting retail prospects in the entire Former Soviet Union (FSU) region.
supermarket
Ben Aris in Samarakand
Xalq Retail (which means “People’s retail” in Uzbek) was only set up in 2020 and has 10 stores but intends to become the leading supermarket chain in the Central Asian market that is home to tens of millions of people.
The organised retail sector in Uzbekistan is wide open. Most people continue to shop at the open-air bazaars that have been operating
for literally millennia, but a growing middle class and rising incomes
are fuelling a shift to Western style supermarkets that offer a broader range of goods and are more convenient,
as they are based in built-up areas.
In other markets such as Russia, Belarus and Ukraine supermarkets have already grown into major businesses with at least a billion dollars a year
of turnover, but in Uzbekistan even
the biggest chain has no more than around two hundred outlets.
Xalq Retail is one of four leading contenders for what should become a very lucrative business, but it has
a lot of work to do and some deep- set cultural habits to overcome.
Xalq was founded by a group of private investors that cut their teeth in investing in the neighbouring markets. One of the investors is the current chairman, Ilya Yakubson, the former chairman of supermarket chain Dixy, one of Russia’s big
four chains that was taken over by market leader Magnit a few years ago, putting him out of a job. The race is on, as in Russia the first decade of the supermarket business was simple a race to build out a comprehensive chain and capture
as much market share as possible.
“After a long career in investment banking, including stints as an analyst with Russian Partners and [private equity market leader] Barings Vostok
I came sniffing around in Uzbekistan and became excited,” says CEO
Arman Alibekov, an ethnic Kazakh and one of the founding investors. “We looked at various opportunities
– telecoms, establishing a fund, retail – and eventually settled on retail.”
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