Page 25 - RusRPTJul23

In 2020, Svetofor entered the top ten largest Russian grocery retailers with a
revenue of RUB200bn ($2.4bn). Over the past two years, the company's
business has doubled, making it one of the five biggest players in Russia’s
burgeoning retail sector. Although the economy has been hit by multiple
shocks in recent years, retail is one of the sectors that is doing well and the
outlook is improving as the Russian economy returns to growth and both
nominal and real incomes start to rise thanks to an extremely tight labour
market.
Discounters have emerged in Russia over the last decade, boosted by the
crises that began in about 2014 and the annexation of Ukraine. The economy
then went into a four-year long recession that saw incomes fall and got another
fillip during the coronavirus pandemic when everyone was forced to stay at
home and cooked more.
Svetofor’s business model is a no-frills offering where its stores look more like
warehouses and it strives to offer a 20%-30% discount on all its goods.
No-name brands of popular durable goods are simply laid out on wooden
pallets and offered in “family-size” packets to bring costs down as much as
possible.
With revenues pouring in, like many of its peers Svetofor started to roll out
stores in the rest of Europe in 2017, but has kept its operations low key and
low profile, operating under the brand Mere in Europe.
Instead of targeting one country and rolling out a high profile chain with the
associated marketing, instead the company has targeted all the EU countries,
but opened small chains in each with no more than a dozen stores in any one
The Bell reports. However, taken together the European network has become significant with approximately a hundred Mere stores in Europe, according to The Bell's calculations. And the war and sanctions have not halted this expansion, with more than 20 Mere stores opened in Europe since the war started, The Bell estimates.
country,
The total revenue of Mere is estimated at around €50mn euros, which is only
approximately 1% of Svetofor's total Russian revenue. That makes it a minnow
in comparison to Europe’s leading discount stores. Germany’s Aldi is the
largest European discounter and generates revenue of around €80bn in the
European market.
However, the company is using the same model that worked so well in Russia:
founded in a remote Russian region, it quietly built up a regional network
focusing on poorer local markets and kept opening low profile stores that
generated a solid turnover, growing the network up slowly.
Svetofor is owned by the enigmatic Schneider brothers, The Bell reports, that have managed to evade sanctions so far as they are reportedly supporters of Putin’s war. A key part of their low budget strategy is to spend nothing on marketing and the
25 RUSSIA Country Report July 2023 www.intellinews.com