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Big retail takes control of Russian food market

The Russian food market is amongst the largest and most populated globally. As the population of 146 million people continues to grow, they are also buying more food.

There are a lot of opportunities for further development, especially in the convenience segment, as the grocery retail market is significantly less saturated than in Western Europe. Changes in tastes and technology have opened up the sector to new suppliers and new ideas.

However, after almost a decade of double digit growth, this over $300bn market has seen a significant deceleration recently due to a difficult geopolitical situation. Huge inflation caused by the devaluation of Russian currency and economic sanctions amongst other reasons, have resulted in lower disposable income and pushed Russian consumers to adapt by shifting towards value products.

This situation facilitates even faster growth of the modern, organized retail groups, such as Magnit, X5 Retail Group, or Dixie, able to take advantage of their economies of scale in areas such as logistics and suppliers’ terms, among others, and therefore they are able to deliver the lower prices demanded by shoppers, with little negative impact to their financial results.

Top 7 Grocery retailers in Russia by sales turnover, 2014

The retail landscape is changing rapidly and further growth of the informal sector, including traditional stores and street kiosks and open markets, can be at risk. Russia’s recent economic woes and the increasingly greater power of the modern retail sector puts traditional retail formats under pressure as they see not only their market share but also their sales revenue dropping.