Russia’s X5 Retail Group Opens Trade Office in Hong Kong

Russia’s X5 Retail Group has opened its first overseas sales office in Hong Kong, the company said in a press release.

X5 is also considering opportunities to establish similar trade offices in Central Asia and South America.

“A permanent presence in Hong Kong, the business getaway to South-Eastern Asia, will enable X5’s procurement team to improve purchasing terms and build up the share of direct imports in a number of product categories, primarily fruit, vegetables, seafood and non-food goods,” the company said.

“In 2017-2018, X5 intends to establish direct imports from another six countries – Bosnia, Mexico, Namibia, Madagascar, New Zealand and Iran. The Company is open to cooperation with producers from other countries looking to tap into the Russian market and is ready to offer favorable procurement terms,” the company said.·

In 2017, the number of countries where X5 has direct relationships with suppliers reached 27. Direct imports already account for almost 50% of supplied fruit and berries. In the 18 months after the launch of the direct import programme, the total number of direct suppliers reached 200.

X5Retail Group is one of the leading Russian food retail companies. The company manages the stores of several retail chains: neighborhood stores under the Pyaterochka brand, supermarkets under the Perekrestok brand, hypermarkets under the Karusel brand, Express-Retail stores under various brands.

As of September 30, 2017, the company operated 11,326 stores.

Net profit of X5 under the international financial reporting standards for the 9 months of 2017 increased by 30.7% compared to the same period of the previous year, to 25.97 billion rubles ($439 mln). Revenue reached 933.3 billion rubles ($15.7 bln), which is 26.2% up year-on-year.

X5 Retail Net Profits up 57.3%

Russian food retailer X5 Retail Group’s revenues rose by 27.8% to RUB1,033,667 mln in 2016 – the fastest growth rate since 2011. Adjusted EBITDA rose by 33.8% to RUB79,519 mln and net profits of RUB22,291 mln were up 57.3% on last time.

Like-for-like sales increased by 7.7% with an improvement across all three of the company’s major formats. The company added a record 2,167 new stores in 2016 compared with 1,537 new stores in 2015. Pyaterochka was the main driver of growth: net retail sales rose by 32.5% y-o-y (9.1% growth in LFL sales and 23.4% growth from a 37.4% y-o-y increase in selling space).

Chief executive Igor Shekhterman said: “We have achieved all of the targets set out by the supervisory board and company management in 2016. We are creating value for stakeholders as the fastest-growing public player in Russia’s food retail market, building a stable and sustainable business that aims to benefit consumers, employees, partners and investors over the long term. As of Q4 2016, X5 is Russia’s #1 food retailer, with a market share of 8.0% for 2016. Revenue grew by 27.8% year-on-year and exceeded RUB 1 trillion, driven by a 7.7% increase in like-for-like (LFL) sales and a 20.1% contribution from a 29.1% rise in selling space. In 2016, we also demonstrated our ability to deliver efficient and sustainable expansion, with the adjusted EBITDA margin improving to 7.7%, up from 7.3% in 2015”.

“Looking ahead to 2017, while we do not expect meaningful positive macroeconomic developments in Russia in the medium term, significant growth opportunities still exist in the food retail sector.  We remain confident about X5’s potential to deliver sustainable growth as Russia’s leading food retailer, driven by market expansion and market penetration. We are now focused on achieving our target market share of 15% by the end of 2020, which will require continued strong performance during the coming years. Our focus will remain on organic growth while maintaining margins as we develop all three of our major formats.”

Russian Retail Market 2016

In 2016, large retail chains grew: Russia’s largest retailers Magnit and X5 Retail Group each opened about 2,000 new stores. Some smaller chains, such as Novosibirsk grocery chain Avoska, Petersburg chain of farm products Girlanda and others, left the market.

A number of companies changed the top management. Alexander Barsukov was appointed a new CEO of Tander (Magnit). Sergei Belyakov replaced Elijah Yakubson as a new president of Dixi retailer, but then a few months later he was replaced by Pedro Manuel Pereira da Silva.

There are reports that Vernij retail chain is selling some of its stores. Although the company denies it, it turned out that a few shops were actually sold to X5 Retail Group.

Meanwhile, retailers explored new markets. For example, many federal companies were interested in opening stores in Grozny, and in February 2016 Lenta retailer opened the first supermarket in the Chechen Republic.

Globus announced that it was going to invest 9 billion rubles in the construction of a retail park near Moscow. Estimated construction period is 2015 – 2020.

Metro Cash&Carry presented a new concept of shops Fasol Express, located at gas stations. The company plans to double the amount of stores every year.

Finnish company Stockmann is leaving the Russian market and closing ten Lindex stores. According to company estimates, the losses amounted to about 78 million euros. Executive Director of the Stockmann was going to resign after the sale of the business in Russia.

In June, Igor Shekhterman, Executive Director of X5 Retail Group, told about the plans of chain development: two most important regions for X5 are Siberia, where it is planned to open 150 stores over the next two years, and South Russia . The first stores are located in Novosibirsk in the stores, previously belonged to Avoska, which was forced to withdraw from the market. The network consisted of 12 stores.

In order to start supplying products to new regions X5 will build new distribution centers. “We have opened 35 distribution centers so far, and we are planning to open around 27 more in five years” – said X5 Retail Group CEO.

In September, premium retail chain Azbuka Vkusa launched a project of biometric payments, now customers can pay by placing a finger on the scanner.

In September, Forbes magazine published the rating of the largest private companies in Russia. Magnit took the first place, followed by X5 Retail Group.

In late October, Kesko Food Russia Holding announced that it would sell 11 K-Ruoka stores in St. Petersburg and Leningrad region to Lenta retailer for 11 billion rubles.

Auchan announced that Atak stores would be rebranded into Auchan store in the next 1,5 year. Also, Auchan in Moscow intends to build the largest distribution center in Europe. The venue will strengthen the retailer’s position in the Central region. In 2017, Auchan plans to increase its investment by almost half – up to 30 billion rubles.

Okey owners, Dmitry Korzhev, Dmitry Troitsky and Boris Volchek, who owned 78.97% of the company, decided to sell their shares. Among the main buyers there are Auchan, Lenta and, according to unconfirmed reports, Magnit.

In December, one of the leading Russian retailer Dixie bought 12 stores from 7th Continent.

X5 Retail Group to import 100% of its fruit & veg directly

The X5 Retail Group (“Pyaterochka”, “Perekrestok” and “Karusel”), primarily owned by Russian billionaire Mikhail Fridman, aims to be able to import 100% of its fruits and vegetables, without intermediaries, by 2019. At the moment, the retailer directly buys from abroad about 20% of its fresh produce.

In order to make it possible for the retailer to import everything directly, the firm will set up contracts with foreign producers, which will allow it to know what the exact price of the products will be, while managing the shipment and delivery terms, which is impossible when working with distributors, reported X5 in a statement.

To do this, the X5 will open two warehouses in rented space, which will be supplied solely by products from abroad until the end of 2016. This arrangement also reduces the duration of travel of fruit and vegetables from abroad by three days. This year, the company will start to operate warehouses in St. Petersburg and Novorossiysk, totalling 6 thousand square metres each, and in 2017 another one will come into operation in the Central Federal District.

At the moment, the company already has more than 100 contracts with foreign producers; a figure it plans to double within the next two years. The retailer is collaborating with suppliers of the EAEC and CIS countries, as well as from Georgia, Syria, Iran, Morocco, Serbia, Macedonia, Moldova, Egypt, Israel, China, India, South Africa, New Zealand, Mexico, Ecuador, Colombia, Argentina and Chile.

Azerbaijani companies to supply major Russian food retailer

X5 Retail Group, Russia’s second largest food retailer, will receive produce directly from member companies of the Azerbaijan Fruit and Vegetables Producers and Exporters Association (AMTIIA ), the Azerbaijan Export and Investment Promotion Foundation (AZPROMO) reported.

The decision was taken within the framework of AMTIIA’s meeting with representatives of X5 Retail Group. The sides discussed the direction of mutually beneficial cooperation and took a decision on the direct export of fruit and vegetables to the Russian market.

Headquartered in Moscow, X5 Retail Group operates such trade networks as Pyaterochka, Perekrestok, and Karusel.

The newly-established AMTIIA is responsible for boosting Azerbaijan’s export potential in the fruit and vegetable sector as well as increasing overall production levels.

Currently, some 14 Azerbaijani companies are allowed to export their agro-production to the Russian market.

The northern neighbor is still one of the main trade partners of Azerbaijan, which has long had a well-established place on the Russian market. The country currently ranks fifth in Russia’s foreign trade with the CIS countries (following Belarus, Kazakhstan, Ukraine and Uzbekistan).

The trade turnover between Azerbaijan and Russia amounted to $1.06 billion in January to July 2016, while some $212.9 million of the figure accounted for the export to this country.

X5 Retail Group is going to sell Iranian products this spring

This spring, fruits and vegetables from Iran will appear on the store shelves of the X5 Retail Group’s three chains: Pyaterochka, Perekrestok and Karusel, according to a company press release.

The trade relationship between the retailer and Iranian exporters was established alongside the efforts of two countries’ embassies.

X5 Retail Group is interested in importing Iranian tomatoes, carrots, garlic, onions, bananas, watermelon, persimmons, pomegranates, figs, pineapple, pineapple guava and other fruits and vegetables as well as fish and seafood.

X5 Retail Group continues to grow

X5 Retail Group announced preliminary results for the first half of 2015. In January-June, retail sales increased by 27.3% compared to the same period of 2014 and amounted to 380.68 billion rubles. Sales of stores “Pyaterochka” increased by 35% up to 274.63 billion rubles, sales of stores “Perekrestok” – by 11.3% – up to 3 billion rubles, sales of stores “Karusel” – by 11.5%, tup o 37.3 billion rubles, sales of  stores “Express”-  by 17.8%, up to 5.68 billion rubles.

During 6 months, the average bill rose by 11.3% up to 373.9 rubles. The number of purchases increased by 14.3%, amounting to 1.16 billion items.

From the beginning of the year, X5 Retail Group opened 488 new stores (235 stores in the first half of the last year). In the end of June 2015, the company operated 5,971 stores (5,273 supermarkets “Pyaterochka”, 438 supermarkets “Perekrestok” and 83 hypermarkets “Karusel” and 177 stores “Express”).

X5 retail group acquires 100% stake in Spar Retail from A&NN investments ltd

X5 Retail Group, a leading Russian food retailer, and A&NN Investments ltd, one of biggest privately-owned investment groupings, announce the acquisition by X5 Retail Group of 100% stake in SPAR Retail, owned by A&NN Investments Ltd. SPAR Retail operates 26 stores (previously – under the “SPAR” brand) in Moscow (11), Moscow Region (7) and Vladimir (8). The transaction has been approved by the Russian Federal Antimonopoly Service.

The average selling space of the acquired stores ranges from 400 sq m to 1,600 sq m. The majority of the acquired stores will be integrated into the “Perekrestok” supermarket format, with only a few stores to be rebranded as “Pyaterochka”.

The Company currently operates 1,300 Pyaterochka proximity stores and over 200 Perekrestok supermarkets in Moscow and the Moscow Region as well as 12 Pyaterochka stores in Vladimir.

Organic growth remains the key growth priority for X5. At the same time, the Company does not rule out the possibility of opportunistic local acquisitions to the extent they add value to the business, are in line with the Company’s strategy and its management and financial capacities and do not negatively impact X5’s on-going operations.

Retail chain Okey launched its online store

Russian retail chain Okey launched its online store. Now, there is only one point to pick up orders in one of the hypermarkets near Moscow (in Putilkovo). In the future, the retailer plans to deliver orders directly to apartments or offices. Online store assortment is based on the assortment of Okey hypermarkets: food and non-food products.

X5 Retail Group launched online store However, the range of its online site was not based on the assortment in X5 stores and consisted mainly of non-food products. In the beginning of 2014, the assortment of totaled 1.8 million non-food items, its share in the revenues of X5 Retail Group amounted to 0.3%. But late last year, X5 decided to close its online store.
Previously, Okey reported the increase in revenues by 8.9% up to 151.9 billion rubles in 2014.

Retail development in 2015

Most leading retail companies have already announced their plans for the current year. Magnit presented the most ambitious program of the development. Initially, the retailer planned to open 1,100 convenience stores, 80 hypermarkets and Magnit Semejnij stores and 300-350 cosmetic stores, now they are planning to launch 1,200, 90 and 800 stores respectively.

Auchan plans to open 7-8 stores, investing 10 billion rubles into the development of business in Russia this year. Metro Cash & Carry is going to open the same amount of stores this year as they did the last year (in 2014 they opened seven stores). Neither Metro nor Auchan have not change the plan of developmet for the year.

Lenta is going to launch at least 10 hypermarkets during the first half of 2015 . This is more than in the first half of last year, when the company opened five hypermarkets and four supermarkets. Their plan to double the retail space in three years (from the end of 2013 to the end of 2016) remains in force.

Dixy did not report that their development plans would change this year. Last year, in November, Ilya Yakubson, Dixie president, spoke about the opening about 500 stores in 2015.

In the end of the last year, Tony Maher, head of Okey company, spoke of plans to open more than 12 hypermarkets and to launch new project – about 40 discounters “Da!” in 2015. The start was scheduled for the spring. For this projects the retailer was going to use debt funds in the amount of 8 billion rubles. Today, the retailer intends to continue developing, but at a pace that “would be sustainable for the business and does not require significant new credits at the current rates,” – as it was stated in the report on the results of 2014.

The only company who has not announced its development plans for the year is X5 Retail Group.