Retail markets in the CIS and Baltic States: main

Retail markets in the CIS and Baltic States: main
characteristics and the future trends
4th Annual Russian Retail Forum
Dr. Olga Sagirova, Principal, Roland Berger Strategy Consultants
Moscow, 4th April 2005
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1
Market environment
2
Does political and economic climate
stimulate overall business
development in the CIS and Baltic
States?
Market attractiveness
Are the retail markets in the CIS and
Baltic States attractive from the
standpoint of formats and retail
development?
CIS retail market
What future trends determine the
market development?
3
Market trends
Who are the main interest groups in
the retail markets of CIS and Baltic
States? What are their key issues?
4
Market players
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1
CIS and Baltic states is a diverse region both in terms of
economic and political development
Comments
Political stability
Estonia
Latvia
High
Russia
Lithuania
Kazakhstan
• In terms of GDP per capita Baltic States
are reaching Eastern European levels, while
Russia will soon reach levels
comparable to Poland and Hungary in
2000
Ukraine
Georgia
Belarus
Turkmenistan
Tajikistan
Uzbekistan
Armenia Kyrgyzstan
Azerbaijan
Low
Moldova
50
100
GDP per capita
Source: statistical offices of the countries, EIU, Roland Berger analysis
300
• All the countries of CIS and Baltic States
have been recovering from the crisis
caused by the collapse of the Soviet
Union
– 1995 has been the turning point in GDP
development
– according to the official statistics, GDP
has been growing in the region since
then
500 GDP
[bn USD]
• Change of the ruling regimes has started
in Georgia with “rose” revolution – the case
has been followed by Ukraine and
Kyrgyzstan
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2
CIS and Baltic states contribute together to less than 3 % of world
retail – of which Russia is responsible for almost three quarters
Retail market worldwide – regional
segmentation, [bn. USD]
100% = 9,236
Western Europe
29%
Northern
America
Latin America +
5% Caribbean
4% Eastern Europe
27%
5%
Africa
30%
Asia Pacific and
Australasia
- CIS and Baltic States (in Eastern Europe and in Asia)
Retail markets – CIS and Baltic States, 2004
[bn. USD]
Russia
Ukraine
Belorussia
Kazakhstan
Lithuania
Uzbekistan
Latvia
Azerbaijan
Estonia
Georgia
Armenia
Kyrgyzstan
Moldova
Tajikistan
Turkmenistan
198.1
23.7
8.1
7.2
7.2
6.41)
4.9
3.4
2.41)
1.7
1.3
0.9
0.6
0.6
n.a.
1) 2001
Source: Euromonitor, statistical offices of the countries, EIU, Roland Berger analysis
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2
Russia and Ukraine are not only the biggest retail national
markets – they also have significant potential in the regions
Retail centralization: CIS and Baltic states
National retail
volume
[bn USD)
180
Decentralized retail markets
Centralized retail markets
Moscow
25
Kiev
10
Minsk
Tashkent
Vilnius
Riga
Astana & Alma-Ata
Bishkek
15%
Source: EIU, Statistical offices of the CIS countries
Baku
Dushanbe
Ashgabat
Chisinau
30%
Tallinn
Tbilisi
45%
60%
Share of
retail sales
in the
capital in
the overall
retail
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2
Baltic states have established retail markets – many CIS national
markets are comparable to Russian regions in many terms
Retail volume and GDP per capita, share of institutional trade
10 biggest Russian regions by
retail turnover, 2003 [USD bn]
Retail volume per
capita [‘000 USD]
Moscow
3.5
38.0
Moscow
2.5
Latvia
Tyumen
Samara
1.5
Estonia
Lithuania
Tiumen
3.5
Krasnodar
3.4
Yekaterinburg
3.4
Rostov-Don
3.2
Russia
Perm
Kazakhstan
St. Petersburg
Ukraine
0.5
Uzbekistan
Armenia Belarus
Kyrgyzstan
Azerbajan
Georgia
Tadjikistan
Moldova
Turkmenistan
>5%
>40%
5.0
St-Petersburg
Share of
institutional trade
Ufa
2.6
Nizhnij
Novgorod
2.4
Krasnojarsk
2.4
Cheliabinsk
2.2
GDP per capita
Source: EIU, Statistical offices of the CIS countries
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3
Rise of economic well-being clearly fasters a shift towards nonfood in overall expenditures of population
Share of food1) expenditures in net income, 2003
GDP,
p.F.2)
1.2
0.3
0.3
67
66
65
1.5
58
1.0
0.4
1.3
3.4
50
49
48
2.3
2.7
46
46
0.7
6.3
42
42
5.4
8.1
5.9
4.6
40
40
4.3
1) food, beverages and tobacco
2) ‘000 USD
Source: CIS Statistics office, EIU
6.4
25
26
27
CZ
Hun.
PL
36
27
Uzb.
10.3
55
32
Armen. Tadj.
10.3
Ukr. Azerb. Kyrg. Georg. Rus. Belor. Kaz.
Moldova
Lith.
Latv. Eston.
CZ
Hun.
2000
PL
2004
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3
Consumer behavior in the CIS countries is likely to change slowly
in terms of price orientation, mobility and shopping patterns
Consumer behaviour patterns in different regions
CIS
Baltic States, Eastern Europe
Western Europe
• Stronger price sensitivity due
to generally lower income –
only selected niches for valueadded retailing
• Price orientation remains
strong; shopping for fun and
pleasure are getting grounds
• Strong polarization towards
price orientation on the one
hand and luxury on the other
hand
• Most of the purchases in
most of the countries is done at
the street markets
• Higher share of daily
shoppers due to expenditure
limits and missing storage
opportunities
Source: Roland Berger analysis
• Street markets are losing
importance, as number of auto
owners is growing
• Shopping-rhythm is slowing
down – growing share of
weekend shoppers
• High share of big shopping
venues outside of city centers
and living areas
• High share of weekendshoppers with high share of
non-food
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3
In CIS we expect a very fast development of retail lifecycle –
up-coming opportunities in Russian regions with all formats
Format development trends
Lifecycle of commercial real estate
Expansion
speed
Moscow
St-Petersburg
Western life-cycle
Department stores
Regions
“Category killers”
Baltic
states
Hard discounter
Birth
Russia
Ukraine
Hypermarkets
Supermarkets/
Soft discounter
Growth
Saturation
Decline
Commercial real estate volume in Russia
2003-2008 [m USD]
Kazakhstan
1 517
Other CIS countries
One-stop
shops
863
Western Europe /
Baltic States
Eastern
Europe
27%
Historical
development
Source: Roland Berger, Goskomstat of Russia, Jones Lang LaSalle
22%
125
CIS
43%
2000
32%
2004
Regions
15%
20%
SPb
Moscow
2008
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3
Russia, Ukraine and Kazakhstan are not only the largest
markets – they are also likely to grow faster than the others
Market growth forecast 2004 –2008 – CIS and Baltic states
Market CAGR
2004-2008 20
Russia
15
Ukraine
Kazakhstan
10
Georgia
Estonia
Latvia
Armenia
5
Moldova
Turkmenistan
Azerbaijan
Belorussia
Tajikistan
Kyrgyzstan
Uzbekistan
5
Source: EIU, Roland Berger estimation
10
25
180
Market
volume
2004
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4
CIS markets have a long way to go in terms of concentration –there
is already a clear difference among the main groups of players
Market concentration 1)
Sweden
95%
NL
83%
France
66%
Germany 53%
Baltic
states
40-50%
CZ
26%
Poland
11%
High
• A league of extremely
strong home-grown
international retailers
dominates the markets
• Clear lead of
international, mostly
Mode- German, retailers –
rate
each holds a
significant market
share
Low
CIS
<2-3%
countries
• Biggest retailers are
local as well as
international players
- none has a more
than 1% market share
Main interest groups in the CIS and Baltic retail markets
Western
European
retailers
• Big sustainable
companies
• Financing from
operations –
also access to
cheap long-term
bank loans
Russian retailers
• Fast growing companies – sales volume of the
leaders start to exceed 1 bn. USD
• Financing through financial investors, with a few
exceptions – no strategic partnerships with
international players
CIS and Baltic retailers
• Fast growing companies, but mostly small
(with the exception of VP-market)
• Self-financing or financing through
financial investors – need in capital in-flow
1) Market share of Top-3 players
Source: press research, AC Nielsen, Roland Berger
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4
There are interesting market opportunities in every region –
they vary among the main interest groups (1)
Future
potential
Current
potential
Fulfilled
potential
Strategic points for international retailers in the CIS and Baltic markets
Source: Roland Berger
Markets
Key points
Baltic States
• Market entry through M&A for all formats
• Independent market entry with non-food formats
• Potential for hypermarkets in Lithuania
Moscow, StPetersburg,
Kiev
• Declining potential for new entry with supermarkets and discounters – M&A as a
solution
• Market saturation has been reached for hypermarkets (except Kiev)
• Strong non-realized potential for non-food formats
Other regions
of Russia and
Ukraine
• Almost virgin markets – lots of opportunities in the richest regions
• Top-priority regions have to be identified with consideration of operational efficiency
• Franchising or partnership for cost-saving
Other CIS
States
• Market potential of most of the national markets is comparable to Russian regions –
political risks are higher
• Possible market entry in cooperation with Russian and Ukrainian chains or
franchising
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4
There are interesting market opportunities in every region –
they vary among the main interest groups (2)
Future
potential
Current
potential
Fulfilled
potential
Strategic points for Russian retailers in the CIS and Baltic markets
Source: Roland Berger
Markets
Key points
Baltic States
• Questionable potential due to high saturation and strong positions of international
retailers
• Market opportunities with creative solutions and formats
Moscow, StPetersburg,
Kiev
• Getting bigger – alliances, M&A
• Clear positioning in terms of format and strengthening of own positions within it
• Fast decision about expansion to Ukraine as opportunities for Russian capital there
are unlikely to increase
Other regions
of Russia and
Ukraine
• Consequent regional expansion with the chosen format – the choice of regions
depend on the format and operational efficiency considerations
• M&A of local players
Other CIS
States
• Limited mid-term potential
• Occasional M&A of local chains, not single shops
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4
There are interesting market opportunities in every region –
they vary among the main interest groups (3)
Future
potential
Current
potential
Fulfilled
potential
Strategic points for Baltic and CIS (w/o Russia) retailers in the CIS and Baltic markets
Source: Roland Berger
Markets
Key points – Baltic retailers
Key points – CIS retailers
Baltic States
• Partnership with a Russian chain
within hypermarket format
• Further intra-Baltic expansion
• Questionable potential
Moscow, StPetersburg,
Kiev
• For national champion(s) – market
entry to Russia and Ukraine through
neighboring regions; Moscow, StPetersburg and Kiev as the next step
targets
• For smaller players – questionable
potential
• Questionable potential
• Limited mid-term potential
• Growth, raising company value
• Search for strategic partners and
investors
Other regions
of Russia and
Ukraine
Other CIS
States
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consulting services
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•
•
•
•
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organizational structure
Strategic alliances / mergers
Market value concept
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Positioning
Market analysis / marketing and sales
Restructuring
•
•
•
•
•
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• Liquidity management
Target customers analysis
Brand-management
Sales organization
Pricing
Market entry
Sales
increase
Company
Cost
optimization
Operations
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Innovations / new product development
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Category management
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