|
|
Russia Food and Drink Report Q3 2008Published by: Business Monitor International Published: Jul. 22, 2008 - 76 Pages Table of Contents
AbstractMultinationals have continued to seek and execute bold acquisitions in the Russian food, drink and massgrocery retail (MGR) markets, capped off by PepsiCo’s US$1.4bn takeover of the juice business ofLebedyansky in March. Large local players are doing well too, with MGR giant X-5 Retail completing ashare issue to fund its takeover option on hypermarket chain Carousel, and Russia’s largest food player,Wimm-Bill-Dann (WBD), delivering 30% plus sales growth in Q108. BMI’s US dollar growth forecastreflects some of the reasons for continued optimism, including 85% growth predicted for the food anddrink market as a whole for the period 2007 to 2012, and 123% for the MGR market.Whether this growth will prove sustainable within and beyond the forecast period remains the centralquestion for foreign investors in Russia’s food and beverage industry. At the moment, the picture remainsmixed. As elsewhere, food price inflation is a major issue, although a strong economy and the continuedapplication of a ‘voluntary’ pricing accord by leading food producers and retailers on a number ofessential products seems to have staved off an immediate crisis, even if underlying structural problems inthe food market remain unaddressed. A major and long-term restructuring of the agricultural sector isdesperately needed - but the government needs to put in place incentives and guarantees to attractdomestic and foreign investment. Other problems facing Russian food and beverage producers are, however, more familiar to Westernmarkets than the country’s dilapidated collective farms. As modern retailers continue to expand, thenegotiating strength of the largest operators presents an ever-greater threat. With its takeover of Carousel,X-5 Retail will control more than 3% of the Russian food retail market, an unprecedented level by localstandards. Foreign MGRs such as Auchan and new entrant Carrefour bring notoriously tough pricingpolicies and international scale to the marketplace. For the largest local players, such as WBD, the scaleand co-marketing opportunities can cancel out narrower margins. Retail concentration is a real threat tosmaller and regional players on the other hand, and they appear to be among those backing a longdiscussed‘Law on Retail’ that would put the brakes on big retailers by, among other things, limitingopening hours. Still, the major reason why Russia remains third instead of first in BMI’s latest Food and Drink BusinessEnvironment Ranking is generalised political and economic risk. The food and drink sector has largelybeen left alone by the state in the past. But as foreign companies come to dominate certain sectors, thereare fears the government could use overt or subtler methods to re-assert a degree of state control (andprofit sharing). The proposal of a government wholesale alcohol monopoly is one example. The newRussian president, Dmitry Medvedev, a former Gazprom chairman, should know better than most thedire impact on productivity and output in the oil and gas industries caused by state control. Investors willbe hoping that the early liberal talk of the new president will mean that the food and beverage sector isallowed to continue to develop with minimal government interference. Get Full Details About This Report >> |
|
|||
|
About MarketResearch.com
|
||||