Russia Retail Report Q1 2013

The Russian Retail Report examines the long-term potential of the local consumer market, but flags shortterm concerns about the impact on Russia's economic outlook of the risk of capital flight and overdependence on oil.

The report examines how best to maximise returns in the Russian retail market while minimising investment risk, and also explores the impact of the ongoing crisis in the country's main export market, Europe, on the Russian consumer and on the ability of producers and exporters to realise returns in the short term.

The report also analyses the growth and risk management strategies being employed by the leading players in the Russian retail sector, as they seek to maximise the growth opportunities offered by the local market.

Russian per capita consumer spending is forecast to increase by 44% between 2013 and 2016, compared with a regional growth average of 33%. The country comes third in BMI's Central and Eastern Europe (CEE) Retail Risk/Reward Ratings, although it underperforms significantly for Risk.

Among all retail categories, mass grocery retail (MGR) will be the outperformer through to 2016 in growth terms, with sales forecast to grow much faster than overall food sales throughout the forecast period, by almost 132% to US$231.46bn by 2016. This would take MGR's share of the overall food market from 42.1% in 2013 to 80.8% by 2016.

In the competitive arena, BMI sees upside potential in the fact that the Russian government has committed to spending billions on infrastructure over the next 10 years, particularly railroads and highways, which should translate to better logistics for expanding retailers. Over the last quarter, BMI has revised the following forecasts/views:

? BMI's below-consensus forecast for Russia's 2012 real GDP growth of 3.4% appears to be well placed as leading indicators point towards a further slowdown in economic growth. We have revised down our forecast for 2013 real GDP growth in Russia to 3.4% from 3.6% previously. This comes on the heels of a stark shift by the central bank towards monetary policy tightening, a bias we expect to remain intact over the coming months.

? BMI's expectation for private consumption to weaken going into 2013 underpins our view for weaker headline growth. Private consumption has been a key driver of economic growth in Russia over the past two years. Falling unemployment and rising disposable incomes have seen household consumption growth average 7.0% year-on-year (y-o-y) in H112, up from 6.1% in the same period of 2011. However, going forward, tighter access to credit, via higher interest rates and the likelihood of more prudent lending practices by banks, will translate to weaker household consumption.

? Leading indicators suggest that these dynamics have already begun to feed through to weaker consumption – real retail trade slowed into H212, coming in at 4.4% y-o-y in August, down substantially from the 7.4 % racked up back in January. As a result of these combined dynamics, we forecast private consumption to increase by 4.2% in 2013, down from our forecast of 4.9% in 2012.

Table of contents

Chapter - Executive Summary

Chapter - SWOT Analysis

Russia Retail Business Environment SWOT

Russia Political SWOT

Russia Economic SWOT

Chapter - Market Overview

Current Trends

Key Players

Chapter - Industry Forecast Scenario

Consumer Outlook

Retail Growth Outlook

Table: Retail Sales Indicators, 2009-2016

Table: Retail Sales Breakdown By Key Segment, 2013f

Macroeconomic Outlook

Table: Economic Activity

Chapter - Regional Retail Outlook

Central And Eastern Europe Retail Outlook

Table: Central And Eastern Europe Retail Trends, 2009-2016

Table: Central And Eastern Europe Retail Sales, 2009-2016 (US$bn, unless stated)

Table: Central And Eastern Europe Retail Sales By % Share, 2009-2016

Regional Retail Trends

Chapter - Risk/Reward Ratings

Table: Regional Retail Business Environment Ratings

Russia's Retail Rating

Limits To Potential Returns

Risks To Realisation Of Returns

Chapter - Mass Grocery Retail

Russia Mass Grocery Retail SWOT

Market Overview

Table: Structure Of The Mass Retail Grocery Market By Number Of Outlets, 2003-2011

Table: Structure Of The Mass Retail Grocery Market By Value, 2003-2011

Table: Average Sales Value per Retail Outlet – 2011

Industry Forecast Scenario

Table: Mass Grocery Retail Sales, 2009-2016

Table: Sales Breakdown By Retail Format Type

Trade

Table: Trade Indicators, 2009-2016

Industry Developments

Chapter - Consumer Electronics

Russia Consumer Electronics Market SWOT

Market Overview

Computers

Table: PC Sales, 2008-2016

AV

Table: AV Sales, 2009-2016

Mobile Handsets

Table: Mobile Communications, 2008-2016

Three Most Popular Models In Different Pricing Categories In MTS Retail Network Q311, % Of Total Units Sold

Industry Forecast Scenario

Consumer Electronics Market

Table: Consumer Electronics Overview, 2008-2016

Industry Developments

Chapter - Automotives

Russia Autos Industry SWOT

Industry Forecast Scenario

Domestic Sales

Table: Autos Sales, 2010-2016

Production

Table: Autos Production, 2010-2016

Trade

Table: Autos Trade, 2010-2016

Passenger Cars

Table: Passenger Car Segment, 2010-2016

Chapter - Demographic Outlook

Table: Russia's Population By Age Group, 1990-2020 ('000)

Table: Russia's Population By Age Group, 1990-2020 (% of total)

Table: Russia's Key Population Ratios, 1990-2020

Table: Russia's Rural And Urban Population, 1990-2020

Chapter - BMI Methodology

How We Generate Our Industry Forecasts

Sources

Related research categories

By sector: Retail (in Off-trade)

By market: Russian Federation (in Asia), Russian Federation (in BRICM)