Boston, MA -- (ReleaseWire) -- 01/07/2014 -- The decision by Russian monetary authorities to rein in consumer credit growth will translate into weaker-than-anticipated private expenditure beyond 2013. We have already cautioned that consumer lending growth of 39.8% - the average for the 12-month period ending in May 2013 - was unsustainable. The decline will weigh on household spending into 2014, with the concomitant effects on food and drink spending.
Headline Industry Data:
- 2014 per capita food consumption (local currency) = +9.7%; forecast compound annual growth rate (CAGR), 2013 to 2017 = +9.1%. - - 2014 beer volume sales = -1.0%; forecast CAGR to 2017 = 0.4%. - - 2014 fruit juice volume sales = +4.6%; forecast CAGR to 2017 = +5.0%. - - 2014 mass grocery retail sales (local currency) = +28.3%; forecast CAGR to 2017 = +30.0%.
Key Company Trends
X5 Continues To Disappoint: Russian grocery retailer and London-listed X5 reported sub-par results for Q313 in October 2013. The food retailer has had a troubled few years, losing its status as the largest supermarket group in Russia to Magnit. In the three months to the end of September 2013, like-for-like sales excluding new store openings fell by 1.7%, primarily driven by a 6.2% fall in consumer traffic.
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Revenue growth also disappointed despite growing by 6.6% to RUB124bn (US$3.9bn). X5 has had difficulties since a change in its growth strategy. Focusing heavily on acquisition growth up until around mid-2011, X5's last purchase was discount group Kopeyka for RUB35bn (US$1.1bn). X5 has since focused on organic growth, and though revenues and profits have risen as a result of this strategy, the company has been far outpaced by Magnit.
Foreign Chocolate To Get Stronger: Establishing a foothold in Russia's chocolate industry has been a challenge for multinationals such as Nestle, Mars and Mondelez International. They have come up against number of Soviet-era brands owned by companies such as United Confectioners but, although these remain popular, particularly with the older generation, younger Russians are in general a lot more accepting of foreign brands, which are seen to carry greater status.
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