Boston, MA -- (SBWIRE) -- 04/10/2014 -- The weakening rouble is of concern to food and drink and wider consumer-facing companies given that this will make importing raw materials into Russia more expensive, and will also weaken the purchasing power of the consumer base. This is the core risk in our opinion. For a company like Carlsberg, which has faced numerous issues in Russia on the back of much higher beer taxes and stricter regulation of the off-trade retail sector, this would pose yet another challenge.

Headline Industry Data:

- 2014 per capita food consumption (local currency) = +9.4%; forecast compound annual growth rate (CAGR), 2013 to 2018 = +8.6%.
- 2014 beer volume sales = 2%; forecast CAGR to 2018 = 2%.
- 2014 fruit juice volume sales = +4.6%; forecast CAGR to 2018 = +5.0%.
- 2014 mass grocery retail sales (local currency) = +28.3%; forecast CAGR to 2018 = +30.3%.

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Key Company Trends

Weak Rouble A Major Concern For Key Retailers Magnit And X5: Magnit earlier featured in BMI's macro/ industry strategy table between 2011 and 2012 on the back of the Europe team's upbeat view on household spending and our bullish view on discount retailing, which we felt would be best represented by Magnit given its core focus on this segment of the industry and its focus on Russia's regions. However, the boom has now passed. The base effects are tougher, the outlook for the consumer is weaker and more regions have been covered. Retailers such as Magnit will find it increasingly difficult to grow annual sales at more than 30% a year consistently through organic growth alone as the structure of the industry moves into a slower growth phase.

We still see Russian discount retailing as a strong growth sector, particularly as there is still a lot of room for it to consolidate given the ongoing strength of independent stores. In this sense, Magnit still looks well placed competitively going forward, certainly more so than X5, which still has more to prove to get back on track. However, the difference is that we no longer see Russia's retail sector as one of the two or three most exciting in the emerging world as we did back in the 2010-2012 period.

Lenta Aims To Raise GBP1bn In London Listing: In February 2014 it was reported that the Russian grocery retailer Lenta was reportedly planning a dual listing in London and Moscow worth around US$1bn for a 20-25% stake, which would value the company at around US$5bn, according to a report by in the Financial Times.

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