Russia’s leading domestic supermarket chains have joined forces this week, creating the country’s first grocery cartel in a bid to defend their market share against foreign competitors and leverage increasing bargaining power against producers.
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Perekryostok, Kopeika, Dixi and Megamart have compiled a blacklist of more than a dozen producers guilty of using “soviet style” business tactics; demanding increased floor space, higher prices and providing poor quality goods. The list now includes some of the largest domestic names, such as confectioner Rot-Front and dairy giant Wimm-Bill-Dann, but the supermarkets say they will not be put off, tired with compromising their own business strategy in a bid to please their suppliers.
The four members of the Russian Retail Alliance, who posted combined sales worth US$391m last year and controlled 38% of the “civilised food market” [not the black market], have expressed their intention to lobby for better wholesale prices and regulated retail prices. They will also consolidate operations against the blacklisted suppliers. For other retailers wishing to join the RRA, annual sales of US$50m are a minimum requirement.
Analyst Andrei Ivanov, from Troika Dialog, explained: “Retail supermarkets in the West can dictate their policy to suppliers – the prices, the quality of products. In Russia the situation is upside down. There is no strong chain dictating to suppliers. Probably now, being together, the alliance can talk to suppliers like they do in the West.”
Mimicking the profitable operations of Western grocery retailers will prove essential as the battle steps up against foreign players in the supermarket sector. So too will a degree of unification in the Russian supermarket sector and ambitious plans for expansion on the part of the individual chains.
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By GlobalDataThe arrival of global majors is still pending, but once they arrive, members of the RRA want to be ready to compete strongly. Germany’s Metro, which has distinct supply chain and profit margin advantages as the world’s third largest chain, revealed late in 2000 that it would open nine stores in Moscow over the next five years. Similarly, French giant Auchan has completed a deal to invest US$40m in new Moscow hypermarkets.
