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June 5, 2008

RUSSIA: X5 on acquisition prowl

X5 Retail Group is on the look-out for further acquisitions to expand in Russia and improve its hypermarket business this year.

X5 Retail Group is on the look-out for further acquisitions to expand in Russia and improve its hypermarket business this year.

“We have a strong expansion plan this year for hypermarkets because there is a lot of competition and we want to be the market leader,” X5 COO Antonio Melo told the IGD Retail Conference in London yesterday (4 June).

The company already operates 14 hypermarkets in Russia and its recent acquisition of Karusel will add an additional 37 stores to the chain. X5 also plans to expand through a programme of new store openings.

Hypermarkets represent 7% of the group’s total sales but are the fastest-growing channel in Russian retail.

“Hypermarkets are a clear area where we are going to put a lot of effort,” Melo said.

With the Moscow and St Petersburg markets “almost saturated”, Melo said Russia’s largest retailer would focus expansion efforts on the Russian regions.

“For us, the most important regions are Yekaterinburg, Chelyabinsk and Notting Novgorod…. To enter the regions we look to buy a local leader, which gives us a footprint and a supply chain basis,” Melo revealed.

X5 will also invest in developing its supply chain to support growth in the coming months. Melo said that X5 will open a “huge number” of distribution centres in the next year.

“In Russia, if you don’t have a good supply chain you are in trouble,” Melo said. “A key element of our success is the centralisation of our supply chain. Supply chain is essential to success – otherwise you don’t have products on shelves.”

Summing up X5’s overall strategy and ethos Melo added: “We like the speed. We like expansion. We like to open stores. We like to buy strategic companies.”

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