Blog: Dean BestNestlé hails Russia; whither Tesco?

Dean Best | 27 March 2008

When Nestlé speaks, the rest of the food industry sits up and takes notice.

As the world’s largest food group, and a company that is seemingly impervious to the cost pressure affecting the industry, Nestlé is at the forefront of many of the emerging trends in our business – by both category and geography.

This week, Nestlé has signalled its confidence in the potential of Russia. Rising inflation has caused some economic commentators to question how long the Russian market will prove a lucrative one for consumer goods companies.

But, according to Nestlé, the rising purchasing power of consumers in the oil-rich country is offsetting concerns over inflation.

Moreover, Russia’s retailers are also showing signs of confidence in the spending power of the country’s citizens.

Last week, X5 Retail Group, the country’s largest retailer by sales, signalled it will continue to expand in 2008 with plans to buy out a key licensee of its discount stores. X5 spent much of 2007 in expansionist mode and there seems to be no let-up this year.

And yesterday, rival retailer Magnit set the ball rolling for its own expansion with plans to raise funds by listing on the London Stock Exchange.

Investing in emerging markets is fraught with challenges. But, right now, it seems leading players in food manufacturing and retailing see Russia as a lucrative growth market.

One pertinent questions remains, however. Just how long will it buy until the likes of Carrefour and Tesco plant their flags outside a Russian store?


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