All roads lead to Russia for expanding retailers

This week saw two retailers of varying size state that they intended to increase their presence in the market through acquisition. Carrefour and Finnish multiple-sector retailer Kesko are not alone in eyeing up the world’s ninth-largest grocery market and, as the speculation heats up, you can be certain the names Wal-Mart and Tesco will be bandied around again.

Perhaps the most interesting thing about Russia is that there is no shortage of potential, with Wal-Mart having previously been linked with grocers Lenta and Kopeika, and Carrefour with food retailer Seventh Continent. However, the words “Russia” and “acquisition” seem to be a bit of a taboo. DSGi’s ill-fated attempt to acquire local electronics retailer Eldorado is a frequently mentioned example of the huge challenges involved with doing business there.

Speculation around Carrefour and Seventh Continent has heated up following the recent acquisition of the retailer’s debt by French bank Natixis from German giant Deutsche Bank.
To achieve the retailer’s aim of occupying a top three slot in the Russian market within the next two years, it has no choice but to acquire a local player; the key question is who and when. So far, Carrefour has been reasonably coy on the situation. However, a recent comment from Jacobo Caller, director of Carrefour Russia, has renewed speculation. He said: “At the moment, we have no deal on the table. But I insist that mergers and acquisitions are one of the possibilities.”

Kesko’s ambitions are likely to be a little more sedate. Having acquired Stroymaster DIY stores in 2005, the company has taken its time to build a network of around nine DIY stores in the country. With nearly five years’ operating experience in the market, Kesko may be a bit of a dark horse and transfer its knowledge of local consumers gained through the DIY sector to develop a successful grocery business.

The attention at some point will turn back to Wal-Mart, with speculation in July suggesting the company had made a preliminary offer to discount chain Kopeika. In the short term, however, its focus is likely to be on other emerging markets and. having recently completed its acquisition of D&S in Chile, markets such as Colombia and Peru seem to be ahead of Russia in the queue.

➤Greg Hodge is research director at Planet Retail. For more information contact us on:

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