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FRESH in St Petersburg
f o o d r e ta i l
Supermarkets offer safe haven
for St Petersburg’s shaken sector
Russia’s leading fresh fruit and vegetable businesses are looking to the major local and
foreign-owned food retailers for more business in future
Local and foreign-owned food retailers such as Okeh, Karusel, Real and Metro are growing their share of fresh food sales in St Petersburg
chriS white
chris@fruitnet.com
How better to service the major
supermarket chains has become the
key question for some of Russia’s
largest fresh produce companies,
which believe that an ever closer union
with food retail offers one of the safest
routes out the credit and commodity
trap that contributed to last year’s
high-profile collapse of two of St
Petersburg’s leading fresh produce
traders, Sunway and Sorus.
“food retail is the future in russia,”
Vyacheslav Pershin, commercial manager
of baltfruit, tells Eurofruit Magazine. “this
is where the new growth is going to come
from.”
it’s a conviction that is shared by
nevskaya, another of St Petersburg’s large
fresh fruit and vegetable importers and
distributors, which believes that the future
shape of the market will be determined by
many of the decisions that are now being
made at food retail.
“our company is investing in a new
fresh fruit and vegetable handling facility
Eurofruit MagazinE - fEbruary 2010 | n o 426
specifically to manage business for our key
supermarket clients,” nevskaya’s import
department head Karina frenkel tells
Eurofruit Magazine. “the project started
a year or so ago, and it is now close to
completion.”
at fruit brothers too, servicing food
retailers is part of the forward strategy.
“We’re investing in new pre-packing lines
to ensure that we can respond to food
retail demands,” explains import manager
anton Smirnov.
JfC, the uS$500m fresh produce
company that is reputedly russia’s largest,
is also focusing a part of its effort on the
emerging food retail sector in St Petersburg
and Moscow (managing director andrey
afanasiev was unable for interview for
this article, but we expect to report on
developments at JfC in next month’s issue).
no surprise then that the growth of
food retail in russia is one of the subjects
to feature large at frESH, the annual
conference for the European fresh produce
sector co-organised by this magazine and
freshfel Europe, which convenes at the
newly-refurbished Corinthia Hotel on St
Petersburg’s fashionable nevsky Prospect
on 13-15 april 2010.
in St Petersburg you can understand
why the future is in food retail. Large,
newly-built and well-stocked retail outlets
now service a significant proportion of the
population of russia’s second city. these
stores, which have become a regular
feature in the landscape of this sprawling
city of some 5m inhabitants, are located
close to the vast Soviet-era apartment
blocks where most people live, a world
away from the historic city centre which
was founded by Peter the great in the
early 18th century.
Powerful, russian-owned food retail
groups such as X5 and foreign-owned
supermarket operators such as germany’s
Metro and real compete for business in St
Petersburg’s suburbs, providing shoppers
with a wide range of locally-grown and
imported fresh fruits and vegetables
in their well-appointed fresh produce
departments.
they’re fighting for market share by
offering high quality produce at competitive
prices, a well-worn formula that has
contributed to the success of supermarkets
all over the rest of Europe.

indeed, their ability to win shoppers
to their smart, well-stocked outlets has
been so successful that life has become
much harder for the small kiosks that sell
fresh fruits and vegetable on many street
corners here.
Shuttered up in mid-December to
protect themselves and the produce
they have on sale from the bitter cold
that is a regular feature of this part of the
world each and every winter, these small
shopkeepers now need to work a lot
harder to earn their living, say locals.
Despite Carrefour’s recent retreat from
the russian market, it is a safe bet that the
supermarkets will continue their almost
inexorable expansion, especially if this
growth is being lead by a russian-owned
retail giant.
this is very much the case for X5,
russia’s largest retail group which was
created in May 2006 from the merger of
the soft discount chain Pyaterochka and
the supermarket operator Perekrestok.
Listed on the London Stock Exchange
and headquartered in amsterdam, X5
acquired hypermarket chain Karusel in
June 2008 and got the green light from
russia’s anti-monopoly authority as
recently as last December to complete
the purchase of Paterson, a Moscowbased
supermarket chain.
this latest acquisition will boost X5’s
net sales, which had already grown to just
short of uS$4bn for the first six months
of 2009, and increase its store portfolio
to more than 1,000 stores in 32 regions of
russia as well as ukraine.
Developing a regular business with
successful food retailers such as X5 makes
sense for St Petersburg’s larger fresh
produce companies. it insulates them
against the high-risk commodity trading
business which contributed to last year’s
collapse of Sorus and Sunway.
their disappearance under a mountain
of debt in the teeth of a financial crisis
that was hit every part of the global
economy as a whole shook confidence
in russia’s fresh produce sector, both at
home and abroad.
it also contributed to a new realism
among St Petersburg’s fresh produce
importers. “We have all become more
careful,” explains Mr Smirnov of fruit
brothers. “Strategic planning is vital in
every area.” better financial management
has become the watchword. “the trust
that foreign suppliers had developed
in russian companies was very badly
undermined,” admits Mr Pershin,
commercial manager of baltfruit. “today,
Karina Frenkel Mohammed Mohammedli Natalia Vrublevskaya Vyacheslav Pershin
the easiest way to restore that trust
among suppliers is to ensure that you
pay on time! We need to ensure that our
credit lines are as a short as possible, that
our cash reserves rather than loans fund
any new investment, and at the same
time we must ensure that a much larger
proportion of the volumes that we buy
from abroad is based on firm orders.”
baltfruit expects some 70 per cent of
its annual sales to be generated by its
supermarket business within three years
compared to less than 20 per cent only
three years ago; nevskaya also believes
that more of its business in future will be
contracted to the major supermarkets
in St Petersburg and Moscow, the capital
city; fruit brothers is also looking for
more retail business.
this news is bound to reassure most
major suppliers outside russia, who
rely on a portfolio of supermarket
programmes around the world as the
least-risk route to market. but it also begs
the question whether there are perhaps
too many companies looking for business
with the major supermarkets.
“Working with the supermarkets simply
isn’t profitable enough,” warns one fresh
produce importer.
it’s a view that will find an echo
elsewhere. Supermarkets may well
feature strongly in the major cities of
Moscow and St Petersburg, but they are
still something of a rarity in other parts of
this huge country.
in fact, the non-supermarket sector
remains a major part of the business in
russia. it is clear that specialist operators
based in St Petersburg such as rgS Co,
FRESH in St Petersburg
rusfruit and akhmed fruit differentiate
themselves by their ability to target
customers in St Petersburg’s enormous
hinterland which stretches beyond
Moscow to the country’s other major
cities and its far-flung regions.
for example, Mohammed
Mohammedli, general manager of
akhmed fruit Co, expects his company’s
supermarket business to remain stable at
about 30 per cent of total sales, but the
Anton Smirnov
large majority of his effort is tied up with
supplying customers across russia. Last
December akhmed fruit’s 12,000 square
metres of coldstores in and around
St Petersburg housed a wide range of
imported fresh fruits and vegetables
which were destined not just for the local
market but predominantly for buyers
much further afield.
Meanwhile, rusfruit markets almost
all of the fresh fruit it sources from all
over the world to the regions. “We have
developed a good reputation among
buyers and suppliers alike,” explains
import manager natalia Vrublevskaya,
“but business is still tough and credit is not
easy to come by. russia is a good market,
but it’s not an easy market, and i think
suppliers sometimes to have more realistic
expectations of what russia can provide.”
others believe that it is a question of
making the business as straightforward
as possible.
“Just keep it simple,” says Marat
Mustafaev of rgS, which markets some
80 per cent of the fresh produce it sources
to russia’s regions. “it’s a question of
paying for the produce you’ve bought,
collecting the money when you’ve sold
it, and to ensuring that the produce is
distributed on time and to order.”
this is an elemental lesson that some
fresh fruit and vegetable companies came
to understand perhaps a little too late. but
St Petersburg’s fresh produce operators
now seem alive to the commercial realities
that are now shaping the market. in turn
they need to reassure their many suppliers
all over the world that the russian market
really is back in business. n
Eurofruit MagazinE - fEbruary 2010 | n o 426