COUNTRY PROFILE

II
FMCG MarkeT
Overview of the Ukrainian Retail Market
Development

By METRO Cash & Carry

Ukraine Ltd.

www.metro.ua

According to A.T.Kearney “Windows of Hope for
Global Retailers”1 of the top 30 emerging markets in
2009 Ukraine kept the position of the previous year
embracing the 17th place. This year has been truly a
challenge for many market operators with some be-
ing forced to close unprofitable stores, like Nash Kray,
Bolshaya Lozhka, Vopak, Velyka Kyshenya, Furshet
etc, others to partially sell their assets to competitors:
Kvartal, Arsen, Barvinok, Olivier and even withdraw
from the market like O’key. Many retailers gave pref-
erence to development of existing objects. Only few
chains including METRO Cash & Carry that opened
two new stores (Kyiv VI and Kharkiv II) continued to
expand in 2009 as well.

TOP 10 Food Retailers Listed According to the Number of Stores

Development in 2009
Number of Stores,
№ Company Head Office Chain in Comparison to
August 2009
2008

1 ATB market LLC Dnipropetrovsk ATB 332 Positive

2 Fozzy Group Kyiv Silpo, Fora, Fozzy, 292 Positive

Bumi market

3 CJSC “Furshet” Kyiv Furshet* 97 Negative

4 “PAKKO- holding” Lutsk Vopak, Pakko 85 Negative

5 CJSC “Eurotek” Kyiv Fresh, Soyuz, Kvartal, 84 Positive

Arsen, Fresh-market

6 LLC “ЕКО” Kyiv ЕКО-market 67 Positive

7 LLC “Ukrainian Retail” Donetsk Brusnytsya, Olivier 67 Positive

8 Volwest Group Lutsk Nash Kray 58 Negative

9 JSC “Kviza Trade” Kyiv Velyka Kyshenya, 49 Negative

Prosto Market**

10 NS Limited Kharkiv Dobryi Kupets 45 Positive

* Without including Fourshet stores in Moldova

** Without including Green Hills Market in Moldova

The 2009 A.T.Kearney Global Retail Development Index

1

www.chamber.ua 179
Figure 1
The 2009 Global Retail Development Index™

Source: A.T.Kearney The 2009 Global Retail Development Index

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 COUNTRY PROFILE

ТОP 10 Food Retailers According to the Geographic Coverage

The Number
of Economy- The Number Geographic
№ Company Head Office Chains Geographic of Regions Type of
Regions Covered Operator
Covered

1 Fozzy Group Kyiv Silpo, Fora, Fozzy, 5 23 National

Bumi-market

2 CJSC “Furshet” Kyiv Furshet 5 20 National

3 JSC “Kviza Kyiv Velyka Kyshenya, 5 19 National

Trade” Prosto market

4 LLC “ЕКО” Kyiv ЕКО-market 5 16 National

5 Metro Cash & Kyiv METRO Cash & 5 15 National

Carry Ukraine Carry

6 Volwest Group Lutsk Nash Kray 5 14 National

7 CJSC “Eurotek” Kyiv Fresh, Soyuz, 5 11 National

Kvartal, Arsen,
Fresh-market

8 LLC ATB Market Dnipropetrovsk АТB 4 14 National

9-10 “SPAR – Ukraine” Kyiv SPAR 4 9 National

9-10 “Billa-Ukraine” Kyiv Billa 4 9 National

M&As Own Brands

Retail has undergone some fundamental but rather pre-
dictable changes in 2009. Such foreign players as the
Baltic O`key and Russian Vester have left Ukrainian mar-
ket in summer. O`key Ukraine has been looking for an
investor but huge debts to creditors and suppliers forced
the operator to leave the market. Auchan, French hyper-
market chain, became the lessee of former O`key prem-
ises. The opening of Auchan stores on former O`key
premises will allow the French company triple its market
share in Ukraine with minimal time period. In overall in
August retailers demonstrated the growing activity. Rain-
ford bought “Bolshaya Lozhka” supermarkets; Ukrainian
Retail purchased Varus Express neighboring stores. And
yet some chains enjoyed a rather comfortable time. For
instance, Ukrainian Retail chain (Donetsk), the subsid-
iary of System Capital Management holding, bought the
rental right of 3 regional retailers and merged “Olivier”
chain of mini markets in Dnipropetrovsk. All outlets were
re-branded in “Brusnytsya”. This reflects an overall trend:
the companies that are a part of big corporations felt bet-
ter and regional retailers building their chains with bor-
rowed funds demonstrated vulnerability.2
The development of own brands is the market trend.
Under the conditions of severe competition and de-
creasing margin retailers are trying to improve their
business profitability through Private Labels (PL). This
though also promotes producers. For retailers the indi-
cation of the producer on the packing serves as an ad-
ditional competitive advantage convincing customers
to purchase. Catching up with market trends mean-
while Ukrainian own brands market is predominated
by the medium and low price segments. The recogni-
tion of some recent own brands grows dynamically.
Nielsen Ukraine data suggest that own brands have
the following recognition: Premia (Fozzy ) – 37%, ARO
(METRO) – 31%, Hit Product (Velyka Kyshenya) and
Furshet (Furshet chain) – 26%. The financial crisis
accompanied with declining incomes decrease made
a significant input into this. Customers switched to
goods of low and medium price segment. After in 1Q
2009 social products e.g. salt, eggs, sugar, sausages,
cheese, butter and oil lead the sales almost all retail-
ers announced the launch of own brands in low price
segment.3

Galitskiye Kontrakty, 07.09.2009

2
3
http://biz.liga.net/articles/EA090052.html

www.chamber.ua 181
As known the success of private labels is ensured by
the combination of good quality and rational pricing.
One of the key issues though still to be addressed by
retailers is the fulfillment of customer expectations.
While producers begin to understand the advantages
of private label production as the source of additional
and stable contracts and guaranteed sales retailers
are sure the sales of private labels will grow indepen-
dently of crisis. As many distributors will have to leave
the market the chains will be forced to optimize as-
sortment and offer the missing goods under private
labels. Most retailers though take own brands as an
opportunistic feature rather then strategy. Opposite
to that METRO Cash & Carry rolled out the revised
own brands strategy offering tailor-made solutions for
every customer group helping them to advance their
business. For instance, the newly launched Horeca
Select offers the targeted assortment to restaurants.
It is thought for the convenience of chefs, which is re-
flected in the packaging and products deemed for pro-
fessional kitchens.
Declining Import
This year has been also characterized by the numer-
ous attempts of government to manage the market in
particular imports. Apart from margin regulations, social
products classification the Law on “The amendments to
some Ukrainian Laws aimed at improving the paying bal-
ance due to the World Financial crisis” adopted by Verk-
hovna Rada and active as of March 7, 2009 imposed a
13% temporary special extra charge on some product
categories: chilled beef, fresh, cooled and frozen pork,
meat by-products and fat, sausages, canned meat, pre-
pared and canned fish and Crustacea, caviar, wine, li-
quors, vermouth, spirits, ethyl. Also coal, carpets, stocki-
net, clothes, underwear, shoes and hats, ovens, heating
boilers, motor cars, lorries, buses, pumps, ventilators,
refrigerators, deep-freezers, electric heater, domestic
electric appliances. The authors proclaimed the Law to
save local producers and support Ukrainian economy4.
On March 18, The Cabinet of Ministers narrowed the list
of products affected by the extra charge and as of March

Retailers and Their Own Brands

Company PL`s Name Assortment List

Fozzy Group Premia Premia: Confectionary, tea, coffee, cheese, fresh
Povna chasha and frozen goods and nonfood.
Own brand Premia is presented by 700 positions in
100 goods categories.
Povna chasha: cereals, canned fish, bisquits, flour,
dairy, tinned stewed meat, disposable cutlery.
500 articles in 80 goods categories.
METRO Cash & Aro, Fine Food, Horeca Select, H-Line, Rioba, Sigma Targeted assortment of food and nonfood products
Carry – strategic brands.
Furshet Furshet Furshet: pelmeny and vareniky, confectionary and
bakery, chocolate bars, Sunflower-seed oil, canned
vegetables, sugar, pine-apple, cereals, tea, juices,
drinking water, ice cream, bed-clothes, wet and dry
napkins, knives, disposable cutlery.
ATB Sladko brand, Sytnyi Ryad, Veselaya Ferma, Pro Confectionary, sausages, tea, juices, flour, kvas,
zapas, Dobrosol, Polyarnaya skazka, Bon vie, Rybnyi beer, spirits, dairy, ice cream, sea foods, semi-
den, Figaro, Mazhornaya, Starorusskiy, manufactured articles, sauces, snakes, household
chemical goods, household goods.
In total over 300 articles of food and non food.
Billa Clever Clever: sliced pine- apples, cheese, tea, pickled
cucumbers, chocolate, cracker, drinking water,
tomatoes Cherry, eggs, paste, ice-cream, butter,
muesli.
Amstor Esto persha tsina Soap liquid
Velyka Kyshenya №1 Chesna tsina №1 Chesna tsina: tea, groceries, canned goods,
Hit Product eggs, household chemical goods, household goods.
Shedroye zastolie Hit product: sunflower oil, cereals, flour, sugar,
Aqua Era mineral water, disposable cutlery, tinned fruits and
vegatebles, personal hygiene products.
Schedroe zastolye: cooked sausage, semi-smoked
sausage, small sausages.
Aqua Era: drinking water
In total 350 articles- food and nonfood
Nash Kray Nash Kray Nash Kray: flour, juices, butter, vareniki, paste,
disposable cutlery, condensed milk.
In total 82 articles in 10 goods categories.

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 COUNTRY PROFILE
25 it was actual only for refrigerators and motor cars. As
a result of such anti crisis law adoption the price on import
goods went up and the relations with some foreign part-
ners have been affected. Eventually on September 7, the
extra charge taxes for import were cancelled as initially it
was a temporary measure planned for 6 months.5
Market Trends
Premium Continues to Grow
Despite the declining incomes and overall decrease of
sales the premium stores enjoy stability. For instance,
consumers show their appreciation of delicatessen su-
permarkets. This is an attractive segment for retailers as
the niche of delicatessen boutiques is relatively empty.
With its Furshet (Furshet gourmet) as an old-timer of
the segment more companies have joined in, such as
Markom with Delight chain,and Reardi with Market Plaza
in Kryvyi Rih. Specialised stores opened in such seg-
ments as fish and wine: Good Wine, Paradis du Vin.
Gastronomical boutiques are represented by Volkonskyi
and Repriza bakery-confectionaries, chocolate boutique
of Atelier restaurant. Some chains even prepare special
shelves or even a separate room for assortment presen-
tations. of the opening of premium class supermarkets is
also more profitable than the traditional retail. For some
chains the fact the premium class store opening increas-
es the brand value serves as the strongest argument to
jump into the sector. Experts forecast that premium retail
players will suffer the least as high profitability will help
them to overcome the crisis.
Discount Programs Become Tougher
Retail chains made their discount programs tougher. This
is true for all types of chains. Chains increased the primary
amount of purchase needed to receive discount. Experts pre-
dict the redistribution of customer flows between the chains
and more strategic approach to discount programs.6
Own Logistics
Product chains are trying to optimize logistics expenses
creating own logistics schemes or outsourcing. In spring
Euroteck set in operation own logistics chain providing
50% of all deliveries. PAKKO Holding Ltd set to increase
its goods turnover by 40% through introducing own dis-
tribution centers. ATB chain considers own logistics as
an integral component of discount trade format. Other
retailers such as METRO Cash & Carry Ukraine cooper-
ate with professional logistics companies.7
Household Appliances and Electronics Sales Reorganize
Volume of household appliances and electronics sales
fell by 60% from the beginning of the year in comparison
http://jerelo.com.ua/ru/business/2009/9/7/109352
4 6
5
http://economic-ua.com/articles/48654
www.chamber.ua
to the previous year. Customers’ preferences moved to
low – price segment.
Dynamics of Low Price Segment
Development in 2007-2009
Thus, trade chains began to review their assortment. Ex-
perts believe soon every retail chain will focus on particu-
lar goods and price segment. The crisis also strength-
ened the development of own brands. Over 90% of own
brand goods are PCs, monitors and laptops. Several
chains showed the dynamic development of own brands:
Foxtrot presented Delfa and Bravis private labels, Eldo-
rado presented Elenberg and Cameron; Unitrade Group
developed Ixtone.
According to Unitrade Group data over 400 points of
sales of electronics closed in 2009. As of November 2009
the digital retail market is represented by over 25 national
and foreign chains. The national chains include Foxtrot,
Foxmart, Comfy, MegaMax, Tekhnopolis, Tekhnoyarma-
rok, ABV Tekhnika, Shok, Mobilochka, Mobidik, Citrus
Discount, TTT, Klik. Ringoo, Allo, Unitrade, Diawest/ For-
eign- Eldorado, Evroset. The following chains stopped
their existence: Melofon, Germanos. Domotekhnika and
MKS initiated bankruptcy.
Dynamics of low price segment development
in 2007-2009
Shaped for 2010
Experts believe the 2009 has tested retailers for qual-
ity and professionalism as well as strategy. The 2010
will show the results of the decisions made finalizing
the distribution of power on the market yet the top 5
should remain unchanged. Retailers themselves be-
lieve the market has already reached its bottom and
will slowly but gradually start to recover. This should
reactivate the expansion plans of retailers and once
again attract foreign chains to enter the market. With
real estate still suffering decline there could be no bet-
ter time to book the development.
Commentarii, 25.05.2009
7
Bizness, 03.08.2009, p. 48 – 50
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