SberCIB Ivanov Consumer Confidence Tracker. January 2021 - Chain Prices Attracting Attention

We continue to track the Ivanovs' savings and spending patterns, as well as their perceptions, to get an idea of how entire sectors and individual companies are performing and might perform in the future. We also looked at competition among Russia's public food retailers. Here are the main conclusions from our most recent survey:> The field work for this survey took place mainly over December 1-15, when the one-time social support payments (R5,000 per family with children under the age of seven) had yet to be announced. The overall consumer confidence index plunged from -21% in 3Q20 to -26% in 4Q20, although this is still above the -31% registered for 2Q20 (when the lockdown period was just lifted) but lower than pre-Covid levels. All of the index components showed a deterioration, most notably the perception of the country wealth component. We attribute the downturn to the surge in Covid-19 cases in October, the ruble's depreciation and the rise in inflation. > Shifts in the Ivanovs' main worries reflected the changing macroeconomic backdrop. The share of respondents concerned about inflation (up 5 pp Q-o-Q to 49%), economic growth (up 5 pp to 36%) and the exchange rate (up 4% to 28%) posted the biggest increases. However, the top concern among Ivanovs remained health (both their own and that of their relatives), which was cited by some 64% of them, up from 61% in 3Q20. The share of Ivanovs worried about unemployment, the second biggest concern, also grew, climbing to 54% from 51% in 3Q20. We associate this with the deterioration shown in the net hiring index (to -50%, from -48% in 3Q20 and -41% a year earlier) and the still-elevated unemployment rate (13% in our survey, versus 11% in 1Q20, right before the pandemic took hold in Russia). The business confidence index fell to 4% in 4Q20 following a rebound to 11% in 3Q20.> Despite a slight rise in average wages, nominal income was under pressure in 4Q20. As a result, average savings per person, which had recovered by 25% Q-o-Q to R59k in 3Q20, dropped back to R51k in 4Q20. We attribute this to both seasonal factors and diminished social support. > In line with the slightly increased price sensitivity, trading-down on food intensified: the share of Ivanovs trying to save on food purchases increased from 62% in 3Q20 to 66%, although this remained below the 67% in 4Q19. In net terms, the trading-up index fell to -36%, well below the six-year high of -29% recorded in 3Q20. Interestingly, despite a slight pickup in trading-down and increased price sensitivity, we saw no increase in either promo hunting or in the popularity of other strategies for saving on food. On the retailers' side, promo activity seasonally intensified, but remained below the 4Q19 level. Though more than half of Ivanovs are ready to absorb higher prices or reduced promos, 55% said that they always monitor prices (of which 27 pp compare prices across groceries online before shopping). > The second wave of Covid-19 and resulting increase in concerns over health encouraged people to make shopping trips less frequently and to buy more in bulk. The Ivanovs made only 2.80 grocery trips per week in 4Q20, down from 2.94 in 3Q20 and 2.99 in 4Q19. However, they seem to have continued to shop around, as the number of stores visited per trip was flat Q-o-Q at 1.98 (but up from 1.92 in 4Q19). This implies 5.5 store visits per week, which was down 6% y-o-y and should translate into an LFL traffic decline across the industry. However, a sharp increase in the average ticket should compensate for this, at least at the large chains.> We regularly ask our respondents how many stores they have within walking distance. Our survey indicates that the number of grocery stores nearby dropped from 4.0 stores in 4Q19 to 3.8 in 4Q20. While the large public chains have been only opening new stores and mature stores enjoy new customers amid rising assessment of the stores, regional chains and smaller players have had to close stores in the face of traffic outflow. This trend is confirmed by another question: 25% of Ivanovs say that they have seen grocery store closures close to their homes.> In 4Q20, the large chains did not fully pass on inflation to customers in order to smooth out the price growth, in contrast to smaller chains. This was positive for CVP, as reflected in improved perceptions of the public chains, and helped to encourage traffic to migrate from small and regional players to the large chains. This also suggests temporary pressure on gross margins, though this should be partially offset by a reduced y-o-y share of promotions and rising operating leverage amid higher sales densities.> The share of respondents naming Pyaterochka as their primary food shopping destination remained close to the 3Q20 and 4Q19 figures at 25%. The same indicator for Magnit edged up to 22% from 21% in 3Q20 and 19% in 4Q19. The share of those who purchase most of their food at Lenta was flat Q-o-Q at 8%, but down from 9% a year earlier. The share of Ivanovs visiting Pyaterochka at least occasionally increased by 1 pp to 59%, while the same figure for Magnit convenience stores climbed 2 pp Q-o-Q to 49% (up from 46% in 4Q19). That correlates well with the improving assessment of the largest players and helps confirm that traffic is in fact moving from smaller stores to large players, as we forecast in our recent note. > Online grocery players enjoy a high Net Promoter Score (NPS) that is considerably above those of brick-and-mortar stores. Pyaterochka.Dostavka (49%), Wildberries (43%, food only) and SberMarket (41%) had the highest NPSs among online groceries, while hard discounter Svetofor (42%) and liqueur specialist Red & White (40%) were pretty close to them. Large boxes such as Metro (37%), Globus (37%), Lenta (37%), Karusel (35%) and Magnit hypermarket (31%) had higher NPSs than convenience stores. Nevertheless, Pyaterochka's (17%) and Magnit convenience's (13%) scores were notably up versus 1Q19, when they were close to zero. > We also analyzed companies' attractiveness in terms of prices and promotions. As far as price perception is concerned, specialized stores are the undoubted leaders, followed by hypermarkets, which are also leaders in terms of the perceived number of promotions. As for convenience stores, Pyaterochka beats Magnit convenience both on regular prices and promotions. One negative implication is that Magnit could consider it necessary to invest more in prices to match Pyaterochka's value proposition. > According Sber Big Data, median wage growth accelerated from 6% in 3Q20 to 9% in 4Q20. Median income growth accelerated from 4-7% in October and November to 13% in December, which we attribute to one-off benefit payments to families with children that month coupled with a greater share of salary payments shifted ahead from January ahead of the New Year holiday period. As for spending, we saw a considerable drop in spending on tourism (down 30% y-o-y), leisure (down 16% y-o-y), eating out (down 13%) and beauty (down 11% y-o-y) in December. The categories that saw the highest growth were utilities, which also includes payments to internet providers (up 11% y-o-y), and home and electronics (up 5% y-o-y). > Among our special areas of focus in this edition were taxi services and food delivery, both of which seem to have recovered from the impact of the lockdown that we observed in our June 2020 survey. They both also demonstrated positive y-o-y trends, which points to structural developments that should support growth in the longer term. Some 76% of Ivanovs took a taxi ride in 2H20, which marked a 12 pp recovery from the June 2020 level and was also 6 pp higher than a year prior. Online taxi aggregators continued to gain in popularity, as the share of Ivanovs that had used them in the previous six months was up 8 pp y-o-y at 46%. In Moscow, 71% of Ivanovs ordered taxis online (flat y-o-y), of which 93% reported using either Yandex.Taxi or Uber (about flat y-o-y) and 39% reported using either Citymobil or VK Taxi (up 14 pp y-o-y). Outside Moscow, 89% of Ivanovs who use taxi apps said they had used Yandex.Taxi (flat y-o-y), while 23% had used either Citymobil or VK Taxi (up 11 pp y-o-y). For food delivery, the positive trends included growth in both users (44% of Ivanovs ordered food from restaurants in 2H20, up 4 pp y-o-y) and the frequency of orders (the share of Ivanovs who had ordered food delivery at least once a month was up 4 pp y-o-y to 40%). We thus believe that many Russians who tried out food delivery during the lockdown have continued placing orders, while the higher order frequency suggests that food delivery is becoming a habit for many. Both Delivery Club (combined with ZakaZaka) and Yandex.Eats (combined with Yandex Go, Yandex's super app, which launched in August 2020) saw a y-o-y increase in users in our December 2020 survey - 10 pp for the former (to 57% of those Ivanovs who ordered food online in 2H20) and 6 pp for the latter (to 38%). This was driven by the growing popularity of aggregators, while the share of those who ordered directly from restaurants was down 8 pp to 43%.