- Andrey Krylov
- Igor Vasilyev
- Julia Gordeyeva
- Mikhail Krasnoperov
- Svetlana Sukhanova
Sberbank CIB Ivanov Consumer Confidence Tracker. January 2018 - Pent-up Demand Brings Some Holiday Cheer
We continued to track the Ivanovs' savings and spending patterns, as well as their perceptions, to get an indication 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 some of our main conclusions:> The consumer confidence index improved from -12% in 3Q17 to -10% in 4Q17, finally recovering to the pre-downturn 2H13 level. There were Q-o-Q improvements in perceptions of personal wealth and the conditions for big-ticket purchases, while country wealth perceptions were unchanged. We think the somewhat brighter sentiment reflects a pickup in real incomes in 4Q17 amid record-low inflation. We have been pleased by the gradual improvement across various metrics. This tells us that the improvement should be sustainable, unlike previous spikes that were followed by disappointment.
> The business confidence index climbed to 10% in 4Q17, the highest level since 3Q14. This corresponds with the improving official hiring and employment statistics. The most optimistic respondents were in the financial and agricultural sectors last quarter, while employees in the transport industry were the most pessimistic. The net hiring index declined slightly but remained close to its level prior to the economic downturn.
> Additional income was directed toward discretionary spending, so food expenditures grew only 3-5% (according to the Ivanovs) while spending on clothes and entertainment surged 20-30% during the winter holiday period.
> The share of those who sought to save on staples over the previous 2-3 months (i.e. curbing impulse purchases and switching to cheaper food items) was flat y-o-y and down 3 pp Q-o-Q at 65%, the lowest level since 2014. The importance of prices in shoppers' decision-making has declined, narrowing the gap with quality, which has become a more important factor. Around 51% of respondents were ready to trade up for higher quality at a fair price. Hence, promotions on more expensive items could be justified. The share of "promo-addicted" Ivanovs dropped further, moving from 62% in 3Q17 to 60% in 4Q17.
> Some 55% of Ivanovs indicated a willingness to pay more if groceries were to become more expensive. The share for convenience store visitors was lower than for hypermarket customers. Meanwhile, there was a higher share of big box shoppers inclined to switch to higher-quality products. The share of "promo-hunters" at Lenta declined Q-o-Q but was flat at convenience stores. All this leads us to believe that hypermarkets have been the main beneficiaries of trading up.
> The frequency of store visits was up y-o-y despite flattish sales (at least in the official data), implying pressure on the average ticket. Our explanation for this is that Pyaterochka was trying to capture traffic from Magnit in the regions (i.e. outside of Moscow and St Petersburg) via promotions. This encouraged some of Magnit's core customers to visit competitors' stores in search of items on sale, which should mean traffic pressure for Magnit and significant margin pressure for X5.
> When one product is offered for R1,000 without a discount and another similar item is offered for the same amount but marked down R500 from an initial R1,500, some 87% of Russians prefer the discounted item.
> In line with the ease in caution with regard to food spending, the share of customers (in net terms) making efforts to save on non-food items decreased across all categories, reaching record lows for categories including eating out, entertainment, vacations and utilities.
> Some 82% of Ivanovs have established patterns in their shopping where they look for certain items in one chain and others in other chains.
PJSC Aeroflot Russian Airlines is an international air transport company which is engaged in operations in Russia. The principal activity of Co. is the provision of passenger and cargo air transportation services both domestically and internationally and other aviation services from its base at Moscow Sheremetevo Airport. Co. and its subsidiaries also includes activities comprising airline catering, the operation of a hotel and insurance services. Associated undertakings mainly comprise hotel and duty-free retail businesses. The principal business segments are airline operations, airline catering, hotel operations and other.
Detskiy Mir PAO is a Russia-based company, which is primarily engaged in the children products retail sector. The Company offers a wide range of products, such as toys, clothing and footwear, baby goods, stationery, school and learning related products, creative kits, sport related products, food, car seats, furniture, among others. The Company's structure includes the chain of stores Detskiy Mir and the retail network ELC (Early Learning Center). The Company's Detskiy Mir chain comprises over 480 stores located on the territory of the Russian Federation and Kazakhstan, as well as more than 40 ECL stores. Detskiy Mir PAO is primarily active domestically and in the Commonwealth of Independent States (CIS) countries. In addition, the Company sells products online via its Website. The Company's major shareholder is AFK Sistema PAO.
Dixy Group OAO is a Russian Federation-based company, which is engaged in the retail industry. Dixy Group OAO and its numerous subsidiaries comprise Dixy Group. Dixy Group of companies are involved in the retail sale of food products and household supplies. The Company offers a wide range of products through its shop chain, such as grocery, beverages, bakery, sanitary and household products, among others. The Company's brands are Dixy, Viktoria, Megamart, Kvartal, Cash, among others. It operates domestically on the territories of in Moscow and Moscow region, Saint-Petersburg and Leningrad region, Yekaterinburg and Sverdlovsk region, Chelyabinsk and Chelyabinsk region, Kaliningrad and Kaliningrad region, among others.
Etalon Group is a real estate development and construction company. Co.'s principal activity is residential development in Saint-Petersburg metropolitan area and Moscow metropolitan area, the Russian Federation. Co. has three reportable segments: Residential Development, which includes construction of residential real estate including flats, built-in premises and parking places; Constructions Services, which includes construction services for third parties and for internal purpose; and Other Operations, which include selling of construction materials, construction of stand-alone premises for commercial use and various services related to sale and servicing of premises.
Lenta is a hypermarket group based in Russia. Co. operates 87 hypermarkets in 50 cities across Russia and 16 supermarkets in the Moscow region with a total of approximately 571,328 sq.m. of selling space. Co. also operates four distribution centers for hypermarkets and one for supermarkets. operates three hypermarket formats: Standard, typically with approximately 7,000 sq. m. of selling space (smaller than many Western European hypermarkets) and 24,000 stock keeping unit (SKUs); Compact, typically with approximately 5,000 sq. m. of selling space and 20,300 SKUs; and Supercompact, typically with approximately 3,000 sq. m. of selling space and 15,000 SKUs.
Group LSR PJSC is involved real estate development in Saint Petersburg, Munich, Yekaterinburg and Moscow, prefabricated panel construction in Saint Petersburg, Moscow and Yekaterinburg, commercial real estate development in Saint Petersburg and Moscow and Yekaterinburg, the production of building materials at plants located in Russia and Ukraine, the extraction and processing of aggregates in Leningrad region, and the provision of construction services. These products and services are sold mainly in Russia. As of Dec 31 2015, Co. had five reportable segments: LSR.Building Materials; LSR. Construction; LSR.Project management; LSR.Cranes; and LSR.Real Estate.
M.video PAO (formerly known as M.video OAO) is a Russia-based consumer electronics and home appliance retail chain. M.video PAO operates through numerous stores in over 100 cities, as well as through online store within the Russian Federation. It offers audio, video, digital, small and large home appliances, media and entertainment products, as well as accessories. It also offers products delivery and repair services. In addition, the Company provides management and consulting services for holding companies and for companies active in the financial and industrial sectors. M.video PAO operates through two wholly owned subsidiaries, located in Moscow. As of December 31, 2011, the Company's major shareholder was Svece Limited with a stake of 67.78%.
Magnit is a holding company. Through its subsidiaries, Co. operates in the retail and distribution of consumer goods under the Magnit name. Co.'s retail operations are operated through convenience stores, cosmetic stores, hypermarkets and other. Most of its stores are located in the Southern, Central and Volga regions. Co. also operates stores in the North-Western, North-Caucasian, Urals and Siberian regions. As of Dec. 31 2014, Co.'s stores chain consisted of 9,711 stores: 8,344 convenience stores, 190 hypermarkets, 97 Magnit Family stores and 1,080 drogerie stores in 2,108 cities and towns throughout the Russian Federation.
Mail.Ru Group is an Internet company based in the Russian Federation. Co. operates the email service [email protected] and two IM networks in Russia - Mail.Ru Agent and ICQ. Co. operates two Russian-language online social networking sites: Moi [email protected] and Odnoklassniki.ru, and owns a strategic minority equity stake in the social network Vkontakte. Co. is also engaged in developing projects in E-commerce and operating more than 40 thematic vertical sites, targeting various user categories. Co. is also Russia's predominant online games company. Co. maintains a portfolio of online games which includes 34 MMO games and over 30 games for social networking sites.
O'key Group is a Russian retailer. Co.'s principal business activity is operation of retail chain in Russia under brand name O'KEY. Co. provides customers with fresh produce (fresh foods and delicatessen products) and non-food goods (cosmetics, clothing, shoes, household cleaning products, domestic appliances, toys, sports and fitness products, etc.). Co.'s stores follow two formats: hypermarkets and supermarkets. Co. manages approximately 71 stores (42 hypermarkets and 29 supermarkets) across North Western, Southern, Central, Urals and Siberian regions.
OR PAO, formerly OR OAO, is a Russia-based company, which is engaged in the footwear industry. The Company specializes in manufacture, retail and wholesale of footwear, outwear and accessories. The Company offers financial services to its customers including installment payments and cash loans. The financial strategy of the Company includes bond program implementation and unsecured loans. Its retailers portfolio is comprised of Westfalika, Emilia Estra, Rossita, Lisette and Peshekhod. The Company also owns such brands as S-TEP, all.go and Snow Guard. It operates two factories in Novosibirsk region. The Company operates domestically.
Sollers provides automobile services comprising all stages from manufacturing up to sales and maintenance services. Co. owns manufacturing facilities to produce Russian UAZ off-road vehicles, Korean SsangYong vehicles, FIAT light and commercial vehicles, Japanese ISUZU cargo trucks, as well as ZMZ petrol and diesel engines.
X5 Retail Group is a holding company. The main activity of Co. is the development and operation of grocery retail stores. Co. operates a retail chain of soft-discount, supermarket and hypermarket stores under the brand names "Pyaterochka", "Perekrestok" and "Karusel" in major population centres in Russia, including but not limited to Moscow, St. Petersburg, Nizhniy Novgorod, Rostov-on-Don, Kazan, Samara, Lipetsk, Chelyabinsk, Perm, Ekaterinburg and Kiev, Ukraine.
Yandex is an internet and technology company that operates an internet search engine in Russia. Co. builds intelligent products and services powered by machine learning. Co.'s products and services are based on complex, unique technologies that are not easily replicated. Co. generates substantially all of its revenues from online advertising. Co. also generates revenues from its e-commerce offerings, classifieds and e-hailing service. Co.'s businesses are organized in the following operating segments: Search and Portal; E-commerce; Taxi; Classifieds and Experimental businesses.
Sberbank CIB Investment Research is a research firm offering equity, fixed income, economics, and strategy research. It covers analysis on all aspects of Russia’s capital markets, issues and industries. The firm analyzes trends in Russia and combines local knowledge with a global perspective. It processes macroeconomic data, market and company-specific news, stock quotes and other information for providing research reports. The firm provides details and latest prices on the most traded names and most traded paper on all segments Russian market. In strategy research, it provides thematic research, tips and descriptions of the methodology used to evaluate companies.
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