Wal-Mart (WMT), may expand into Russia in the next two years in order to capitalize on a swelling economy and a stunning lack of competitors said UBS AG (UBS) analysts last week.
The bank said, “Open markets and independent grocers generate most Russian retail sales, according to UBS. The country’s $145 billion food- retailing industry accounts for almost half of total spending and will expand on average by 17 percent annually through 2010 as rising incomes boost demand for better food”.
The country is in its 10th consecutive year of expansion grew 7.6% in 2007, the Economy Ministry said in December, beating a prior forecast of a 6.7% pace. Auto sales in the country may rise 13% this year and surpass deliveries in the U.K.
Because the five largest chains control just 7.4% of sales, compared with 35% in the U.S. and as much as 80 percent in Europe, UBS said the country is “ripe for consolidation”.
Wal-Mart will most likely use the JV format it has used in India or enter through acquisitions like it did in Japan. Like China, Russia present a host of difficulties in its bureaucracy, but also offer a stunning opportunity. When one looks at the near 20% annual sales growth of Wal-Mart’s international operations, the thought that the rapidly growing Russian market could become part of that has to make shareholders excited.
I have long pushed the need for increased spending on international operation at the expense of domestic ones as the opportunities Wal-Mart has abroad dwarf those at home.
Disclosure (“none” means no position):Long Wal-Mart
