Normally in developing countries, including Russia, traditional grocery retailers is a channel that is understood to generally be rapidly falling in the face of pressure from modern corporate retailers with strong supply networks and recognisable brands. However, the ongoing economic crisis has pushed Russian consumers, especially in rural and sparsely populated areas, to save money and buy only the cheapest goods at the lowest possible prices, even compromising on quality; foregoing purchases of non-essential goods altogether.
As consumers in Russia have entered a pattern of saving, their focus has narrowed to only the goods that are the most essential and immediate to their lives – which in practice has been personal hygiene products, cleaning products, medicines and groceries. Small shops operated by independent owners have been the staple of consumers in small towns and villages in Russia since the time of the Soviet Union, and during times of crisis, consumers have turned to them as they are most closely integrated into their communities, most conveniently located and, because of their locality and no-frills concept, due to offering goods at budget-friendly prices.
In addition to modern grocery retailers, another force responsible for the static current value performance in 2018 was the government. With the country struggling to bring its economic performance back to pre-crisis levels, the Russian government is active in expanding its taxable base.
Labirint-S, a Russian company which is developing the alcoholic drinks retail brand Krasnoe & Beloe, selling inexpensive wines and beers and hard liquor, has been the value leader in traditional grocery retailers for years. In 2018, it controlled 5,300 small outlets across the country, benefiting from very rapid development over the review period, opening outlets in residential areas and in close proximity to places with high pedestrian traffic.
Of the players with notable shares in traditional grocery retailers, all the leading players are retailers of alcoholic drinks. This trend is not new to Russia, as it was present throughout much of the economic crisis, especially at its lowest point in 2014.
Whilst sales of alcoholic drinks are normally of interest to regulators, in Russia no serious attempts to regulate the expansion of alcoholic drinks retailers have been made. This serves to establish alcoholic drinks retailers as the biggest players within traditional grocery retailers.
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