Renaissance Capital Ukraine, an Investment Bank, Estimated In Q406 That Chain Stores Occupy Around 30% of the Ukrainian Retail Food Market

Business Wire, June 21, 2007

DUBLIN, Ireland -- Research and Markets (http://www.researchandmarkets.com/reports/c60409) has announced the addition of Ukraine Food & Drink Report Q4 2006 to their offering.

Ukraine Food & Drink Report provides independent forecasts and competitive intelligence on Ukraine's food & drink industry.

During 2006, Ukraine became the food mass grocery retail (MGR) market to watch in Central and Eastern Europe (CEE). Unlike Romania or Russia, where a large number of multinational retailers have already established a firm and expanding presence, Ukraine has only a few foreign retailers present, namely Germanys Metro Cash & Carry and Rewe. Now, the planned entrance of French hypermarket group Auchan appears certain in 2007, with reports that the company had found a land plot near Kyivs Borisopol airport. December brought news that another SPAR group company would re-enter the market. Leading Russian MGR player, Sedmoi Kontinent, also reportedly plans to enter the market. Large local player Furshet continued to expand, launching an ambitious expansion programme, while Velika Kishenya began work on a massive logistics centre in Kyiv. Outside of retail, the US Department of Agriculture published a study in late 2006 indicating the country's food processing industry had reached a value of US$10bn after five years of 15% annual average growth.

After a strong year by domestic and foreign players alike, the author has upgraded a forecast for full-year 2006, with MGR market growth expected to hit US$2.30bn. For the five-year period 2005 to 2010, the Ukrainian market is expected to see a compound annual growth rate of 19.0%, reaching a value of US$4.51bn. Renaissance Capital Ukraine, an investment bank, estimated in Q406 that chain stores occupy around 30% of the Ukrainian retail food market. This still trails traditional markets, which occupy around 40% of the market, but the MGR sector is catching up, albeit in the country's largest cities, leaving much of the rest of the country behind.

In a fragmented marketplace, future entries by foreign players may be through mergers and acquisitions with existing players or joint-venture projects. In part, this is due to rapid crowding, limited modern retail space and (as a consequence) relatively high lease and land prices in the capital Kyiv - although nowhere near overheated levels in Russia's largest markets, Moscow or St Petersburg. Another major reason for buying an existing player is to acquire existing licenses and a management familiar with the local bureaucracy, suppliers and, unfortunately, corrupt officials and politicians.

This last factor is a major reason for Ukraine's continued position at the bottom of our Business Environment Ranking. The country is palpably less authoritarian than Russia. The rough and tumble of Ukraine's politics should not be mistaken for vibrant, functional democracy. The country remains deeply divided and the government seems to be heading toward another confrontation between president and prime minister. A lack of central authority means that regional barons have a free hand to run their fiefdoms as they see fit. The economy performed far better during 2006 than expected, but a massive spike in energy prices is in the pipeline, thanks to Russia's shock therapy shift from artificially low to world market rates for natural gas. Ukraine is dynamic, and has massive potential, but it is not for the faint-hearted.

Content Outline:

Executive Summary

Chapter 1 - Business Environment

Chapter 2 - Retail

Chapter 3 - Food & Drink

Chapter 4 - Tobacco

Chapter 5 - Competitive Landscape

BMI Forecast Modelling

How We Generate Our Industry Forecasts

Retail Industry

Sources

Companies Mentioned:

- Baltic Beverages Holding

- Billa

- Fozzy Group

- Galakton

- Rainford

- Roshen

For more information visit http://www.researchandmarkets.com/reports/c60409