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Global consumer insights survey 2019 (Russian edition) Martijn Peeters market PwC’s 10th annual Global Consumer Insights Survey gathers the sentiments 1 of more than 21,000 online consumers Partner in 27 territories — shows that Retail & Consumer leader, technology has put them in a position PwC Russia trends to demand a tailored, channel-agnostic, socially conscious and social media- [email protected] powered experience. +7 (495) 967 6144

Digital era in retail: Future success depends on the ability to adjust to digitized environment now Q1 2019 What key global retail market trends 2 have impact on Russian retail environment and how to adapt business to changing environment? PwC has launched special survey for SPIEF 2019 session "Digitalization of retail: technology and leadership"

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We continue the practice of regular analytical updates showing key 3 trend on Russian R&C market.

Find more publications at: PwC Russia (www.pwc.ru) provides industry-focused assurance, tax, legal and advisory services. Over 2,700 professionals working in PwC offices in Moscow, St Petersburg, Ekaterinburg, Kazan, Rostov-on-Don, Krasnodar, Voronezh, Novosibirsk, Vladikavkaz, Ufa, Nizhny Novgorod and Perm share their thinking, experience and solutions to develop fresh perspectives and practical advice for our clients. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Together, these firms form the PwC network, which includes over 250,000 employees in 158 countries. Please see http://www.pwc.ru/ru/about.html for further details.

© 2019 PwC. All rights reserved. GDP growth declined mostly due to increased VAT rate, accelerated Average check has declined following seasonal trend after New Year More families believe that their financial situation got worse in Q1 2019 inflation and reduction of real retail sales period

Russian real GDP*, Q4,17 – Q1,19 growth, Y-o-Y, (constant 2016 prices), % How do consumers assess changes in their financial situation Average check, Q4’17 – Q1’19, Q-o-Q, RUB in the last 12 months?, % of respondents 2.7 -2.2 p.p. 592 586 11 567 569 14 13 12 12 13 Improved 551 538

2.2 2.2 57 52 No change 1.9 58 58 56 55

0.5 +3 p.p.

34 Worsened 31 27 27 31 31 0.3

Q4,17 Q1,18 Q2,18 Q3,18 Q4,18 Q1,19 Q4,17 Q1,18 Q2,18 Q3,18 Q4,18 Q1,19 Q4,17 Q1,18 Q2,18 Q3,18 Q4,18 Q1,19

*Source: Federal State Statistics Service – updated estimates of previous periods Source: FOM, PwC Analysis Source: ROMIR

Acceleration of current inflation has not strongly reflected consumer There is a noticeable shift to purchasing cheaper products after pre-VAT Retail turnover growth was limited by decline in real disposable incomes expectations increased spending which were not compensated by consumer loans

Inflation, Y-o-Y, Q4’17 – Q1’19, % Key trends in consumer behaviour, % of respondents Retail turnover growth*, Q4’17 – Q1’19, Y-o-Y, % 35 10.5 10.3 10.1 10.2 9.5 9.4 32 5.2 30 29 9.9 9.8 9.9 29 3.9 9.1 27 8.6 8.7 25 3.0 3.0 5.2 2.7 2.4 3.9 25 20 2.6 2.6 2.7 22 22 2.3 2.4 3.0 21 1.8 2.6 2.3 2.4

Q4,17 Q1,18 Q2,18 Q3,18 Q4,18 Q1,19 Q4,17 Q1,18 Q2,18 Q3,18 Q4,18 Q1,19 Q4,17 Q1,18 Q2,18 Q3,18 Q4,18 Q1,19

Current Observed Expected Buy less Buy cheaper Turnover Inflation Source: Central Bank of Russian, FOM Source: FOM, PwC Analysis *Source: Central Bank of Russia, Federal State Statistics Service - updated estimates of previous periods

Accelerated inflation and transfer of wage indexation in public sector Most of leading food retailers maintain positive LfL sales growth in More consumers believe current period is bad for large purchases have led to decline in real wage growth smaller formats stores

Average real wage growth, Y-o-Y, % Readiness for large purchases, % of respondents Estimation of Y-o-Y revenue growth by factors*, Q1’19 to Q1’18, %

Perekrestok 7,6% 12,7% 20,3 LfL Sales

24 25 23 23 10.2 21 21 Good Pyaterochka 4,7% 11,6% 16,3 % growth based on other factors, Lenta 5,0% 4,9% 9,9 including opening / 7.6 4.1 closing stores 5.9 6.3 Magnit 0,6% 8,3% 8,9 -33 Total % revenue -37 -35 -35 -36 -38 Bad change, Q1’19 to 1.3 2,0% O’KEY -1,3% 0,7 Q1’18, %

Karusel -3,4% 2,0% -1,4 Q4,17 Q1,18 Q2,18 Q3,18 Q4,18 Q1,19 Q4,17 Q1,18 Q2,18 Q3,18 Q4,18 Q1,19 *LfL effect was estimated based on reported revenue numbers and LfL revenue growth rates. LfL revenue growth rates have been applied to total revenue of the previous period, as share of LfL revenue is not available. Source: Federal State Statistics Service Source: FOM, PwC Analysis Source: Company reports, PwC analysis