Belarus Grocery Retail Market
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Belarusian Grocery Retail Market July 2018 Belarusian Economy Agenda Grocery retail market Logistics overview Regulation in grocery retail Belarusian consumer Grocery e-commerce Barriers to market entry Key players profiles The Boston Consulting Group, Inc. All rights reserved. 1 Copyright © by 2018 Belarusian Economy: Overview and Outlook The Boston Consulting Group, Inc. All rights reserved. 2 Copyright © by 2018 Overview Belarus is a mid-size developing country in Eastern Europe with strong links to neighbors and the EU via foreign trade. GDP dynamics affected by exchange rate volatility & commodity price fluctuations Economy Before 2016 2016-2017 2018-2022 In recent years, the However, the economy Economic forecasts are Belarusian economy has has been picking up cautiously optimistic: been through since 2016 and a basis • 2-3% real GDP and a number of crises for growth established GDP/capita growth • 2009: systemic problems • Tight monetary • 3% real wage growth in the world economy and fiscal policies • YOY CPI stabilization at 107 • 2011: currency crisis in helped to reduce • Refinancing rate continues Belarus - devaluation inflation downward trend: 10,5% in by 64% followed by • Refinancing rate 1Q2018 balance of payments cut from 24% to Cyclical factors to track are Executive crisis 11% within 2 years commodity prices, currency • 2015-2016: oil prices • Subsequent volatility, and performance of summary plummet, crisis leading increase in public trading partners to currency devaluation investment and Results of Q1 2018 exceed and redenomination of GDP growth forecasts: real GDP growth at the Belarusian ruble recovery 5.1%, optimistic scenario likely Regions Belarus consists of 7 administrative units – Minsk city and 6 regions: Minsk, Grodno, Gomel, Vitebsk, Mogilev and Brest. The regions have different industrial specializations, most often machinery, food processing, and petrochemical. Minsk and Minsk region contribute ~50% of Belarus GDP and have the highest wages; otherwise GDP and wages are evenly distributed among the remaining regions Retail The outlook is positive for the development of grocery retail. Worldwide GDP – retail The Boston Consulting Group, Inc. All rights reserved. market curve suggests growth from 22B ($11.4B) to 34-36B BYN ($14-14.8B) in 2022 following forecasted GDP growth. Low downside risk in food retail as demand would largely remain unaffected even in the event of an unexpected economic shock Source: Belarus National Statistical Committee, National Bank of the Republic of Belarus, BCG analysis 3 Copyright © by 2018 Belarus at a glance 2017: a developing country in Eastern Europe Population 9.5M GDP nominal 105B BYN / $ 55B Nationalities 84% Belarusian GDP/capita $ 5,737 8% Russian nominal 8% Other GDP real 144B PPP US$ at 2005 prices Petrochemical Religion 48% Orthodox 48.3% Key economic 7% Catholic 7.1% sectors Machinery 4% Other 3.5% Chemicals 41% Non-believers Food processing 41.1% Metals & mining years Life expectancy 73 Agriculture Median age 40 years IT Doing business 38 out of 190 Currency Belarusian Ruble rank1 (BYN) President Alexander Lukashenko Area 208K km2 Membership in United Nations The Boston Consulting Group, Inc. All rights reserved. international CIS Capital Minsk organizations Eurasian Economic Union2 1. World Bank Doing Business Report 2018; 2. Russia, Kazakhstan, Armenia, Kyrgyzstan, Belarus Source: CIA; World Bank 4 Copyright © by 2018 Belarus is a mid-size European country with potential to grow its economy to emerging the markets level Population 2017, M Nominal GDP 2017, $B Nominal GDP per capita 2017, $ Latvia 2.0 Georgia 15 Ukraine 2,540 Georgia 3.9 Latvia 30 Georgia 3,893 Norway 5.3 Serbia 42 Belarus 5,737 Serbia 7.0 Belarus 54 Serbia 5,959 +33% Bulgaria 7.1 Bulgaria 57 Emerging markets1 7,635 Belarus 9.5 Ukraine 108 Bulgaria 8,022 Sweden 9.9 Greece 200 Turkey 10,435 Portugal 10.3 Romania 211 Russia 10,710 Czech Republic 10.6 Czech Republic 216 Romania 10,737 Greece 11.2 Portugal 218 Poland 13,568 Romania 19.7 Norway 397 Latvia 15,332 Poland 38.3 Poland 519 Greece 17,929 Ukraine 42.4 Sweden 539 Czech Republic 20,342 Spain 46.4 Turkey 843 Portugal 21,153 Italy 59.4 Spain 1,314 Spain 28,352 France 65.0 Russia 1,574 Italy 32,699 United Kingdom 65.5 Emerging markets1 1,931 EU 34,033 Turkey 80.8 Italy 1,941 France 39,769 Germany 82.8 France 2,584 United Kingdom 40,096 Russia 147.0 United Kingdom 2,627 Germany 44,587 The Boston Consulting Group, Inc. All rights reserved. Emerging markets1 252.9 Germany 3,690 Sweden 54,360 EU 508.6 EU 17,309 Norway 74,984 1. Emerging markets include Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan and Uzbekistan Source: The Economist Intelligence Unit, Belarus National Statistical Committee and National Bank of the Republic of Belarus for Belarus 5 Copyright © by 2018 The performance of the Belarusian economy is on par with the economic development of neighboring countries 12% Key growth factors: • Limited inflation and low refinancing rate supporting 3 scenarios for 8% public and private investment • External demand led by GDP growth 2017-2022 economic growth of trade Conservative Basic Optimistic partners 4% 2017 1.8% 2018 1.4% 1.9% 3.0% 0% 2019 1.5% 2.1% 3.1% -4% 2020 1.6% 2.2% 3.2% 2021 1.7% 2.3% 3.3% -8% 2022 1.8% 2.4% 3.4% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2009: Systemic 2011: Currency crisis 2015-2016: Significant drop Forecast problems in – devaluation by 64% in exports caused by World economy followed by balance Russia’s economic Actual GDP growth in Q1 of payments crisis problems; BYN depreciation Forecast for Belarus 5.1% '18 vs 1.6% forecasted – optimistic scenario likely The Boston Consulting Group, Inc. 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Real GDP growth, Russia (%) Real GDP growth, Belarus (%) Real GDP growth, EU (%) Optimistic Conservative Note: Optimistic and conservative forecast for Belarus 2020-2022 based on basic forecast 2020-2022 and corresponding 2018-2019 forecast from Focus Economics Source: Economist Intelligence Unit for EU and Russia; Belarus National Statistical Committee for actual Belarus data; Basic forecast for 2018-2022, and other Belarus forecasts 2018-2019 from Focus Economics (Panelists: Barclays Capital, BMI Research, EIU, Euromonitor, Frontier Strategy Group, JPMorgan, KUKE S.A., Oxford Economics, Raiffeisen Research, Renaissance Capital, WIIW) plus forecast from Eurasian Development Bank and World Bank; BCG analysis 6 Copyright © by 2018 Real GDP started recovery in 2017 and is set to grow, 2013-2014 stabilization of economy following basic consensus forecast moderately positive for Belarus 2011 currency crisis 2015-2016 Oil prices plummet, crisis lead to devaluation and redenomination of the Belarusian ruble Nominal GDP, B BYN Real GDP, B BYN at 2005 prices 2017-2018 200 30 Stabilization of the Belarusian economy prompted by investment- +10% 167 encouraging reforms 151 150 138 Economy expected to pick up in 2019 based on healthy consumption and 126 20 +12% 115 trade, but dependence on trading 105 partners Russia and EU remains a risk 95 100 90 81 67 10 10.4 10.6 10.9 10.0 10.2 9.8 9.5 9.8 10.0 10.2 50 Optimistic scenario likely +2% -3% +2% +2% 176B 0 0 Nominal GDP 2022 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 BYN Forecast The Boston Consulting Group, Inc. All rights reserved. Nominal GDP (B BYN) Real GDP (B BYN at 2005 prices) xx% CAGR 11.4B Real GDP 2022 Source: Actual data from Belarus National Statistical Committee and EIU; Forecast from Focus Economics (Panelists: Barclays Capital, BMI BYN Research, EIU, Euromonitor, Frontier Strategy Group, JPMorgan, KUKE S.A., Oxford Economics, Raiffeisen Research, Renaissance Capital, WIIW), Eurasian Development Bank, World Bank; BCG analysis 7 Copyright © by 2018 GDP PPP is on average emerging markets level & expected to further accelerate 2017 GDP PPP 2017 Nominal GDP Country per capita, $ per capita, $ Ukraine 8,650 2,540 GDP per capita (nominal BYN), K GDP per capita ($ at PPP), K Georgia 10,148 3,893 18.1 Serbia 15,340 5,959 16.3 30 Belarus 19,220 5,737 14.8 2 15 Emerg. markets 19,690 7,635 13.4 19K BYN Latvia 20,120 15,332 12.2 by 2022 likely in 11.1 25 Bulgaria 20,409 8,022 optimistic scenario1 10.0 Romania 25,140 10,737 10 9.5 8.5 Russia 25,490 10,710 21.7 22.2 7.1 20.7 21.2 20 Greece 26,727 17,929 20.0 19.2 19.2 Turkey 27,010 10,435 18.5 18.7 18.5 5 +2% Poland 28,950 13,568 +1% 15 Portugal 32,158 21,153 Czech Republic 36,760 20,342 Spain 38,270 28,352 0 10 Italy 40,660 32,699 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 EU 41,600 34,033 Forecast France 44,130 39,769 GDP per capita (nominal BYN), K UK 44,219 40,096 The Boston Consulting Group, Inc. All rights reserved. xx% CAGR GDP per capita ($ at PPP), K Germany 50,743 44,587 Sweden 50,911 54,360 1. The World Bank Belarus economic update on 19 April 2018. 2. Emerging markets include Armenia, Azerbaijan, Belarus, Norway 60,250 74,984 Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan and Uzbekistan Source: Actual data from Belarus National Statistical Committee and EIU; Forecast based on Focus Economics and EIU; BCG analysis 8 Copyright © by 2018 Positive outlook for the future: CPI and currency rate stabilizing, wages growing, population moving to cities, unemployment remains low CPI (YOY) Currency/Exchange rate (average) Wages (YOY) BYN:US$ BYN:EUR CPI CPI - food Wages growth (%) Nominal Real -3% 120 4 +5% 40 0% 3 -55% 2,18 107 108 13 110 2 2,43 20 12 1 1,93 106 3 100 0 0 6 2013 2014 2015 2016 2017 2018