With one of the highest income rates per capita in the Central Asian region, Kazakhstan is a promising market for the FMCG sector. However, a lack of specialized real estate in the country has somewhat slowed the development of a modern retail segment. Things are beginning to change, however, as traditional open-air bazaars are replaced by modern retail centers, and investment, both domestic and foreign, increases.
One such investor is the German Metro Group, which entered the market in 2009 after gaining significant experience in Russia. It has so far opened five stores across the country, sells approximately 25,000 products, has over 1,400 employees, and sources 90% of its supplies from local companies. “Everyday we take a step forward in integrating ourselves into the community, and our commitment to Kazakhstan will be unwavering,” Stephen Kreeger, Managing Director of Metro, told TBY in an interview. A double benefit is also envisaged as major retailers pull people out of unemployment, thus increasing consumption.
Other major foreign players attracted to the market include Danone, which established itself in the country just over a decade ago after originally having just exported to Kazakhstan. A large market to begin with, Danone has brought best practices to the dairy industry, deciding to establish a factory in 2009. “The challenge is [now] to be able to build the size of the market up as quickly as possible in terms of penetration and consumption”, David Manzini, General Director of Danone Central Asia and Caucasus, told TBY. In a similar fashion to Danone, Nestlé is also present in the country and selling “items that cater to the premium segment of the market”, and is also planning “to launch some additional premium products in coffee and chocolate due to significant demand,” Country Manager for Eurasia, Mark Pothast, told TBY. Optimistic about the future of the FMCG sector, Pothast added that “We expect to see double-digit growth over the next few years”, as “CIS countries are the growth engines for the Eurasia region”. Debenhams is also present in the country, as are well-known international retailers Ramstore, originally from Turkey, and Vester, from Russia. Kazakhstani chains are also making a splash, with Kazakhstan’s newest supermarket chain, Green, expanding at a rapid pace since opening its doors in 2008. It now employs 1,950 employees and generated a turnover of $20 million in 2009. SM Market also has 24 stores in a variety of formats, with plans to reach a total of 40 stores domestically and launch itself abroad following the enactment of the Customs Union.
This growth of formal retail will no doubt lead to consolidation in the retail sector, following a course seen before in Turkey, Russia, and Ukraine. There is still room for investment, however, and Spinneys Group is said to be watching the market closely as the market grab continues.
© The Business Year