TBY talks to Stephen Kreeger, Managing Director of Metro, on the retail sector, consumer habits, and the domestic supply chain.
TBY Metro is one of the largest international trading companies in the world. What sparked the company’s interest in Kazakhstan?
STEPHEN KREEGER Our analysis of the market here showed us the incredible potential of this country. We’re very happy with how we’ve performed in Russia and Ukraine, and the way our concept and format has been received in the B2B community. Based on our research and experience, Kazakhstan seemed an ideal new investment destination for us. We chose Astana as our first entrance point in 2009, as the city is vibrant and growing. Almaty was as an obvious destination too. We now have five stores in four cities. We have two stores in Almaty, and one each in Astana, Karaganda, and Shymkent. Everyday we take a step forward in integrating ourselves into the community, and our commitment to Kazakhstan will be unwavering.
What strategies are you employing to change the consumer habits of your target market, which has traditionally shopped at open-air bazaars?
This is a common challenge, and the strategies we employ here are time tested. I was at Metro when our Russian operations began in 2001, and we were faced with the same situation. Russians would ask us how it could be better than the marketplace, where the consumer has a wide range of choices at competitive prices. So that’s what we have to do in our stores—offer a wide choice of food and non-food products at comparable prices. We must be competitive in the market. It’s a very simple road, but navigating it can be complicated for a new player in the industry.
Do you believe the market has reached saturation point in terms of retailers, or is there still room for new players?
I do not believe that the market is overcrowded yet. Kazakhstan’s dynamic growth will continue to present opportunities for new players, whether domestic or international.
The World Bank has praised Kazakhstan as a top economic reformer. What do you believe is going to drive the country forward as a destination for foreign investment, and as a hub for the region?
Having the World Bank praise Kazakhstan in such a way is of great significance, and I fully concur with its analysis. Kazakhstan is a superb place to invest. Furthermore, the Customs Union between Kazakhstan, Russia, and Belarus is accelerating Kazakhstan’s aim to be a hub in Eurasia. For us this is incredibly important, because building on the success we have had in Russia with our business model will become even easier when the union comes into effect and the borders between the three countries effectively dissolve. It will allow us access to a wider range of products and better conditions that will eventually work to the benefit of our customers in terms of the choice we will be able to offer them.
What percentage of your products is supplied locally?
We have about 300 suppliers, with 90% of our products being supplied by local players and stakeholders. This converts into around 30% to 40% of our sales revenue. Our local producers are concentrated in the fresh foods area, such as dairy, meat, and vegetables.
Since entering the market, what positive changes have you noticed and helped to effect among local producers?
We have seen positive improvements in supply chain efficiency and packaging. We also work closely with suppliers to upgrade and maintain sanitary conditions. This improvement is also appreciated by the government as it raises the overall quality of the industry. This is a relatively small market of 16 million people. But with the Customs Union, we also offer direct consulting, a system in which we help suppliers improve their product for our stores, which then raises them to the standard at which they can also export to Russia and numerous other countries, whether it’s through Metro or other chains.
Which Kazakhstani products do you believe have the potential to be marketed more extensively on the world stage?
Kazakhstan’s strength lies in its production of grain products, like wheat and flour, or foodstuffs such as macaroni and pasta, as well as meat. Through Metro, Kazakhstani meat producers are selling in our stores in Russia. We’re focusing on meat and grain products for the time being. The grain is high quality, and the industry will only continue to grow and yield greater overall export value.
How do you see the wholesale retail market evolving as the economy picks up following the global economic downturn?
Its growth will contribute substantially to economic recovery. We believe that a rising tide lifts all boats, and the recovery process will make the retail market here much more attractive. We will also see more international players enter the market in the coming years. The market is dynamic, young, growing, and increasingly wealthy. I believe this is only the beginning, and Kazakhstan will continue to offer superb opportunities for Metro.
© The Business Year