"This is the first time we have become involved in the food retailing sector in Russia and only the second time in the retailing sector as a whole," said Richard Wallis, spokesperson at the EBRD Moscow bureau. "The negotiations are at a reasonably advanced stage, but a final decision is still pending. However, as a publicly accountable body, we have to make known any discussions we have in this type of area."
The EBRD's move comes in support of a domestic retail business which is struggling to raise the same sort of invesment that some of the international players on the market there currently have. On a domestic level Lenta is well placed on the St. Petersburg market, but foreign players such as Germany's Metro and Turkey's Ramstore are successful international players with infinitely larger budgets for investment.
The bank is proposing that the loan be spread over an eight year period, providing parent company JSC Istochnik with the means to remain competitive in a market that has become increasingly pressurised by the likes of Metro and Ramstore in recent years. However local players such O'key and Lenta are now starting to fight back in the race to develop and cash in on growth.
Metro entered the St. Petersburg food retail market in 2002 and now has two cash and carry outlets, with a third set to open later this year, while Ramstore is starting the construction of several supermarkets this year. Both companies already have extensive operations in Moscow, and being part of large multinational retail chains each has the capacity for considerable expansion in the St. Petersburg area.
Lenta is one step ahead of the competition though, and is just about to open its fifth store, located in the southeast of the city. It is the company's largest store yet, with a total floor space of 20,000 square metres.
The Russian supermarket and hypermarket sector has grown from about 8 to 13 per cent in the past three years, according to consultants Collier International. But as the kaasa system (which involves choosing the item, paying for it separately and then going back to collect it) dies out for food purchases, the hypermarket and supermarket format is becoming increasingly popular for Russians who are increasingly affluent and time starved.
In 2002 around 69 per cent of Russian disposable income was spent on food products, according to figures from the Czech Statistics Office. However spending patterns are changing rapidly and as incomes increase the proportion spent of food is decreasing although the overall expenditure cointunues to increase.