New battle to begin in Russia

Although there are many Western supermarkets in Russia, two obvious players have been missing - Carrefour and Wal-Mart. Since July 2007, Wal-Mart has been sniffing around for Russian property and is still in the running for Lenta. Carrefour announced in April that they were going to open two supermarkets there this year, beating Wal-Mart to the punch.

"Two stores will open in October or November 2008," stated Carrefour CEO, Jose Luis Duran. "They are currently under construction; one in Moscow, and the other one in Krasnodar. Moreover, we plan to open a minimum of 5 hypermarkets in 2009, in Moscow, Krasnodar and Rostov-on-Don."

Although Wal-Mart's Stephen Fanderl, head of emerging markets for the group, earlier this year stated the retail giant's intentions to expand into Russia and Eastern Europe, tensions between the US and Russia over Georgia could lead to Wal-mart reconsidering any plans to enter the Russian market, making room for other players to expand their current base.

Real, part of the Metro Group, is "ready to open a store in each city with over 250,000 inhabitants" according to Elena Asanova, the head of Real's PR department. In particular, the company plans to open more than 60 stores in the North-Western regions of Russia, Volga-region, Urals, Eastern Siberia and in the south of the country by 2012.

"With more than 30 cities with more than 500,000 residents, Russia still offers a vast potential for our expansion," said Martin Bommersheim, head of media relations for Metro Group. Metro Cash and Carry, which already has 40 stores in Russia, 10 of which are in Moscow, is still looking to build more stores.

In recent years there has been substantial growth in Russia's consumer market. Foreign supermarket chains are now looking to cash in on the spending surge as they rapidly open new stores across Russia.

Despite the opportunities that Russia's economy offers, there are also serious challenges for companies trying to expand, in particular land prices. The increasing cost of land could lead to more mergers and acquisitions rather than more stores opening in the next few years. More importantly, the absence of infrastructure in some regions, unreliability of local suppliers, and complicated procedures to get official permission for technical and land works might also be a deterrent for smaller groups.