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WHEN WILL WAL-MART STORES SAY DA TO RUSSIA?

BY CURT HAZLETT

As the Russian retail sector blossoms, the roster of foreign companies doing business there grows steadily. But they are largely European companies; absent are the big American retailers found in other developing countries — notably Wal-Mart.

It’s not that the behemoth of Bentonville, Ark., isn’t interested. Wal-Mart sent a team that included financial, legal, merchandizing and logistics experts to Moscow last April to explore such a move, but spokesman William Wertz says the company has made no decisions as a result of that visit.

But there are signs that it could happen soon. Last September the chairman of St. Petersburg’s economic development committee told Russia’s Interfax news agency about Wal-Mart’s plans to open a 215,000-square-foot store on the outskirts of the city this year and that the company had begun interviewing job candidates. Wal-Mart would not comment on the report.

In February the German food industry magazine Lebensmittel Zeitung reported that Wal-Mart had created a joint venture procurement company in Hungary through which it plans to service the Russian market.

IGD, a British research group that specializes in the grocery industry, speculates that Wal-Mart will enter Russia with a Supercenter this year. The research firm notes that “although Wal-Mart may be too late to gain first-mover advantage in Russia … it needs to enter within the next year in order to exploit the potential in this rapidly developing market.”

If it should do so, Wal-Mart will find plenty of competition. The European hypermarket heavyweights that are already either open for business in Russia or considering it include:

• Turkish giant Ramenka, which has moved quickly to establish itself in the fast-growing market around Moscow. So far the chain has opened 28 hypermarkets, 20 of them in the Moscow area, along with six shopping centers. This year three more centers and four additional hypermarkets are set to open.

• Auchan Group, of France, opened its first hypermarket in 2002, a 160,000-square-foot store in a Moscow suburb. Auchan now operates six hypermarkets and is considered a leader in low-price retailing there.

• German retailer Rewe Group, which specializes in community shopping centers, is teaming up with Russia’s Marta Group to develop Billa supermarkets in Russia. Each company has agreed to invest $500 million in the project. The initial plan calls for at least 20 Billa markets in the Moscow area.

• Carrefour, Europe’s largest operator of hypermarkets and supermarkets, is in the same boat as Wal-Mart. IGD says Carrefour will enter the market within three years.

Some of the competition Wal-Mart would face is homegrown. One of the fastest-growing retailers in Russia is Perekryostok, which operates 75 supermarkets. Its sales topped $650 million last year, and the chain says that’ll grow by 40 percent this year.

Most analysts say that to successfully crack this lineup, Wal-Mart will need to team up with a local name, as it has in Mexico and Britain. “A number of them had already met with the Wal-Mart representatives,” said Frank Badillo, senior economist and global program manager for U.S. consultant Retail Forward, Columbus, Ohio.

If Wal-Mart is coming, that begs the question whether other American companies, REITs in particular, can be far behind. Don’t hold your breath. Though U.S. developers are increasingly drawn to foreign ventures, Russia’s reputation for graft and instability could present a barrier for now, especially for publicly held companies. “It’s a market where there are risks in the supply chain and the infrastructure,” Badillo said, “and that will keep a lot of companies out of Russia.”