According to X5 Group, the country’s largest food retailer, Russian customers are choosing less costly food alternatives as a result of a reduction in real disposable income. High inflation is also limiting consumers’ purchasing power, the company added.
Consumer prices in Russia remain high even if a stronger rouble and a drop in consumer demand have helped to restrain inflation. After Moscow sent tens of thousands of troops into Ukraine on February 24, annual inflation increased to 20-year highs.
Consumer prices have increased by 11.60 percent overall so far this year, according to last week’s data from the Service for Federal Statistics, Rosstat. However, according to X5, food inflation surged from 13.5 percent in the first quarter of 2022 to 19.5 percent in the second.
The merchant asserted that the rate of development is being slowed down by deflationary elements including the strengthening of the rouble and the rise in the supply of fruit, vegetables, eggs, and sugar.
According to a trade report, net sales at X5’s “hard discounter” Chizhik rose 28 times year over year in the second quarter to 6.8 billion roubles ($120.4 million). 300 new locations were opened during the quarter, and overall net sales increased 18.6% year over year to 647.3 billion roubles.
X5 “continues to focus on enhancing its positions in key operational regions and growing its footprint and its market share through both organic and tactical M&A alternatives,” the company claims.
It may benefit X5 if global firms leave the country in opposition to Russia’s actions in Ukraine. The Prisma retail chain, which X5 had agreed to buy from the Finnish business SOK Retail for an undisclosed sum in the middle of June, had virtually all of its locations rebranded by the end of June.
High inflation has always been a significant problem for Russian people since it affects living standards. The situation will get worse this year as a result of the unprecedented Western sanctions against Russia.
The Bank of Russia is expected to decrease its main rate from 9.5 percent at its board meeting on July 22 in response to a drop in consumer prices in June. (One USD equals 56.5000 RUB)
