Magnit dishes up big­ger food out­put after EU ban

The Star Early Edition - - BRICS FOCUS - Ilya Khrennikov

MAGNIT, Rus­sia’s largest re­tailer, would invest more in food pro­duc­tion in the coun­try after cer­tain im­ports from the EU were banned fol­low­ing the Ukraine con­flict.

The company planned to open 40 food pro­duc­tion fa­cil­i­ties in Rus­sia over a decade, in­clud­ing 14 in its na­tive Krasnodar re­gion, chief ex­ec­u­tive Sergey Gal­it­skiy told gov­er­nor Alexan­der Tkachev on Wed­nes­day, ac­cord­ing to the re­gional ad­min­is­tra­tion’s web­site. A Magnit rep­re­sen­ta­tive de­clined to say what goods would be pro­duced.

Magnit grows cu­cum­bers, let­tuces and cherry toma­toes in its green­houses in the re­gion to se­cure sup­plies and boost prof­itabil­ity. It also pack­ages bulk goods such as nuts and ce­re­als. Its own out­put ac­counts for about 1.5 per­cent of sales.

Magnit might “en­ter new com­mod­ity food prod­ucts that only have small re­liance on es­tab­lished brand names”, VTB Cap­i­tal an­a­lysts said yes­ter­day. “Magnit has a re­li­able track record of launch­ing its own pro­duc­tion. The Krasnodar green­houses cur­rently ser­vice 30 per­cent of the company’s cu­cum­ber needs.”

Pres­i­dent Vladimir Putin banned im­ports of cer­tain foods from the EU and the US in Au­gust to re­tal­i­ate for sanc­tions against the coun­try. That move spurred food in­fla­tion.

Magnit im­ports 3 per­cent to 8 per­cent of its goods from EU mem­ber states. While that meant Gal­it­skiy had to turn to sup­pli­ers in non-EU states after the ban, the company’s rev­enue rose 34 per­cent in Septem­ber and 36 per­cent in Oc­to­ber from a year ear­lier. – Bloomberg

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