Magnit dishes up bigger food output after EU ban

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