MACROECONOMIC OVERVIEW: GDP

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2 CONTENT 1. Introduction 2. Macroeconomic Overview 3. Trade Sector 4. Main Players in Retail Trade 5. Sector Regulations 6. FMCG Market Demand. Population Survey in Yerevan 7. FMCG Retail Trends in CEE countries 8. Potential Developments in Armenian FMCG Market 2

3 2,376 2,87 3,577 4,9 6,384 9,26 11,662 8,648 9,26 1,138 Forecasted GDP, mln USD bln. AMD % to same quarter of previous year MACROECONOMIC OVERVIEW: GDP 12,5 1,5 8,5 6,5 4,5 2,5 GDP Dynamics and growth change to previous year, % GDP Quarterly Dynamics Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q GDP GDP real growth rate (right axis) GDP GDP real growth (right scale) Source: National Statistical Service of Armenia Source: NSS RA 3 time periods are revealed: 22-28Q3 (before crisis with 13.1% average annual growth), 28Q4-29 (crisis), 21 now (recovery low growth). Nominal GDP for 211 is 3,778 bln AMD and exceeds 28 level by 5.8%. While in real volumes it is less by 8.1%, and at nominal USD equivalent is less by 13.1%, IMF forecast for Y212 is 6.2%, for Y %. Government target for Y213 is 6.2%. Expected growth for 212 will be probably around 7.%. 3

4 DOMESTIC TRADE - COUNTRY COMPARISON Trade Sector in GDP (211) Source: National Statistical Offices of countries Russia Estonia Turkey Georgia Armenia Moldova Source: National Statistical Offices of countries ARM GEO RUS TUR EST MOLD The best way to compare the size of trade sector between the countries is the share of Trade in GDP and correspondingly per capita value added in trade, More detailed comparison is usually biased by different methodologies and coverage used in statistics. Armenia is the only country from the list where share of trade in GDP is continuously growing since Trade Sector's Share on GDP-Armenia

5 RETAIL TRADE: STORES Retail Trade Turnover by Formation Sources Retail Trade Turnover by Formation Sources (% in total) 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % 2.1% 37.% 35.3% 38.8% 33.3% 27.9% 15.6% 14.8% 12.6% 57.6% 59.% 6.1% 63.4% 41.% 41.2% 45.2% 46.6% 5.8% Shops Consumer goods markets Kiosks Agricultural products markets Other trade units Source: National Statistical Service of Armenia 5

6 COMPANIES FMCG The share of shops has gradually increased during the recent years. Additionally, within the segment of shops the retail trade is slowly moving from the small and medium stores to large trade centers, including supermarkets. Currently, there are several large stores operating in Yerevan, involved in trade of food and consumer products. The following are the supermarket chains involved mainly in FMCG trade: 1. STAR retail chain, 2. Yerevan City retail chain, 3. SAS retail chain, 4. Moskvichka retail chain. 5. Nor Zovq retail chain. 6

7 FMCG MARKET DEMAND. POPULATION SURVEY IN YEREVAN 7

8 CONTENT OF THE SURVEY Introduction Conclusions Main Findings: Summary Making Purchases: Customers Characteristics Retail Channels: Customer Flow Using Outdoor Food Services Supermarkets: Use Supermarkets: Assessment Supermarkets: Customer Cards Important Factors: Choosing Supermarkets, Shops, Products Household Expenditure on FMCG Appendix: Survey Demographics and Sampling 8

9 INTERESTING FACTS DISCLOSED ESTIMATED MONTHLY FMCG SALES USD 96.8 mln. ESTIMATED ANNUAL FMCG TURNOVER USD 1.2 billion SHARE OF SUPERMARKETS IN FMCG MARKET IN YEREVAN ~ 39% SHARE OF MAIN 4 SUPERMARKET CHAINS 3% FMCG MONTHLY EXPENDITURE PER CAPITA - 37,371 AMD DAILY CUSTOMER FLOW OF SUPERMARKETS ~ 37, 9

10 3.9% 26.9% 51.1% 44.2% 1.3% 61.% 72.9% 62.2% 19.% 18.4% 19.7% 37.2% 33.6% 56.7% 44.7% 7.1% 39.1% 43.8% 77.4% 68.% 44.8% 53.9% 32.3% MAKING PURCHASES: CUSTOMERS 1% 8% 6% 4% Share of respondents making purchases by gender and age groups Who makes purchases in household: Man or Woman? Together 14% Male 25% Female 61% 2% % 8% 7% 6% 5% 4% 3% 2% 1% % Total Female Male Share of active buyers by cathegory Employed Housewife Pensioner Unemployed Student Female Male 45.3% of all Respondents solely responsible for making purchases of consumer goods for their households, 14.4% are usually participating in joint visits to stores. About 2/3 of the customers of FMCG stores are women, Most active buyers are pensioners. Women are becoming 2.2 times more active buyers after marriage (62.9% vs. 28.5%), while men - by 1.7 times (39.8% vs. 23.2%). 1

11 Customers per day, thousand STORE TYPES Use of stores for FMCG purchases by type of store and frequency of use (% in all respondents) Usually 2-3 times Once a 2-3 times Once a daily a week week a month month Occasionally Supermarkets 42.3% 25.4% 13.8% 8.2% 3.6% 3.7% Small shops 41.% 13.7% 6.3% 3.6% 1.3% 6.3% Large grocery store 36.1% 21.3% 6.3% 2.7% 1.7% 4.7% Large HH goods stores 5.2% 12.8% 18.6% 12.4% 9.5% 8.% Trade centers.5% 1.7% 3.4% 8.4% 14.4% 22.5% Markets 6.1% 9.4% 13.1% 7.2% 5.8% 13.1% Streets, kiosks 1.2% 6.4% 6.% 2.3% 2.3% 6.5% Estimate of number of daily customers by types of store Supermarkets are most frequently used stores for FMCG purchases in Yerevan. Supermarkets keep leadership with thousand daily customers, while small shops have more than 3 times less customers. 11

12 81.4% 33.2% 5.2% 58.3% 64.% 51.8% 19.7% 32.6% 28.8% 39.9% 24.4% 22.% 3.4% 17.3% 2.4% 13.3% 25.% FMCG IN FOOD SERVICES 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % Use of Food service by category and gender (% in all respondents of same category) Fem Male Fem Male Fem Male Fem Male Fem Male 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % Use of Food service by income and gender (% in all respondents of same category) Fem Male Fem Male Fem Male Fem Male Fem Male up to Employed Housewifes Pensioners Unemployed Students Household monthly income groups, ths. AMD Usually daily Weekly Monthly Occasionally Do not use Usually daily Weekly Monthly Occasionally Do not use More active category using outdoor food services - STUDENTS It is interesting that the behavior of employed and unemployed women is very similar, which means that for woman the category is not so important for using outdoor food services. For housewives the behavior is different. For men the difference between the behavior of employed and unemployed is obvious. One of the determinants on behavior of using food services is household income. 12

13 SUPERMARKETS: CUSTOMER CARDS Why to have cards? 4% 1% 7% 44% 35% Bonus Discounts No queue Privilеgе Don't know or no reason 13

14 IMPORTANT FACTORS: SUPERMARKETS Importance of factors for customers on supermarkets Female Male 14

15 IMPORTANT FACTORS: SUPERMARKETS Importance of factors for supermarkets by age groups of customers Age groups Total Brand Location Time spent Service quality Trust Assortment Prices Discounts Ads Card payment

16 IMPORTANT FACTORS: SUPERMARKETS Importance of factors for supermarkets by residency of customers Locati Brand on Time spent Service quality Trust Assort ment Prices Discounts Ads Card payment Arabkir Ajapniak Avan Davitashen Erebuni Kentron Malatia-Sebastia Nor Norq Norq-Marash Nubarashen Shengavit Kanaker-Zeytun

17 IMPORTANT FACTORS: BY TYPES OF PRODUCTS Main factors: for Food products (share of respondents choosing the factor, %) Product quality 89.8% Freshness of product 76.8% Product price 58.6% Previous experience Brand of product Product apearance 6.9% 11.3% 23.2% Main factors: for Households goods (share of respondents choosing the factor, %) Advices by friends, etc. 2.3% Product quality 86.3% Ads 1.8% Price of products 61.% Previous experience 41.6% Brand of products 23.9% Advices by friends, etc. Product apearance Ads Other Product expiration date 9.6% 7.8% 4.6% 4.2% 1.3% 17

18 SUPERMARKETS: BY RESIDENCY OF A CUSTOMER Star Yerevan City 1.6% 1.1% 1.4% 14.6% 5.2% 11.6% 8.9% 9.8% 13.9% 13.2% 1.% 6.9% 2.7% 8.2% 8.8% 11.6% 13.8% 2.7% 1.6% 1.4% 8.9% 17.% 8.5% 7.6% SAS Moskvichka 1.2% 7.5% 2.5% 9.1% 15.4% 8.7% 1.8% 5.4% 8.1% 8.1% 5.4% 13.7% 4.6% 9.1% 22.4% 1.7% 4.1% 56.8% 18

19 SUPERMARKETS: BY RESIDENCY OF A CUSTOMER Nor Zovq 1.2% Kaizer 2.9% 2.9% 5.9% 5.9% 5.9% 2.6% 33.3% 1.2% 23.5% 14.7% 6.5% 17.6% 1.2% 1.2% Titan Evrika 6.5% 6.5% 14.3% 3.6%.% 3.6% 1.7% 87.1% 7.1% 6.7% 19

20 EXPENDITURE ON FMCG: By Income groups HH income - up to 1 thousands AMD HH income thousands AMD supermarkets large stores HH goods stores small shops kiosks, streets trade centers markets supermarkets large stores HH goods stores small shops kiosks, streets trade centers markets HH income thousands AMD HH income - over 5 thousands AMD supermarkets large stores HH goods stores small shops kiosks, streets trade centers markets supermarkets large stores HH goods stores small shops kiosks, streets trade centers markets Growing share of supermarkets in FMCG expenditure along with higher income groups is noticed. At the same time the shares of markets and HH goods stores are declining with the growth of income. 2

21 FMCG RETAIL TRENDS IN CEE COUNTRIES 21

22 FMCG RETAIL TRENDS IN EASTERN EUROPE The most recent relevant developments in the region are: - Diversification and growth of hypermarkets and discount formats. - Retail investments in small towns and more remote areas. - Continued growth of foreign participation. - Increasing concentration. - Shift towards private standards. 22

23 FMCG RETAIL TRENDS IN EASTERN EUROPE 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % Main Shopping Place for Food in CEE hypermarket supermarket discount store other/small shops Source: Shopping Monitor CEE Decrease of usage of small stores in CEE countries; Increase in usage of large stores (including hypermarkets, supermarkets and discount stores). According to Euromonitor 21, usage of small stores (for purchase of food) decreased from 67% to 52% (in Poland), from 84% to 58% (in Romania) and from 84% to 71% (in Bulgaria) for the period of According to the FMCG Survey in Yerevan, the share of supermarkets is estimated around 39% of all food products purchases. 23

24 FMCG RETAIL TRENDS IN EASTERN EUROPE Comparison of place of purchase Armenia and some CEE countries (general data by Poland, Bulgaria and Romania) Poland, Bulgaria, Romania 1 Armenia 2 Modern retailers Market Traditional shops Other Supermarkets, trade centers Market Traditional shops Other Fruits, Vegetables 36% 33% 29% 2% 24% 28% 44% 4% Diary 67% 5% 28% % 47% % 44% 9% Meat 55% 2% 34% 9% 56% 11% 3% 4% Wine 77% 1% 2% 2% 64% % 33% 3% Other beverages 64% 1% 35% % 51% 1% 48% % Sources: 1 Social Impact of Discount Food Retail in Remote Regions (Poland, Bulgaria, Romania), FAO/EBRD FMCG Survey in Yerevan, Ameria

25 FMCG RETAIL TRENDS IN EASTERN EUROPE Modern retailer as their main shopping place (% of interviewees), General Trends for Poland, Bulgaria, Romania 1 mid 2 21 Fruits 19% 37% Vegetables 19% 35% Diary 38% 67% Meat 28% 55% Staple food 44% 78% Processed food 4% 71% Wine 46% 77% Other beverages 37% 64% Sources: 1 Social Impact of Discount Food Retail in Remote Regions (Poland, Bulgaria, Romania), FAO/EBRD 211 FMCG trade in Armenia Projection of growth in shares of supermarkets, hypermarkets Fruits, Vegetables 24% 28% 31% 35% 4% Diary 47% 52% 58% 64% 69% Meat 56% 58% 6% 61% 62% Alcohol 64% 68% 71% 74% 8% Other beverages 51% 55% 58% 62% 67% Share of Modern retailers (supermarkets, hypermarkets) will grow mostly acquiring the share of traditional shops in Armenian market. 25

26 RETAIL TRADE FORECASTS IN ARMENIA Mid-term forecasts, mln. AMD GDP, current prices Total VA in Trade Trade turnover Retail trade turnover Retail in Yerevan-retail Retail in Other marzes Shops-Retail trade turnover Yerevan-shops Other marzes-shops Supermarkets-turnover Yerevan-supermarkets Other marzes-supermarkets Other shops-turnover