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UPDATE 2-Carrefour looks to speed Russian expansion

Published 06/18/2009, 12:22 PM
Updated 06/18/2009, 12:24 PM
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* French retailer targets leading position in long term

* Opens first Russian store, two more will follow in 2009

* Declines to comment on Seventh Continent

* Russian daily Vedomosti says talks have stalled

(Adds more quotes, details, background)

By Maria Kiselyova

MOSCOW, June 18 (Reuters) - French retail giant Carrefour, a relatively late arrival to Russia, plans to stake out a leading position in the market and is looking at all options to speed growth, a top executive said on Thursday.

"We want to be among leading distributors in Russia in the long term. We are talking about a very large market, so there should be enough space for several big distributors," Executive Director Thierry Garnier told a news conference.

Garnier was speaking at the opening of Carrefour's first store in Russia, in a newly built Moscow shopping mall, which will be followed by two more hypermarket openings in the Russian regions in 2009.

Russian retailers are facing a difficult year as the country enters recession while rising unemployment, slower income growth and limited access to credit have hit most consumers.

But the downturn may also offer global majors an easier entry into a highly fragmented sector which has more potential than many mature markets and where distressed asset prices are set to plunge.

Russia's top grocer by sales, X5 Retail Group, has a 4 percent share of the food retail market and had revenues in 2008 of about $9 billion.

"We have been waiting for the best environment to enter," Garnier said when asked why Carrefour had not moved into the Russian market in the 1990s when the purchasing power of local consumers was soaring on the back of high oil export revenues.

A top French competitor, Auchan, was among the first foreign hypermarket chains to hit Russia, opening its first Moscow store in 2002 and now has more than 30 stores. It has expanded widely in the provinces and plans to open another six stores this year.

Another global major, Wal-Mart, may soon follow Carrefour's Russian move and bankers say it is talking with local chains in need of cash to cope with the crisis.

"We really believe in the potential of the Russian market in long-term prospective and I think the best demonstration of our confidence is that we are opening (our) first stores in 2009, a difficult year for the world economy," Garnier said.

The world's second-biggest retailer is seen as a potential buyer of Moscow grocer Seventh Continent which would give Carrefour an immediate foothold in the Russian market.

"In all countries we are looking at all the opportunities to speed our development," Garnier said, but he declined to comment on Seventh Continent specifically.

Banking sources have said the French hypermarket chain offered to buy out the Moscow chain's main owner, Alexander Zanadvorov, whose stake is collateralised with Deutsche Bank, for up to $1.6 billion.

A Russian radio station said on Wednesday the deal could go ahead but daily business newspaper Vedomosti said on Thursday the negotiations were halted.

"There are new rumours every day and I will not comment on them," Garnier said.

He said it was too early to say how many stores Carrefour would have in its Russian chain by the end of 2010 or what market share the company wanted to achieve.

Carrefour also had no immediate plans to expand into the neighbouring markets of the Commonwealth of Independent States (CIS). "So far, only Russia is on the agenda for us," he said. (Editing by Greg Mahlich)

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