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City news
Finnish Supermarket Chain to Open Stores in City
03.28.2008 10:26

The Finnish retailer SOK plans to open and develop its Prisma supermarkets in St. Petersburg until it occupies 15-17 percent of the local retail market by opening about 20 supermarkets over the next five years.

“We think there are still areas in St. Petersburg where supermarkets can be opened in the city center and hypermarkets in the suburbs,” Antti Sippola, vice-president of SOK Corporation, said Thursday at a press conference.

Last year Prisma sales stood at $3.73 billion. The company operates 51 Prisma stores in Finland, five in Tallinn and one in Riga. This year SOK will open its first supermarket in Vilnius as well as a new supermarket in Riga.

In St. Petersburg, the first Prisma will open this summer in the Hotel Moscow shopping center at the Ploshchad Alexandra Nevskogo end of Nevsky Prospekt.

“This central location offers good prospects — there are no other large food retail stores in this area,” said Vesa Punnonen, president of SOK Retail in Russia.

The space for the 2,500 square-meter supermarket was leased from Adamant, and investment totaled almost $8 million. By 2015, SOK expects to operate 15 to 20 supermarkets in St. Petersburg and its suburbs, investing 475-790 million dollars.

The supermarkets will occupy areas varying between 4,000 and 17,000 square meters, and their ranges will exceed 60,000 items, including food, consumer products, clothes and electronics. Initially, 80 percent of products will be supplied by Russian companies and the rest imported from Finland.

Kirill Akinshin, head of the assessment and consulting department at Maris Properties in association with CB Richard Ellis, indicated that in the city center large shopping areas could be created only in zones assigned for complex redevelopment.

“Considering the high concentration of shopping areas in St. Petersburg, Prisma’s project could be more profitable in the suburbs, such as the Primorsky, Kurortny, Pushkinsky, Petrodvortsovy and Lomonosovsky districts,” Akinshin said.

Igor Luchkov, director of assessment and analysis at Becar Commercial Property SPB, also recommended looking for large areas in the suburbs rather than in the city center.

“The most attractive premises along the city’s main roads are already occupied, and now basements and former air-raid shelters are being redeveloped. The company could take part in the St. Petersburg Property Fund tenders, but in that case they would have to buy whole buildings, open a supermarket on the ground floor and somehow manage the other areas,” Luchkov said.

Even in the suburbs, the most attractive central locations are often unavailable, he warned.

Akinshin estimated construction costs at $1,200 per square meter. Luchkov said that construction could cost $1,000-1,200 per square meter, but infrastructure and power network expenses would comprise up to 20 percent of the total cost.

Large retail areas are popular in St. Petersburg, Luchkov said, including hypermarkets.

Akinshin saw Perekryostok (whose stores occupy up to 10,000 sq. m.), Karusel and OKey (12,000-15,000 sq.m.) as Prisma’s likely main competitors.

Luchkov suggested that Prisma would focus on middle-class and upper-middle class shoppers, putting emphasis on its “Finnish quality.”

“We have many economy-class chains like Diksi and Pyatyorochka and a couple of elite brands, but the middle-class niche is unoccupied. Many consumers want something more than standard middle-class goods and expect higher quality, but are not prepared to pay for expensive products. SOK has good chances of winning these customers,” Luchkov said.

Mikhail Podushko, director for strategic development at WorkLine Research, indicated that as incomes increase and more city residents buy cars, people prefer supermarkets and hypermarkets to discount stores.

According to WorkLine, Pyatyorochka and Diksi are the most popular discount stores, while Lenta, OKey and Karusel are the most popular hypermarkets. The largest increase in monthly spending has been seen among customers of Karusel and OKey — seven percent over the last two years.

“Prisma’s plans are too optimistic. Of course, much will depend on the locations, range of goods and marketing, but it will be difficult to force out the leaders, as the recent attempt by Auchan to do so shows,” said Podushko.

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