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. Last Updated: 07/27/2016

Spar to Open 30 Local Supermarkets

Spar, the largest supermarket chain in the world, and local partner Rusmed, a consumer goods and food product distributor, are planning a local pilot program.

The partners are not saying how much they plan to invest, but other operators estimate the amount to be $70 million to $80 million.

Oleg Bakun, executive director for Spar in Russia, said the chain plans to open 30 local stores in three years. These will be 500- to 1500-square-meter budget supermarkets, the first of which could be opened in Moscow this summer.

Spar came into being in the 1930s in the Netherlands and has more than 18,000 stores in 32 countries. The chain caters to about 8 million customers a day. Its global turnover is more than $24.8 billion.

For the most part, Spar has expanded through franchising. Typically, it unites independent retailers under its trademark and they then work in conjunction with Spar's distribution network.

However, news that Spar is coming has caused few ripples. Evidently, local retailers have grown tired of widespread scare mongering regarding the imminent appearance of major Western retail networks.

However, Spar is the first Western chain to have officially confirmed to Vedomosti that it will develop projects in Russia and to have shared its plans regarding the local market.

At Spar's international congress, held in Cape Town, South Africa, last month, the supermarket chain announced it would open stores for the first time in four countries f Lithuania, Mauritius, Cyprus and Russia.

The management of Spar Russia emphasizes that the company will stick to its global development strategy here. Over three years, the pilot program will bring distribution centers up to speed, a retail strategy will be refined and personnel will be trained.

Bakun said shops that purchase a Spar franchise will receive working capital and shop equipment.

However, analysts say success is not certain.

"Budget supermarkets that can set low prices thanks to high turnover are undoubtedly profitable in Russia," said Andrei Myasnikov, director for strategic and marketing research with Modern Business Technologies.

"However, the franchise system in the retail business has, to this day, never worked in Russia. In general, it is impossible to impose a strict management hierarchy."

A few years ago, the Finnish division of Spar tried to develop its business in St. Petersburg. It opened five shops that it was subsequently forced to sell "because of the criminal conditions in the city," Bakun said.

This time things will be different, he said.

"Spar arrived unofficially back then, whereas now Spar's Russian division has a general license from the company's central office."

Marek Marzhek, a representative for Metro, another Western goods chain with big plans for the local market, said Spar has a good chance of occupying the cheaper end of the local retail business. Metro has higher prices and anticipates it will be able to hold its own, he said.