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. Last Updated: 07/27/2016

AVA Begins Work on First Hypermarket

German retail giant AVA on Thursday laid the cornerstone of its first hypermarket in Russia, an $18 million complex set to open next spring along the southeast rim of the Moscow Outer Ring Road, or MKAD.

"The size of the market, the high degree of demand and the growth potential of the Russian economy make this market interesting," AVA's chief executive Kurt Lindemann said at a news conference.

Lindemann told local dignitaries and journalists that the 35,000 square-meter, 40 million-Deutsche-mark ($18 million) trading center with a 26,500-square-meter self-service store is expected to employ about 700 staff. It will have an annual turnover of about 100 million marks in its first year and this would grow, he added.

He said goods for sale will include groceries, beverages, household goods, building materials, electronic goods and gardening equipment. More than 70 percent of items will be domestically produced. A 2,000 square-meter mall will provide for specialist shops and services.

Lindemann said AVA's policy was to offer permanent low prices that would encourage customers to return to its large-area retail outlets. AVA was also considering building other hypermarkets in Moscow, he added.

Healey & Baker define a hypermarket as a self-service store, usually on a single level, with a range of food and nonfood goods with at least 5,000 square meters parking space and ample car parking spaces.

The AVA hypermarket will be built on a 10-hectare site in the settlement of Kotelniki in the Moscow region and will have parking for more than 2,300 cars.

The site is being provided by the Moscow-region-owned enterprise Mosobltestgarant, which will build the store using local contractor PSP-Farman Corp., he said. AVA will own 75.1 percent of the German side of the venture with Moscow-based importer and distribution firm Mawy GmbH holding 5 percent and Trojan GmbH holding the remainder, he added.

Lindemann did not explain the financial arrangements with Mosobltestgarant, but its general director Yan Rovner said proceeds from the partnership would later be used to build a school, hospital and residential buildings on the site.

AVA employs more than 28,000 staff in Germany and last year had sales of 10.3 billion marks, 7 percent more than in 1999. Together with Edeka, which holds a 49.4 percent stake in AVA, it is the largest grocery retailer in Germany with annual group sales of more than 60 billion marks.

Michael Lange, managing director of Jones Lang LaSalle, said that AVA's chances of success were realistic.

"The demand is there. The disposable income is there," he said

Quite a few Western retailers are planning to construct hypermarkets around Moscow in the next 12 months, and time would tell which would be completed first, Lange said.

Natalya Oreshina, retail consultant with Stiles & Riabokobylko, the Moscow-based associate office of Healey & Baker, agreed, saying AVA's hypermarket would soon face competition from similar projects, but was well placed in the east of the city, because many retailers were eyeing the west of the city, she said.

Turkish company Ramenka last week announced its fourth Ramstore hypermarket — 37,000 square meters — in Moscow is due to open in the Belyayevo district in October. Apart from three hypermarkets, Ramenka operates six supermarkets.