Velyka Kyshenia supermarket chain expands in Ukraine

by Zenon Zawada
Kyiv Press Bureau

KYIV - The supermarket chain Velyka Kyshenia has recently emerged as one of Ukraine's top-financed and most recognized companies internationally.

On December 23, 2005, the company concluded a 10 percent sale of $27.5 million worth of its shares to Western investors by offering them on the First Securities Trading System, the closest thing Ukraine has to a stock market.

The income earned from "the 10 percent that we floated will be directed towards developing our retail network in 2006," said Roman Lunin, the board chairman of Retail Group, the company that owns Velyka Kyshenia.

The company plans to open 15 new supermarkets this year. It currently operates 23 stores - 15 in Kyiv and one hypermarket recently opened in Ivano-Frankivsk. Hypermarkets are stores that are double the size of supermarkets.

Kyiv-based investment bank Dragon Capital brokered the deal in which eight European institutional investors became shareholders, including Swiss-based Julius Baer, Germany's DWS Investments and Sweden's East Capital.

Retail Group hopes to make its stock available to all investors with a planned 2007 initial public offering (IPO) of between 25 and 30 percent of its stock on the London Stock Exchange.

If successful, Velyka Kyshenia would be the first Ukrainian company to have its shares traded on a major stock exchange.

At present, two Ukrainian firms have traded their shares on the London Stock Exchange's Alternative Investment Market (AIM).

On December 16, 2005, Kyiv-based real estate development and property management firm XXI Century Investments began selling its shares on the AIM. It raised $140 million by floating 32 percent of its shares.

UkrProduct Group Limited became the first Ukrainian company to sell its shares on the AIM on February 11, 2005, offering 27.2 percent of its shares.

The company didn't respond to a question asking how much the sale raised.

Retail Group expects to earn between $30 and $35 million in profit in 2006, Mr. Lunin said.

Retail market poised for growth

Ukraine's retail market is poised to grow 10 to 15 percent annually through 2010, according to a Global Retail Development Index study performed by A.T. Kearney, a Chicago-based market research firm. Retail sales in Ukraine have increased 40 percent in the past two years, the report said.

The retail market is still very fragmented, with the five top grocers owning more than 20 percent of the total share.

"Although food sales account for two-thirds of total retail sales, as the population becomes wealthier, the balance is tipping toward non-food," the report said.

Although "Ukraine's infrastructure is underdeveloped, and spending power remains limited ... the time to enter is now," the report said.

Velyka Kyshenia probably had sales of $270 million in 2005, which it expects will increase by 63 percent to $440 million by the end of 2006, Mr. Lunin said.

Copyright © The Ukrainian Weekly, January 29, 2006, No. 5, Vol. LXXIV

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