Russian consumers are switching to less expensive food options as a result of a decline in real disposable income, according to X5 Group, the nation’s largest food store, which also noted that high inflation is reducing consumers’ purchasing power.
Although a stronger rouble and a decline in consumer demand have assisted Russia in containing inflation, consumer prices are still high. Annual inflation rose to 20-year highs after Moscow pushed tens of thousands of troops into Ukraine on February 24.
Service for Federal Statistics Rosstat reported last week that the year’s total increase in consumer prices is 11.60 percent. However, X5 reported that food inflation increased to 19.5% year-over-year in the second quarter of 2022 from 13.5 percent in the first.
However, the merchant claimed that deflationary factors such as the strengthening of the rouble and the increasing availability of fruit, vegetables, eggs, and sugar are lowering that growth rate.
Net sales at X5’s “hard discounter” Chizhik increased 28 times year over year in the second quarter to 6.8 billion roubles ($120.4 million), according to a trading report. In the quarter, total net sales climbed 18.6% year over year to 647.3 billion roubles, and 300 new outlets were added.
According to the firm, X5 “continues to focus on improving its positions in key operational locations and extending its footprint and its market share through both organic and tactical M&A options.”
The migration of multinational corporations opposed to Russia’s activities in Ukraine might be advantageous for X5. By the end of June, X5 had nearly completely rebranded every location of the Prisma retail chain, which it had agreed to purchase from the Finnish company SOK Retail for an unknown fee in the middle of June.
Since it lowers living standards, high inflation has been a major issue for Russian households for years. This year, the economic crisis brought on by unprecedented Western sanctions on Russia will make the situation worse.
Following a decline in consumer prices in June, the Bank of Russia is generally anticipated to lower its main rate from 9.5 percent at its board meeting on July 22. (1 USD = 56.5000 RUB)
