Last week Lenta announced an agreement to acquire online-retailer Utkonos from Severgroup. The parties expect to complete the transaction in February 2022.
A major Russian retail group listed in both Moscow and London, Lenta aims to “create a leading e-grocery platform covering all key shopping missions and market segments.” Lenta will also “significantly expand its online market share,” leveraging the “loyal customer base, unique competencies and competitive advantages” of Utkonos.
Commenting on the deal, Steve Johnson, Lenta Senior Independent Director, stated: “Online is an important element of Lenta’s strategy and the acquisition of Utkonos is in line with the company’s strategic goal to reach 10% share of Russian e-grocery market by 2025.”
The base purchase price for the acquisition was set at 20 billion rubles ($270 million at the current exchange rate). Lenta will finance the transaction by an additional issuance of its shares, which will be placed by closed subscription to Severgroup. Preemptive rights may be exercised by other shareholders to acquire additional shares, with Severgroup committing to pay 20 billion rubles into Lenta’s share capital. In total, Lenta will issue shares worth 25.6 billion rubles ($345 million), as reported by Reuters.
Controlled by Russian billionaire Alexey Mordashov, Severgroup is the owner of both Lenta (78%) and Utkonos (100%). Its other properties include Severstal, Nordgold, TalentTech, TUI AG and TUI Russia, to name a few.
A $13 billion market in 2025?
A pioneer of Russian e-grocery, Utkonos claims more than 330,000 customers as of Sept. 2021, with deliveries in Moscow — where it claimed a 10% marketshare in 2020 — Kaluga, Tver, and Tula.
The platform generated 14.3 billion in revenues last year, up from 8.6 billion in 2019 ($192 million and $134 million respectively, at the average exchange rates of these years). In the first half of 2021, the company’s total sales increased by 11% (to 7.8 billion rubles) year-on-year.
With more than 85,000 SKUs — the largest fresh food assortment in Russia — Utkonos operates four dark stores in Moscow and Moscow region, as well as a fleet of 920 vehicles. It employs some 5,200 people.
The company is particularly well positioned in the Russian capital, especially within the upper-middle and premium segments. However, Utkonos is not number one on the Russia e-grocery market.
This market, which amounted to 135 billion rubles ($1.86 billion) in 2020 according to Statista, has been growing fast since the beginning of the pandemic. X5 Retail Group reported the largest food e-sales volume at roughly 22 billion rubles ($303 million), followed by SberMarket (20 billion rubles or $276 million).
Another study by AliExpress Russia and the Center for Expertise and Integrated Models (CEIM) puts Russia’s e-grocery market volume at some 300 billion rubles (around $4.1 billion) in 2021. Russian e-grocery could jump to 500-600 billion rubles by 2023 and to 1 trillion rubles ($13.6 billion at the current exchange rate) by 2025.
This story also appeared in DigitalCommerce360, a major US industry publication and a syndication partner of East-West Digital News.
