UK’s Kingfisher to invest $180 million in Russia

When I was in Moscow recently, as part of the visit by U.K. Prime Minister David Cameron, I was struck once more by the scale of the retail opportunity in Russia. Russia has a growing economy, a willingness to modernize its economic structures and a population eager to enjoy the benefits of a more consumer-oriented society. 

These are just some of the reasons why I was delighted to announce plans for Kingfisher to invest £115 million ($180 million) in opening nine new Castorama stores in Russia over the next two years. We already operate 17 home improvement stores across 12 cities in Russia and the investment is consistent with our plan to open 4-5 stores each year there. The expansion will create around 1,600 jobs in Russia, in addition to the 2,500 people we currently employ. 

Of the nine new stores, six will be built in Moscow and the Moscow region as we feel we are currently under-represented in this part of the market. Achieving planning permission for large stores in the Moscow region is not easy, but we are making progress and our spread of stores in cities such as St. Petersburg, Omsk and Samara is a major asset. I am also pleased with our financial performance in Russia. Last year our sales in Russia grew 39 percent to £240 million ($375 million).

As Europe’s largest home improvement retailer operating nearly 900 stores in eight countries, we believe Russia represents a major opportunity with scope for many more stores. Taxes are low, the housing stock is in need of investment and consumers place a high priority on improving their homes. The market is large, fragmented and growing. Indeed, we estimate that the value of the Russian DIY and home improvement market to be around $30 billion with annual growth forecast at around 10 percent. An added attraction is the dacha market, with a high proportion of Moscow homeowners owning a dacha, which often includes a garden. Demand is clearly growing and our aim is to meet that demand with high quality, good value products backed by Castorama’s well-known, well-trusted consumer brand name.

Kingfisher has had a good experience of doing business in Russia. Much progress has been made over the past few years and we look forward to working with the authorities at all levels to improve things further. But challenges remain. The regulatory and business environments are tougher than other markets and efforts to reduce bureaucracy must continue. We would like to see the planning process become less complex and the road infrastructure improve, as well as the supply of key utilities, such as electricity.

We see our business in Russia as a mutually beneficial relationship. For our part, we obviously want to build a growing, profitable business. In return we aim to provide jobs, investment and an increase in the amount of goods that we source from Russian suppliers. By offering consumers innovative, exclusive products at low cost, we can play a part in helping millions of Russia people modernize their homes and improve their quality of life.

Ian Cheshire is group chief executive of Kingfisher.