TASHKENT (Reuters) – As the coronavirus pandemic empties the bustling bazaars that have long dominated Uzbekistan’s food trade, supermarkets are driving into the vacuum, foreseeing a reshaping of food retail should social distancing become the new normal.
While a slew of industries around the world are scrapping growth plans, some food retailers in Uzbekistan are pressing ahead, believing changing consumer habits due to the outbreak will accelerate their efforts to win market share from traditional farmers’ markets.
However being able to reliably source the wide range of products required by supermarkets will be a severe challenge given the current disruptions to global supply chains, a significant risk factor that could derail expansion plans.
United Arab Emirates-based Majid Al Futtaim, for example, said it was on track to open its first Carrefour store in the capital Tashkent in the third quarter as construction has continued during the national lockdown.
“Phase one will see four stores open in 2020, of which there will be three supermarkets and one hypermarket,” CEO Hani Weiss told Reuters.
The company, which operates Carrefour stores under a franchise deal with the French retail giant <CARR.PA>, will earmark about $11 million for its market entry, and invest $10 million a year to support expansion in coming years, he said.
Local supermarket chain Korzinka.uz said it was sticking to its strategy of tripling its number of stores by 2023 in Uzbekistan, Central Asia’s most populous nation with 34 million people.
The company may open slightly fewer locations this year than previously planned due to the pandemic, with its increased focus on online sales which are likely to grow faster than before, said founder and CEO Zafar Khashimov.
The pandemic could speed up Uzbekistan’s retail modernisation by driving some bazaar traders and convenience stores, who have smaller financial buffers than large chains, out of business, Khashimov said.
“In the medium and long term, most likely, consumer preference and behavior will change. Sanitation, safety and hygiene will become more important,” he added.
“We need not three times as many, but 10 times as many stores to catch up, to provide full modern retail coverage.”
DECADES OF NEAR-ISOLATION
Foreign investment has started trickling into Uzbekistan, a former Soviet republic, after President Shavkat Mirziyoyev, in power since late 2016, introduced a series of reforms to open up its economy following decades of near-isolation.
There is no comprehensive independent industry data for the Uzbek food retail market. Weiss said, however, that the market in Tashkent was valued at $3.4 billion in 2018 and was expected to reach $5 billion in 2023, citing figures from SAD Marketing.
Tashkent residents buy more than two-thirds of their groceries at traditional farmers’ markets and more than a quarter from small convenience stores. Large, modern retail outlets account for only 4.4% but their share could more than triple with five years, he added.
Both Weiss and Khashimov cautioned, however, that a key challenge to growth was ensuring reliable sourcing amid output disruptions and border closures.
(Additional reporting and writing by Olzhas Auyezov in Almaty; Editing by Pravin Char)