As Uzbekistan’s economy continues to grow, retailer Makro, which celebrated its tenth anniversary last year, is eager to capitalise. Stephen Wynne-Jones spoke to Roman Sayfulin, its chief executive. This article first appeared in ESM Issue 1 2021.
With its key location in Central Asia, Uzbekistan has been intertwined with history since the dawn of time – Alexander the Great and Genghis Khan both laid claim to its fertile lands over the years, while it was a centre of industry under close to seven decades of Soviet rule.
Today, 30 years on from its independence, Uzbekistan is making headlines once again, as one of the fastest-growing former Soviet economies. Its GDP grew by 5.9% in 2019, boosted by a growing population, increased urbanisation, and a young workforce – some 72% of the population is under 40.
Two years ago, no less a publication than The Economist named Uzbekistan its ‘Country of the Year’ – an honour to which it is eager to live up.
Modern food retailing is also advancing fast, with a continuous shift from traditional bazaars to grocery stores. While modern formats today account for 4% to 5% of the overall retail market, the pace of change is particularly seen in the capital, Tashkent, which is starting to bear all the trappings of a modern urban centre – Carrefour and Fix Price recently opened their first stores in the city.
Setting the template for modern retail in Uzbekistan, however, is a local retailer with big ambitions.
Makro is the country’s largest grocery group, with a network of 96 stores, 61 of which are located in Tashkent and the surrounding region. In December, it marked its tenth anniversary with the opening of ten new stores in one day, and it has ramped up investment in e-commerce, to meet growing demand amidst the COVID-19 pandemic.
Growth Ambitions
As chief executive Roman Sayfulin tells ESM, with modern retail only starting to find its feet, the sky is the limit in terms of Makro’s future growth potential.
“We are in a stage of very active development,” Sayfulin explains. “This year, we’re planning to open around 100 stores, of which 20 will be classic supermarkets and 80 will be express stores.
“Of course, to develop the business in Tashkent is one thing, but to develop business in other regions is another case entirely. If we talk about long-term strategy, we would like to enter each city or town with a population of over 5,000 people, so that we can be represented in every corner of the country,” he continues.
Sayfulin joined Makro in 2017 as chief executive. As he explains, the momentum has really gained pace in the past two to three years, as the retailer sought to develop a new business philosophy.
“When Makro was founded, it was intended to be a franchise operation with a major global operator at the helm, but, as time went on, our knowledge of the local market led us to rethink in what direction we should go, and in what areas we should develop,” he says. “We built a philosophy, we built a concept, and we developed an assortment tailored to the local consumer. Before 2015, we only had around seven or eight stores, but since then, it has grown rapidly.”
While the COVID-19 pandemic has, understandably, been a setback – the country had reported around 78,500 cases at the time that ESM went to press – it has focused minds at the retailer on the proximity channel, which was already part of Makro’s strategy.
“We opened our first Makro Express store four years ago and renovated the concept recently,” says Sayfulin. “During the lockdown, it was more convenient for people to visit stores located close to where they lived, and this has now shaped our vision for the future. Also, as we look to expand, it’s much easier to find possible locations for convenience stores, rather than supermarkets.”
Responding To The Pandemic
According to Sayfulin, Makro responded “rapidly” to the coronavirus crisis, firstly by ensuring that its distribution centres were well stocked, and, secondly, by developing an e-commerce platform – a first for grocery retailing in Uzbekistan.
“Developing e-commerce was always part of our plan, and we had already worked with a company from Ukraine on outsourcing their online services,” says Sayfulin, “but when the lockdown appeared, we moved ourselves into this segment, and there was huge demand. It was beyond our capacity, to be honest.
“Now, with online orders back to a manageable level, we are looking to refine our e-commerce platform. We will soon be opening a ‘dark store’ to handle orders, and also plan to work with other companies, to help them develop their online capabilities.”
The retailer’s strong links to Uzbek producers has also ensured an availability of supply throughout the pandemic – some 53% of items sold in its stores are sourced domestically.
“We have helped local producers maintain their supply chains and provided logistics services to small and medium-sized businesses because a lot of them have found the switch to new ways of working a challenge,” says Sayfulin. “That goes for non-food producers, as well as food producers and agriculture.”
With such strong connections in place, he adds, the logical step for Makro was to develop a private-label range, which was launched in 2019 and currently boasts around 500 SKUs.
“Our policy for private label is to offer entry-price products of high quality,” says Sayfulin. “Private label is a new concept to many people, and we explain how it works, why it is cheaper, and what standards they can expect. We brought in a private-label expert who used to work for Carrefour in Bulgaria and Romania to help us implement our strategy. Last year, private label represented around 2% of sales. This year, it should be 5%.”
The medium-term aim is to generate around 20% of sales from private label, he adds. Add to this Makro’s extensive sustainability programme, with electric car-charging stations at selected locations, and, all in all, it’s a seismic step for a population that has traditionally relied on local markets and bazaars for their daily shop.
“People will continue to shop at bazaars – it’s in their blood,” says Sayfulin, “but times are changing, and while people still have an emotional connection to that way of shopping, they are demanding more modern shopping solutions.”
Distribution Network
Uzbekistan, with a population of 34 million, is the third most populous country in the former Soviet Union (after Russia and Ukraine), and it is geographically larger than Germany or Italy. Sayfulin acknowledges that expansion is going to require some serious capital investment over the coming years, with the roll-out of new logistics centres already under way.
“We are currently developing a central distribution centre, and as we develop our store numbers, the more warehouses and distribution centres we will need – not just around Tashkent, in the east of the country, but also in the south, and the west. Of course, we’re taking things step by step, but we have a clear picture of how to develop.”
© 2021 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.
