SUMMARY. THIS CABLE REPORTS ON COMMERCIAL OPPORTUNITIES FOR U.S. FIRMS TO PARTICIPATE IN A CONSTRUCTION PROJECT WHICH ENVISIONS A CHAIN OF WHOLESALE FOOD MARKETS IN MOSCOW AND THE MOSCOW REGION, RUSSIA. END SUMMARY.
1. CS ST PETERSBURG WAS RECENTLY APPROACHED BY THE LOCAL INVESTMENT COMPANY "SEVER-INVEST" ON BEHALF OF TONAR, THE MOSCOW-BASED MULTI-PROFILE JOINT STATE AND STOCK CORPORATION. MR VLADIMIR KALININ, DIRECTOR OF SEVER-INVEST, REQUESTED OUR ASSISTANCE IN IDENTIFYING A POTENTIAL U.S. INVESTOR AND SUPPLIER OF FOOD PRODUCTS FOR THE CONSTRUCTION AND OPERATION OF A CHAIN OF FOOD WHOLESALE MARKETS IN MOSCOW AND IN THE MOSCOW REGION.
2. THIS WHOLESALE FOOD MARKET CHAIN IS A MAJOR PROJECT FOR TONAR FOR 1996. IT HAS INITIATED BY THE GOVERNMENTS OF MOSCOW AND THE MOSCOW REGION IN DOCUMENTS NO. 755-P OF NOVEMBER 10, 1993, "ON SETTING UP A FOOD WHOLESALE MARKET", AND NO. 368-P OF APRIL 19, 1994, "ON URGENT MEASURES FOR ESTABLISHING A FOOD WHOLESALE MARKET IN THE CITY OF DOLGOPRUDNY". THIS PROJECT IS TO SUPPORT THE EXISTING AND PROJECTED FOOD DISTRIBUTION CHANNELS IN MOSCOW AND IN THE REGION. ITS PURPOSE IS TO SUPPLY VARIOUS FOOD STUFFS TO THE RUSSIAN CAPITAL FROM DOMESTIC AND FOREIGN SOURCES. IN THIS RESPECT, TONAR WILL BE HIGHLY INTERESTED IN ESTABLISHING BUSINESS CONTACTS WITH U.S. FOOD PRODUCERS AND DISTRIBUTORS AND OPERATORS OF LARGE WHOLESALE FACILITIES TO PROVIDE GOODS AND FOOD MARKET EQUIPMENT AND MANAGEMENT SERVICES, FOOD PROCESSING EQUIPMENT AND TECHNOLOGIES.
3. A PRELIMINARY FEASIBILITY STUDY FOR THE CONSTRUCTION OF FOOD OUTLETS AND PROCESSING ENTITIES IS AVAILABLE. HOWEVER, BASED ON THE DOCUMENTS PROVIDED TO POST, WE BELIEVE THAT AN ADDITIONAL, MORE DETAILED PROJECT STUDY WILL BE REQUIRED. TO THIS DATE, THE PROJECT FORESEES THE FOLLOWING ELEMENTS:
--CONSTRUCTION OF 4 FOOD WHOLESALING OUTLETS WITH A TOTAL AREA OF 40,000 SQUARE METERS IN THE VICINITIES OF MOSCOW;
--PURCHASE OR RENTAL OF A HAULAGE FLEET FOR GOODS DELIVERY;
--SETTING UP A SYSTEM MANAGEMENT CENTER FOR LOGISTICS COORDINATION;
--CONSTRUCTION OF FOOD PROCESSING AND PACKAGING ENTITIES FOR DOMESTICALLY PRODUCED MEAT, MILK, VEGETABLES AND FRUIT;
--ESTABLISHING SUPPORT CENTERS FOR LOCAL AGRIBUSINESSES PARTICIPATING IN THE PROJECT AND SUPPLYING FOODS FOR THE WHOLESALE MARKETS.
4. THE FOOD OUTLETS/MARKETS ARE PLANNED TO BE CONSTRUCTED BY TONAR IN COOPERATION WITH POTENTIAL INVESTORS, WITH THE FIRST TWO BEING PLACED IN DOLGOPRUDNY AND LUYBERTSY (SOME 40 KILOMETERS FROM MOSCOW). TWO MORE FOOD CENTERS WOULD BE LOCATED IN THE SOUTHERN AND THE WESTERN NEIGHBORHOODS OF MOSCOW. THE FOOD CENTERS WILL SERVICE MOSCOW FOOD RETAILERS, SUPERMARKETS AND GROCERY STORES. THE NUMBER OF ITEMS TO BE STOCKED AND DISTRIBUTED FROM A WAREHOUSE WOULD BE APPROXIMATELY 15,000. ACCORDING TO TONAR, A BROAD SELECTION OF PRODUCTS WOULD BE A NECESSITY FOR AN EFFECTIVE SYSTEM OF FOOD CENTERS. EACH FOOD OUTLET WOULD BE OF 10,000 SQUARE METERS AND WOULD BE EQUIPPED WITH MODERN AUTOMATED HANDLING EQUIPMENT. WAREHOUSING AND OPERATIONS WOULD BE CONDUCTED ACCORDING TO INTERNATIONAL STANDARDS.
5. SMALL DEPARTMENTS FOR PACKAGING AND SORTING OUT PROCESSED FOODS WILL BE ESTABLISHED AT THE WHOLESALING FACILITIES. THE MERCHANDISE WILL BE TRANSPORTED TO CUSTOMERS BY THE VENTURE'S TRUCKS UPON REQUEST. FOR THIS, THE PROJECT ENVISAGES THE PURCHASE OR RENT OF APPROXIMATELY 100 SPECIAL TRUCKS AND CONTAINERS.
6. MILK, MEAT, VEGETABLES, POTATO AND FRUIT PROCESSING PLANTS WOULD BE PART OF THE FOOD MARKETS PROJECT. THESE RAW COMMODITIES WILL BE SUPPLIED BY LOCAL FARMERS AND AGRICULTURAL PRODUCERS, PROCESSED DOMESTICALLY AND THEN SOLD THROUGH THE NEW FOOD DISTRIBUTION CENTERS.
7. IMPLICATIONS FOR U.S. FIRMS: THE FOOD WHOLESALING PROJECT ANTICIPATES THE ESTABLISHMENT OF A JOINT STOCK COMPANY. IT IS EXPECTED THAT THE SHAREHOLDERS WILL INCLUDE THE GOVERNMENTS OF MOSCOW AND THE MOSCOW REGION, THE TONAR CORPORATION, AND INTERESTED RUSSIAN AND FOREIGN INVESTORS. U.S. FIRMS INTERESTED IN CO-FOUNDING THE JOINT STOCK COMPANY CAN APPROACH SEVER-INVEST FOR DETAILS. ACCORDING TO MR KALININ, TONAR WOULD PREFER U.S. PARTICIPATION IN THIS PROJECT BOTH IN TERMS OF FUNDING AND TECHNICAL ASSISTANCE, CONSECUTIVE FOOD SHIPMENTS AND MANAGEMENT TRAINING, WAREHOUSING TECHNOLOGIES AND EQUIPMENT FOR FOOD OUTLETS AND PROCESSING PLANTS. ACCORDING TO TONAR, IMPLEMENTATION OF THIS PROJECT COULD SERVE AS AN EXAMPLE FOR THE REST OF RUSSIA.
8. POST COMMENTS: RUSSIA'S FOOD DISTRIBUTION SYSTEM IS STILL IN ITS INFANCY. EMERGING FOOD TRADERS ARE STRIVING TO ESTABLISH EFFECTIVE WAYS OF DISTRIBUTION FOR FOOD PRODUCTS IN THE RUSSIAN MARKET. THERE ARE SEVERAL TRADITIONAL VENUES FOR FOOD DISTRIBUTION USED BY NEWLY ESTABLISHED RUSSIAN FOOD DEALERS: (A) SMALL KIOSKY SCATTERED WIDELY, ESPECIALLY IN LARGE CITIES (MOSCOW AND ST PETERSBURG) SELLING INSIGNIFICANT AMOUNTS OF CANDIES, CHOCOLATES, AND BEVERAGES; (B) COMMON GROCERY SHOPS WITH A RELATIVELY SCANTY VARIETY OF FOOD PRODUCTS; (C) "WESTERN-STYLE" SUPERMARKETS WHICH ARE SMALL COMPARED TO AMERICAN SUPERMARKETS BOTH IN TERMS OF SPACE OCCUPIED AND FOODS ASSORTMENT PROVIDED - THE LARGEST ONES ARE NO LARGER THAN 8,000-10,000 SQUARE FEET, AND THESE ARE FEW, WITH A VARIETY OF SOME 5,000-7,000 GOODS; (D) CASH-AND-CARRY STORES, NOW BECOMING POPULAR, SELLING TO RETAIL ACCOUNTS; AND (E) DISTRIBUTORS AND WHOLESALERS BUYING FOOD STUFFS DIRECTLY FROM DOMESTIC AND FOREIGN PRODUCERS AND DISTRIBUTORS FOR FURTHER DISTRIBUTION WITHIN THE LOCAL MARKET.
9. FOR MORE INFORMATION, U.S. FIRMS INTERESTED IN THE PROJECT MAY WISH TO CONTACT:
MR VLADIMIR KALININ, GENERAL DIRECTOR
SEVER-INVEST
38 PILOTOV ULITSA
ST PETERSBURG 196210, RUSSIA
TEL: 7 (812) 296-0401
FAX: 7 (812) 108-4892
E-MAIL: NATASHA@SNN.SPB.SU