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X5 to Add Convenience Stores Under Franchising Joint Venture

By Maria Ermakova


X5 Retail Group NV, Russia's largest supermarket chain, plans to add convenience-store franchises under a joint venture with a group of individual investors.

The venture will open stores in Moscow and St. Petersburg with trading space ranging from 50 square meters (538 square feet) to 200 square meters, Moscow-based X5 said today in an e- mailed statement. X5 will own as much as 40 percent of the venture and the investor group will own the rest.

``The project aims to support small business by offering distinct competitive advantages to small, successful entrepreneurs,'' Chief Executive Officer Lev Khasis said in the statement. ``If the project is successful in Moscow and St. Petersburg, we'll consider developing it in other cities.''

X5 is opening its own stores and franchise outlets to gain market share in Russia, where the amount of food stores per person lags behind other European states. The retailer is tapping higher spending by Russians as economic expansion fuels wages.

The new stores will operate under names of Pyaterochka- Express and Perekriostok-Express. X5 will have an option to buy a further 30 percent of the venture in 2011 and the remaining 30 percent in 2013, it said today. Valery Tarakanov, the owner of X5's Perekriostok-Mini franchise stores, will co-own the venture and may become its chief executive officer.

X5 operated 516,328 square meters of selling space as of June 30 and had 539 discount Pyaterochka outlets in Russia and 170 Perekriostok supermarkets in the country and Ukraine. Franchisees ran 591 Pyaterochka stores in Russia and Kazakhstan and 10 Perekriostok supermarkets in Moscow.


Bloomberg, October 8, 2007

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