Brief market overview. Retail market of Uzbekistan is valued at appr. UZS 107trillion (appr. $15 bn) with +24% CAGR in 2013-2017e, official statistics shows, thanks to rising spending power and favorable demographic trend. Almost nearly a quarter of retail turnover is traded through the organized supermarkets (including hypermarkets, shopping malls, and the likes), while the rest by so called bazaars where official data are less accurate. Therefore, official statistics may not represent the whole true picture of the market situation.
The market of the Tashkent capital city represents 22% of the country’s total, appr. $3bn, with +23% CAGR, official figures show. Due to large share of unorganized retail and under-reporting by official statistics, the real scale of the market is too huge, estimated appr. $12bn in Tashkent city, in our view.
Due to high import duties and excise taxes for food, clothing, footwear, home appliances and other consumer goods, shopping malls offer mainly locally-manufactured products on their shelves. Due to lack of currency convertibility before, international brands have not had official franchises in the country. We expect this situation is about to change soon.
Organized retail. Substantial investments, mostly by local firms, have been spent on supermarkets, hypermarkets and shopping malls as well as boutique shops to capture the rising trend of consumers showing more preference to international brands. Reforms in the banking and monetary policies by the regulators boosted significantly to shifting consumers to organized card-served retail from cash-based bazaars. Appr.$300mn investment, or 5% of total investments (2017e), were made in retail and related sectors in Uzbekistan 2017e. We note that foreign investments in retail business are almost non-existent.
Average retail turnover per capita in the country is estimated at $400 (2017e), while in Tashkent city $1,100, three times bigger than the country average, according to official data which we believe underestimated. Therefore, the bulk of the shopping centers are concentrated in the prime locations of the capital city. This leaves tremendous opportunities for further growth in the industry to tap to wider regions.
Major brands. The largest supermarket brands, which are mainly functioning in the capital city, are korzinka.uz (24 stores), Makro, MEDIAPARK, Magnit – all local brands. There are no international official brands as yet.
Government program. President Mirziyoyev issued a resolution in March this year that adopted a Program to reconstruct bazaars and build on their territories modern shopping malls for 2017-2019. The Program suggests building 9 3-storey hypermarkets, 28 2-storey supermarkets, 126 1-storey supermarkets and 79 minimarkets on the territory of 59 inefficient and loss-making bazaars.
To implement this plan, UZS746bn (appr. $93mn) worth financing will be arranged, including UZS632bn ($79mn) by National bank of Uzbekistan and UZS82bn ($10mn) by entrepreneurs and preferential commercial banks loans.
We expect the retail industry to see substantial growth in coming years due to boost in economic activities driven by currency unification and liberalizing import regime as well as rising personal income. The market size of the whole country in the organized supermarkets, hypermarkets and shopping malls segment may reach $30bn, including $8bn in Tashkent city by 2020, in our estimate.
We also believe international strategic and portfolio investors’ interest in the retail industry of Uzbekistan will rise in the short and medium terms who will be seeking stakes in local supermarket and hypermarket brands as well as international brands once the necessary regulations are in place. Also we will not be surprised to see the US, Europe and Asian franchises to launch their businesses in Uzbekistan with their local partners soon.
