Russian food retailer X5 seeks suppliers in India

As Moscow faces a severe food shortage following sanctions from western countries, representatives of Russia’s largest food retailer X5 Group will visit New Delhi next week to sign large deals for groceries and agriculture produce to ensure adequate supplies for its nearly 18,000 departmental stores. 

Besides basic food products such as tea, coffee, wine, rum, rice, ketchup, pasta, and cornflakes, it is also exploring Indian suppliers for beauty products and apparel. 

Earlier this week, company representatives attended a virtual meet organized by Federation of Indian Exports Organizations (FIEO) to shortlist suppliers. 

According to local reports, department stores in sanctions-hit Russia have run out of daily essentials such as sugar, pasta and rice. 

X5 may sign supply deals with Indian manufacturers and wholesalers for at least one year, said people in the know. It has requested for an annual supply of 200,000 kg of tea and coffee, 8,000 tonnes of seafood, 2,000 tonnes of rice, 1.6 million women’s hygiene products, 150,000 cooking ware items, 80,000 units of textiles, 1.5 million bottles of shampoo, and 5 million packs laundry detergent, besides other items.

Mint had reported that Russian retailers are scouting for food and other essential supplies from India. “They have put in requirements for a lot of products, including food, textile and beauty care products. The team will visit India next week to finalize the deals with sellers following the discussions during the virtual sensitization meet  earlier this week. Their requirement is huge,” said Ajay Sahai, director general and chief executive officer, FIEO. 

While agri and food products can be shipped without any hassle, the West have placed sanctions on textiles and beauty products. “Textiles are under sanctions, and we have made it clear that we will only want to talk about food and agri items,” Sahai added. 

The Russian Embassy in New Delhi had reached out to FIEO to facilitate the buyer-seller meeting.

While an India-Russia alternative payments mechanism using the rupee and rouble is still in the works, after the West led by the US excluded some Russian banks from the SWIFT financial messaging system, retailers in India are exploring opportunities to increase sales. Russian buyers are willing to pay in rubles, which would be converted to rupees and paid to Indian sellers, a person privy to the discussions said.

“The high freight cost will be built into the final price quoted to Russian buyers, and they do not have a problem with that. It is a great opportunity for Indian buyers. The only concern at the moment is the availability of shipping lines” said a Delhi-based retailer dealing in processed food, who did not wish to be identified.

X5 operates across retail formats—convenience stores under the Pyaterochka brand, supermarkets under the Perekrestok brand and hypermarkets under the Karusel brand, as well as the Perekrestok.ru online market, and food delivery services. 

The company’s global depositary receipts are listed on the London Stock Exchange and the Moscow Stock Exchange.

Queries emailed to X5 Retail and the Russian Embassy did not elicit any response till press time.

According to some reports, a payment mechanism alternative to SWIFT has been worked out between Russia’s state-owned development bank VEB and the Reserve Bank of India for transactions in local currency. Only one port in Georgia is currently functional for supplies to Russia.

The state-owned Export Credit Guarantee Corp of India (ECGC) had in February modified the cover category shipments to Moscow from ‘Open Cover’ to ‘Restricted Cover Category’ and increased premiums. The restrictive cover has revolving limits (normally valid for a year), and are approved specifically on a case-to-case basis.

In FY21, India’s exports to Russia stood at $ 2.6 billion, while imports stood at $ 5.5 bn. Among the top exported items, India shipped $469 million worth of pharma products and $301 million worth of electrical machinery to Russia. Other items of exports include tea and coffee, apparel and textile.