Russia's World Cup Party Has Retailers Cheering for Now at Least

(Bloomberg) -- The party mood that's been a hallmark of the soccer World Cup in Russia is cheering retailers, restaurants and bars as fans give a boost to consumer spending.

Supermarket chains, electronic stores and eateries report a surge in sales and customer traffic as the world's most-watched sports event spurs demand for beverages, food and TVs. The flow of foreign and domestic visitors around Russia may give “a material boost” to consumer spending, according to a report by Bank of America Corp.

After President Vladimir Putin spent $11 billion on preparations, Russia's earned widespread praise for its efficient organization of the World Cup that's drawn hundreds of thousands of visitors. The national team's success in reaching the quarterfinals against expectations also sparked huge excitement among domestic supporters.

Many foreign fans have remarked on the warm welcome they've received, adding to the festive atmosphere in the 11 cities that have hosted matches including Moscow, Kaliningrad in the west, Volgograd in the south and Yekaterinburg in the Urals.

“Sales during game days are four times higher than a typical weekend night and it's almost all beer,” said Doug Steele, a Canadian whose Papa's bar and grill is located on Moscow's Nikolskaya Street, which became the unofficial epicenter of fan celebrations during the month-long tournament. “It's complete chaos.”

Spending Boost

The World Cup may boost event-related spending in Russia by as much as $5 billion in June and July in areas “like retail sales, paid services, including internet, mobile traffic, as well as domestic travel,” Vladimir Osakovskiy, an economist at Bank of America, said in an emailed note. While it'll have a “fairly small” overall effect on Russia's economy, the “total positive impact of the World Cup” may be about 1 percentage point of monthly gross domestic product split between the second and third quarters, he said.

It's a welcome fillip for an economy struggling to regain momentum after emerging last year from the longest recession this century. While consumer demand is the main driver of expansion, the pace of retail sales growth remains weaker than before the downturn. It averaged 2.4 percent in the first five months of 2018 and probably expanded 2.5 percent in June from a year earlier, according to a Bloomberg survey.

Beer, Snacks

Customer traffic rose between 45 percent and 63 percent at Perekrestok supermarkets in host cities in the tournament's first two weeks, with significant increases in sales of beer, soft drinks and snacks, according to X5 Retail Group NV, the country's largest retailer, which owns the chain. Magnit PJSC, Russia's second-biggest retailer, and another chain, Lenta Ltd., reported a similar sales picture.

Sales at Rosinter Restaurants Holding, which has 249 eateries across Russia, are up 30 percent on average since the World Cup started and have doubled at some locations, according to Sergey Zaytsev, the company's president. “Foreign visitors usually make up 10 percent to 15 percent of customers in our restaurants in Moscow and St. Petersburg, but during game days, and especially after matches, it was 90 percent,” he said.

Russia's largest electronics chain, M.Video, said sales of TVs and smartphones as well as accessories for them rose by about 20 percent in May to June compared to a year earlier.

Even so, World Cup fever may subside quickly once the championship ends on Sunday. Among the countries that staged the previous three World Cups, only South Africa registered significant growth in consumption after the tournament while retail sales fell in Germany.

A gauge that tracks Russian service industries from restaurants to telecommunications also fell to 52.3 last month from 54.1. “Despite the World Cup kicking off, business activity in Russia's service sector expanded at only a modest rate in June” said Sian Jones, an economist at IHS Markit, which compiles the survey.

--With assistance from Jake Rudnitsky.

To contact the reporter on this story: Olga Tanas in Moscow at otanas@bloomberg.net

To contact the editors responsible for this story: Gregory L. White at gwhite64@bloomberg.net, Tony Halpin, Torrey Clark

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