Magnit introduces additional restrictions to limit markup on certain socially important products at 5%

Krasnodar, Russia (March 02, 2022): Magnit PJSC, one of Russia’s leading retailers, introduced voluntary markup restrictions for 304 items across 27 categories included into the basic food basket of Russian consumers.

Markup on 276 products fr om such categories as beetroot, carrot, cabbage, potato, onion, milk, quark, kefir, butter, sugar, and bread will not exceed 5%. Markup restrictions will be effective as of March 1 in all regions wh ere the Company operates and will not limit the minimum level of markup, which may also be negative.

These particular restrictions are intended to supplement Magnit’s ongoing initiative to limit markup on a number of products from socially important categories at 10%, which the Company launched on February 1 this year.

Items with minimum markup are available in all 16.5 thousand of the Company’s grocery outlets — Magnit Convenience stores, Magnit Family supermarkets, and Magnit Extra superstores. To keep shoppers informed, Magnit added a special three-letter designation — СОЦ (SOTs) — to the names of such products and will later on highlight them with special price tags and place corresponding messages on the sales floor. In addition to that, customers can ask store employees for advice about products with limited markup.

The share of items covered by the voluntary markup restrictions will amount to around 40% of sales of socially important products in Magnit in value terms. Measures to introduce voluntary markup restrictions were developed in cooperation with and supported by the Federal Antimonopoly Service, Ministry of Industry and Trade, and Ministry of Agriculture of Russia.

Jan Dunning, President and CEO of Magnit:

“Current inflation rates affect the purchasing power of Russian consumers, especially those from socially vulnerable segments of the population. We want to support these customers and so are introducing additional markup restrictions for a number of socially important products to make them even more affordable. We expect other market players, both retailers and suppliers, to support our initiative. Only by acting together can we effectively hold off price increases.”

Magnit takes various measures to prevent the cost of products on its shelves from growing, for instance, by demanding that suppliers justify their price increases and meticulously examining the respective justifications to determine their objectivity. The Company also tries to minimize on-shelf prices by expanding the assortment of local suppliers, ensuring efficiency of its logistics, and selling products under its own private labels.

It is important to note that markup does not represent a profit for the Company and is set at a level sufficient to cover the cost of logistics, selling space lease, information technologies, decent working conditions for the staff, store openings and refurbishments, and expansion into new regions. Generally, food retailers have low net profit margins that do not exceed 1–3%.