Cost Drivers for Food Retailers in Developed and Emerging Markets

Abstract

The subject of research is a set of methodological and practical aspects of assessing the cost factors of food companies. The study of the above factors is becoming relevant under the current conditions of environment instability and the necessity to stimulate investment, given the low elasticity of demand for products in this sector. The purpose of the research was to confirm the hypothesis of a variety of cost drivers that form the financial result of companies in a developed and emerging markets by an example of 39 food retailers in an emerging market and 48 companies in developed markets based on a system approach and the comparison method using elements of factor and correlationand-regression analysis. The research findings obtained are as follows: the choice of indicators for the regression analysis of cost factors mostly of a multiplicative type is substantiated; the research was carried out using the indicator of financial result less the tangible assets depreciation; to clarify the results of the research, the elements of the comparative analysis were applied, with the companies classified into four groups where Lenta and X5 were in the group of the most efficient companies of the first quantile, and Dixie fell into the group of the fourth quantile companies that had difficulty in generating their own funds; the cost drivers of food retailers in emerging and developed markets were identified. It is concluded that the cost driver of food retailers in developed markets is profitability of sales, and in emerging markets it is the share of capital inputs in sales revenues. It has been established that the growth rate of consumer consumption plays a key role in the retail market of all countries. At the same time, there is a market tendency to oust small companies by large players whose assets have a higher level of investment demand. The novelty of the research lies in using by the authors the EBITA profitability indicator in the regression model, where EBITA is the profit before tax, interest and intangible assets depreciation.