Friday26 July 2019 ★ FINANCIAL TIMES 13COMPANIES
MAX SEDDON— MOSCOWMikhail Saltin could buy the office sup-
plies for his small Moscow legal firm
from a local shop, but he says he can
save up to two-thirds of the cost by
ordering online from China.
“It’s easy and you don’t even have to
wait that long any more; the post office
tracks it,” Mr Saltin said ofAlibaba’s
AliExpress site. “I even bought a Lenin
badge just like Brezhnev had. The Chi-
nese can do anything.”
Customers like Mr Saltin, who said he
spends an average of Rbs20,000 ($316)
a month on AliExpress, are driving a
huge surge in cross-border trade
between Russia and China. Last year, 90
per cent of the 290m parcels sent to Rus-
sia came from China, according to the
Gaidar Institute think-tank.
And nowMail.ru— ownerof Russia’s
top social network VK — the mobile
operatorMegaFonand Alibabaare
teaming up to make it easier for the likes
of Mr Saltin to shop online.
Online shopping in Russia remains
relatively under-developed. The coun-
try is one of the few markets where
Amazonand other major global retail-
ers have yet to tread and AliExpress, Ali-
baba’s main overseas brand, currently
has a 70 per cent share of the Rbs316bn
of annual spending.
Boris Dobrodeyev, Mail.ru’s chief
executive, said VK will be a one-stop
shop for social networking and also
shopping, following in the footsteps of
the so-called superapps, such asTen-
cent’s WeChat, which has layered pay-
ments and food delivery on top of its
messaging service.
He described the 97m monthly users
of VK being able to shop on AliExpress
from within the app or website, to flag
interesting items and to buy things their
friends recommend to them. A payment
system integrating Alibaba’s Alipay
with Mail.ru’s technology is expected to
be agreed this year.
“Imagine, if you combine Tencent and
Alibaba on one market — this is what’s
really happening in Russia,” MrDobrodeyev said. “This isn’t happening
anywhere else. Facebook and Amazon
are separate, Tencent and Alibaba are
separate, and we are putting it all
together.”
Alibaba controls 56 per cent ofthe
joint venture’s capital, but 49.9 per cent
of the voting rights. The Kremlin’s Rus-
sia Direct Investment Fund, which owns
1.2 per cent of voting rights, ensures the
Russian shareholders control theopera-
tion and has an open-ended option to
buy a further $194m stake from Ali-
baba.
The JV is not the only Kremlin-linkedattempt to build an “ecosystem” uniting
retail and payments. State-runSber-
bankis backing a $1bn competitor
alongside Mail.ru’s rivalYandex, with
which it decided to set up a partnership
after talks with Alibaba failed.
ButAliExpress’s dominance of the
Chinese cross-border market, where it
has 20m Russian users, is such that Yan-
dex.Market’s new venture Bringly,
which launched in November, is focus-
ing on products from western countries
instead.
Mr Dobrodeyev says AliExpress’s suc-
cess is partly due to its sellers fillingwhat was a previously empty niche in
the market.
Russia’s $18bn ecommerce market —
$5.4bn of which is cross-border trade —
only accounts for 4 per cent of retail
sales, even though it grew 21 per cent
year-on-year in 2018, according to mar-
ket research firm Data Insight.
Russia’s struggling postal service has
also felt the benefits.Pochta Rossii
made a record Rbs2.7bn profit last year,
350 per cent more than its 2017 total,
according to its Russian accounts.
In September, the postal service
announced a new route for parcelsthrough the Pacific city of Vladivostok
to service deliveries to the Urals and
Siberia, which account for 40 per cent of
AliExpress’s Russian sales. The new
route will see delivery time shortened
from 40 days to 14.
Mr Dobrodeyev says the improved
logistics will drive further sales. “The
main thing wasn’t logistics, paymentor
marketing, but access to the largest
number of affordable goods,” he said.
“That model is absolutely perfect for
Russia, because in that growth para-
digm it was really easy — it doesn’t
require big investments in logistics or
the product offering.”
Though Mail.ru’s own efforts at ecom-
merce have brought little success — its
cross-border site Pandao made a
Rbs1.6bn loss in the first nine months of
last year — he says the joint venture’s
main asset will be monetising VK’s 97m
monthly user base by luring it to buy
from AliExpress.
“We think the biggest value in the
transactional economy is not your aver-
age spend but how often users use your
service. Even if they’re not spending
that much but they’re using it 15 to 20
times a month, you have a huge advan-
tage over the player where people spend
more but only use it once a month,” Mr
Dobrodeyev said.
Unlike Facebook’s chat service, VK’s
messenger is integrated with its mobile
app, which he claims will help “leverage
the high frequency of messaging” into
ecommerce.
VK is already flooded with pictures of
the esoteric items available for sale on
AliExpress, including a giant spoon that
doubles as a selfie stick, a shower soap
dispenser in the shape of a noseand
plastic cockroaches.
Mr Dobrodeyev calls the phenome-
non a “viral wave” that thejoint venture
needs to “saddle”.
“Why leave social networks if that’s
where you find content? Why do you
need 20 different stores where you have
to register every time and trust them
with your payment details? That’s what
we’re trying to get rid of,” he said.Russian social network taps into ecommerce
Joint venture between leading site VK and China’s Alibaba streamlines purchases and boosts cross-border trade
A step up:
Mail.ru, owner
of Russia’s top
social media site
VK, seeks to
build a one-stop
shop for users
buying Chinese
products— AlamyLEILA ABBOUD AND JONATHAN ELEY
LONDONAnheuser-BuschInBev’s chief execu-
tive said the heavily indebted brewer
had “no need” to sell additional assets
after last week’s decision tosell its Aus-
tralian businessto Japan’sAsahifor
$11.3bn.Carlos Britosaid Asahi had made too
good an offer to refuse but it should be
considered a one-off.
“At this time, we have no need [to sell
assets] since we have a good plan to de-
lever and continue to expand the busi-
ness,” he said.
“Australia was a very particular case
in that the valuation was attractive, and
we felt it was fully priced. [It also] gets
us to focus in Asia on our other fast-
growing markets.”
The veteran chief of the world’s big-
gest brewer sealed the Asahi deal only a
week after AB InBevabandoned the list-
ingof its Asian business, which included
fast-growing China and more mature
Australia.
Its shares are up almost 15 per centsince it pulled the IPO, rising again yes-
terday after it reported second-quarter
earnings ahead of analyst expectations.
Organic sales growth, which strips out
the effect of currency movements,
acquisitions and disposals, rose 6.2 per
cent in the second quarter, helped by
strong sales in Mexico, Colombia and
Brazil, which are among its top five big-
gest markets. Beer sales in terms of vol-
umes grew at their fastest pace in five
years.
Analysts were expecting organic sales
growth of 5.1 per cent for the second
quarter, according to company-com-
piled consensus.
The US, its biggest market, remains a
sore spot, however, as Americans have
been moving away from AB InBev’s
mass-market beers Bud Light and Bud-
weiser, preferring imported beers, craft
brews, or ditching the drink altogether.
Overall revenues in the second quar-
ter increased to $13.9bn from $13.8bn in
the same period last year. Net profits
rose to $2.8bn from $2.2bn.
Earnings growth was held back by
commodity prices and currency swings.The group is heavily exposed to emerg-
ing markets and their volatile
currencies.
Normalised earnings before interest,
tax, depreciation and amortisation
stood at $5.86bn, while earnings per
share were $1.25.
Net debt was $104bn, unchanged
from the end of 2018. The borrowings
are largely a hangover from its 2016 pur-
chase of rivalSABMiller, and over the
past year AB InBev has halved its divi-
dend and refinanced its debt maturities
in order to bring them down.
It reiterated with these results that
dividend growthwould be modestin the
short term.
Mr Brito also said the company would
keep its options open on reviving an IPO
in Asia. Investors balked at the $54bn to
$64bn valuation that AB InBev had
been seeking for the business.
“We could consider it again, but there
is no commitment or decision to do so,”
he said. “The rationale is intact, namely
to create a local champion” that could
be a platform for future deals in the
region.Food & beverage
AB InBev draws line under asset sales
DON WEINLAND— BEIJINGThe Chinese cryptocurrency entrepre-
neur who paid a record $4.6m to have
lunch with Warren Buffett has apolo-
gised for self-promotion and “imma-
ture” behaviour as questions swirl over
why he later postponed the meal.Justin Sun, founder of Tron, announced
last month he was the winning bidder of
the US billionaire investor’s annual
charity auction, inviting industry peers
to share his table with the renowned
cryptocurrency critic.
But the event was delayed on Monday,
with Mr Sun’s foundation saying he
was suffering with kidney stones and
that the two parties had agreed to
reschedule.
Mr Sun took to Weibo, the Chinese
social media site, yesterday — the day
the lunch had been due to take place —
to issue a lengthy apology to his many
followers for excessively publicising the
event in the days before the meal.
He said that with his “immature
words and deeds, youthful arrogance
and speaking without thinking, it grad-ually got out of control”. The apology
followed days of confusion and specula-
tion over the reasons behind the post-
poning of the lunch.
TRX prices tumbled on Wednesday
after Chinese media reported that Mr
Sun had been detained in China and that
his company was under investigation.
Mr Sun responded to those allegations
by posting footage of himself in San
Francisco and denying that his com-pany had done anything wrong. Mr Sun
could not be reached for comment yes-
terday. His team in Beijing did not
respond to requests for comment.
Regulators in China have taken a
tough stance on cryptocurrencies such
as bitcoin, banning their trade while
also attempting tostop the mining of the
cryptocurrency, an energy-intensive
computing process that unlocks new
coins.
Reports of China’s top cryptocurrency
investors not being allowed to leave the
country have been commonplace in
local media over the past two years.
Mr Buffett has a cult-like following in
China, where some of the wealthiest
investors, includingGuo Guangchang,
the chairman of Fosun, have modelled
their businesses on his.
The lunch would have paired the
cryptocurrency promoter with one of
his industry’s most prominent critics.
Mr Buffett has warned against investing
in the sector on numerous occasions,
dismissing cryptocurrency trading as
“dementia” and branding bitcoin “rat
poison squared”.Technology
Crypto winner of Buffett lunch apologises
Justin Sun has taken himself to task
for his ‘immature words and deeds’‘The main
thing wasn’t
logistics or
marketing,
but access to
the largest
number of
affordable
goods’
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