Retailer Epicenter K to invest $1.2 billion in development over 2 years

Ukrainian retail giant Epicenter K has announced its plans to invest over $1.2 billion in the company’s development in 2021–2022.

Epicenter K, a leading construction materials and home improvement retailer in Ukraine, intends to raise a loan from Dutch-based investment bank ING and insurer Atradius, Interfax-Ukraine reported on Jan. 14, citing Epicenter K head Petro Mykhailyshyn.

“We intend to make unprecedented investments in the development of all segments of our company this year,” Mykhailyshyn said during a press briefing in Kyiv.

One of the investment targets is a logistics center in Kyiv Oblast as well as four fulfillment centers in other oblasts of Ukraine. Epicenter K plans to purchase equipment for them from Dutch material handling and logistics automation company Vanderlande.

The planned loans have an effective rate of up to 3% per year for a period of seven to 10 years, Mykhailyshyn said. However, Epicenter K must invest up to 30% of its own money, the agreement requires.

Epicenter K, which chain consists of 59 stores and employs 22,000 people, couldn’t be immediately reached for comment to provide more details.

Mykhailyshyn, meanwhile, also said the quarantine restrictions prevented the company from making a profit in 2020, despite the fact that the company made $1.8 billion in revenues amid the March–May lockdown imposed on furniture and other non-essential stores to stop the spread of the coronavirus. 

The network of Epicenter K is owned by Oleksander and Halyna Gerega. 

Oleksander Gerega is a lawmaker and entrepreneur whose fortune was estimated at $930 million in a 2019 rating conducted by Ukrainian magazine Novoe Vremya. He used to be a lawmaker with the Party of Regions, a political party of ousted President Viktor Yanukovych.

In 2018, journalists at RFE/RL’s Schemes investigative unit revealed the couple was still running their business in Russian-annexed Crimea, but Gerega denied the claim.

In 2019, Epicenter K announced it would ramp up its presence in the agriculture sector, too. That year the company purchased farm company Robimaks-Agro, increasing its farmland bank to 1,364 hectares back then. 

And in 2020, despite the pandemic, the company continued to expand in that sphere. In January 2020, Epicenter secured a $70 million loan from Black Sea Trade and Development Bank to build three silos and upgrade four more as well as to buy agricultural machinery. 

Having secured the loan, Epicenter K also bought 40,000 more hectares of land. The company exported $86 million worth of grain in 2019, but its aim is to become a major player in Ukraine’s agribusiness.

“We have to grow more than a million tons of grain and get $150 million from exporting these grains,” Mykhailyshyn told Interfax-Ukraine in September 2019.

In May 2020, the company got in trouble. After the government imposed a strict lockdown in Ukraine in March, the company claimed their furniture stores sell products too and — like other grocery stores — can continue to operate. 

In response, the Anti-Monopoly Committee of Ukraine opened in May an investigation against the company, claiming that it violated the quarantine restrictions and was making profits while other construction materials stores were closed. 

The investigation did not produce any result and the chain opened its doors again during three weeks of so-called weekend lockdown in November 2020, which has had no legal consequences for the retailer so far.

It wasn’t the first time Epicenter K had been criticized for abusing its position on the market. 

In April 2016, Vladyslav Chechotkin, chief executive at Ukraine’s largest online shop Rozetka, accused the management of Epicenter K of putting pressure on his company. According to Chechotkin, Epicenter K had been asking its suppliers not to sell goods to Rozetka from 2014 to 2016.

The owners of Epicenter K did not reply to the accusations.