LIST OF CONTENTS AND TABLES

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2 LIST OF CONTENTS AND TABLES Apparel in Ukraine - Industry Overview... 1 Executive Summary... 1 Recovery of Apparel Market Begins... 1 Slow Shift Towards Modern Retail... 1 State Focuses on Unofficial Imports... 1 Expansion of New Apparel Specialist Brands Slows Down... 1 Further Apparel Market Development on the Way... 2 Key Trends and Developments... 2 Slow Recovery From Economic Recession... 2 Growing Cotton Prices Influence To Ukrainian Apparel Market... 3 Domestic Producers Look To Specialisation in Order To Compete... 3 Logistical Obstacles Limit Expansion To Country s Regions... 4 Slow Development of Apparel s Internet Retailing... 4 Market Data... 5 Table 1 Sales of Apparel by Category: Volume Table 2 Sales of Apparel by Category: Value Table 3 Sales of Apparel by Category: % Volume Growth Table 4 Sales of Apparel by Category: % Value Growth Table 5 Apparel Company Shares Table 6 Apparel Brand Shares Table 7 Sales of Apparel by Distribution Format: % Analysis Table 8 Sales of Apparel by Category and Distribution Format: % Analysis Table 9 Forecast Sales of Apparel by Category: Volume Table 10 Forecast Sales of Apparel by Category: Value Table 11 Forecast Sales of Apparel by Category: % Volume Growth Table 12 Forecast Sales of Apparel by Category: % Value Growth Definitions... 9 Summary 1 Research Sources Apparel in Ukraine - Company Profiles Adidas Ukrayina Dp in Apparel (ukraine) Strategic Direction Key Facts Summary 2 Adidas Ukraina DP: Key Facts Company Background Production Competitive Positioning Summary 3 Adidas Ukraina DP: Competitive Position Internet Strategy Argo-torgovelna Merezha Tov in Apparel (ukraine) Strategic Direction Key Facts Summary 4 ARGO-Torgovelna Merezha TOV: Key Facts Company Background... 13

3 Production Competitive Positioning Summary 5 ARGO-Torgovelna Merezha TOV: Competitive Position Internet Strategy Delta Sport Tov in Apparel (ukraine) Strategic Direction Key Facts Summary 6 Delta Sport Ukraina TOV: Key Facts Company Background Production Competitive Positioning Summary 7 Delta Sport Ukraina TOV: Competitive Position Internet Strategy Intertop Tov in Apparel (ukraine) Strategic Direction Key Facts Summary 8 Intertop TOV: Key Facts Summary 9 Intertop TOV: Operational Indicators Company Background Production Competitive Positioning Summary 10 Intertop TOV: Competitive Position Internet Strategy Marateks Dp in Apparel (ukraine) Strategic Direction Key Facts Summary 11 Marateks DP: Key Facts Summary 12 Maratex DP: Operational Indicators Company Background Production Competitive Positioning Summary 13 Marateks DP: Competitive Position Internet Strategy Mikhail Voronin Td in Apparel (ukraine) Strategic Direction Key Facts Summary 14 Sela Ukraina TOV: Key Facts Summary 15 Sela Ukraina TOV : Operational Indicators Company Background Production Competitive Positioning Internet Strategy Royal Shoes Tov in Apparel (ukraine) Strategic Direction Key Facts... 23

4 Summary 16 Royal Shoes TOV: Key Facts Summary 17 Royal Shoes TOV: Operational Indicators Company Background Production Competitive Positioning Summary 18 Royal Shoes TOV: Competitive Position Internet Strategy Sela Ukraina Ooo in Apparel (ukraine) Strategic Direction Key Facts Summary 19 MIKHAIL VORONIN TD: Key Facts Company Background Production Competitive Positioning Ultra-jins, Tov in Apparel (ukraine) Strategic Direction Key Facts Summary 20 Ultra-Jins TOV: Key Facts Company Background Production Competitive Positioning Summary 21 Ultra-Jins TOV: Competitive Position Internet Strategy Zara Ukraina Tov in Apparel (ukraine) Strategic Direction Key Facts Summary 22 ZARA Ukraina TOV: Key Facts Summary 23 ZARA Ukraina TOV: Operational Indicators Company Background Production Competitive Positioning Summary 24 ZARA Ukraina TOV: Competitive Position Internet Strategy Childrenswear in Ukraine - Category analysis Headlines Trends Competitive Landscape Prospectss Category Data Table 13 Sales of Childrenswear by Category: Volume Table 14 Sales of Childrenswear by Category: Value Table 15 Sales of Childrenswear by Category: % Volume Growth Table 16 Sales of Childrenswear by Category: % Value Growth Table 17 Childrenswear Company Shares Table 18 Childrenswear Brand Shares Table 19 Sales of Childrenswear by Distr bution Format: % Analysis

5 Table 20 Forecast Sales of Childrenswear by Category: Volume Table 21 Forecast Sales of Childrenswear by Category: Value Table 22 Forecast Sales of Childrenswear by Category: % Volume Growth Table 23 Forecast Sales of Childrenswear by Category: % Value Growth Clothing Accessories in Ukraine - Category analysis Headlines Trends Competitive Landscape Prospects Category Data Table 24 Sales of Clothing Accessories by Category: Volume Table 25 Sales of Clothing Accessories by Category: Value Table 26 Sales of Clothing Accessories by Category: % Volume Growth Table 27 Sales of Clothing Accessories by Category: % Value Growth Table 28 Clothing Accessories Company Shares Table 29 Clothing Accessories Brand Shares Table 30 Sales of Clothing Accessories by Distribution Format: % Analysis Table 31 Forecast Sales of Clothing Accessories by Category: Volume Table 32 Forecast Sales of Clothing Accessories by Category: Value Table 33 Forecast Sales of Clothing Accessories by Category: % Volume Growth Table 34 Forecast Sales of Clothing Accessories by Category: % Value Growth Hosiery in Ukraine - Category analysis Headlines Trends Competitive Landscape Prospects Category Data Table 35 Sales of Hosiery by Category: Volume Table 36 Sales of Hosiery by Category: Value Table 37 Sales of Hosiery by Category: % Volume Growth Table 38 Sales of Hosiery by Category: % Value Growth Table 39 Hosiery Company Shares Table 40 Hosiery Brand Shares Table 41 Sales of Hosiery by Distribution Format: % Analysis Table 42 Forecast Sales of Hosiery by Category: Volume Table 43 Forecast Sales of Hosiery by Category: Value Table 44 Forecast Sales of Hosiery by Category: % Volume Growth Table 45 Forecast Sales of Hosiery by Category: % Value Growth Men's Outerwear in Ukraine - Category analysis Headlines... 49

6 Trends Competitive Landscape Prospects Category Data Table 46 Apparel Size Chart for Men: (Mikhail Voronin, Jeans) Table 47 Apparel Size Chart for Men: (Domestic, No-name Brand, Coats & Jackets) Table 48 Apparel Size Chart for Men: (Domestic, No-name Brand, Sports Shirt) Table 49 Sales of Men s Outerwear: Volume Table 50 Sales of Men s Outerwear: Value Table 51 Sales of Men s Outerwear: % Volume Growth Table 52 Sales of Men s Outerwear: % Value Growth Table 53 Men s Outerwear Company Shares Table 54 Men s Outerwear Brand Shares Table 55 Sales of Men s Outerwear by Distribution Format: % Analysis Table 56 Forecast Sales of Men s Outerwear: Volume Table 57 Forecast Sales of Men s Outerwear: Value Table 58 Forecast Sales of Men s Outerwear: % Volume Growth Table 59 Forecast Sales of Men s Outerwear: % Value Growth Men's Jeans in Ukraine - Category analysis Headlines Trends Competitive Landscape Prospects Category Data Table 60 Sales of Men s Jeans: Volume Table 61 Sales of Men s Jeans: Value Table 62 Sales of Men s Jeans: % Volume Growth Table 63 Sales of Men s Jeans: % Value Growth Table 64 Sales of Men s Jeans by Type: % Volume Breakdown Table 65 Sales of Men s Jeans by Type: % Value Breakdown Table 66 Men s Jeans Company Shares Table 67 Men s Jeans Brand Shares Table 68 Forecast Sales of Men s Jeans: Volume Table 69 Forecast Sales of Men s Jeans: Value Table 70 Forecast Sales of Men s Jeans: % Volume Growth Table 71 Forecast Sales of Men s Jeans: % Value Growth Men's Underwear, Nightwear and Swimwear in Ukraine - Category analysis Headlines Trends Competitive Landscape Prospects Category Data Table 72 Table 73 Sales of Men s Underwear, Nightwear and Swimwear by Category: Volume Sales of Men s Underwear, Nightwear and Swimwear by Category: Value

7 Table 74 Sales of Men s Underwear, Nightwear and Swimwear by Category: % Volume Growth Table 75 Sales of Men s Underwear, Nightwear and Swimwear by Category: % Value Growth Table 76 Men s Underwear, Nightwear and Swimwear Company Shares Table 77 Men s Underwear, Nightwear and Swimwear Brand Shares Table 78 Sales of Men s Underwear, Nightwear and Swimwear by Distribution Format: % Analysis Table 79 Forecast Sales of Men s Underwear, Nightwear and Swimwear by Category: Volume Table 80 Forecast Sales of Men s Underwear, Nightwear and Swimwear by Category: Value Table 81 Forecast Sales of Men s Underwear, Nightwear and Swimwear by Category: % Volume Growth Table 82 Forecast Sales of Men s Underwear, Nightwear and Swimwear by Category: % Value Growth Women's Outerwear in Ukraine - Category analysis Headlines Trends Competitive Landscape Prospects Category Data Table 83 Apparel Size Chart for Women: (No-name Brand, Jackets) Table 84 Apparel Size Chart for Women: (No-name Brand, Jeans) Table 85 Apparel Size Chart for Women: (No-name Brand, Women's underwear) Table 86 Sales of Women s Outerwear: Volume Table 87 Sales of Women s Outerwear: Value Table 88 Sales of Women s Outerwear: % Volume Growth Table 89 Sales of Women s Outerwear: % Value Growth Table 90 Women s Outerwear Company Shares Table 91 Women s Outerwear Brand Shares Table 92 Sales of Women s Outerwear by Distribution Format: % Analysis Table 93 Forecast Sales of Women s Outerwear: Volume Table 94 Forecast Sales of Women s Outerwear: Value Table 95 Forecast Sales of Women s Outerwear: % Volume Growth Table 96 Forecast Sales of Women s Outerwear: % Value Growth Women's Jeans in Ukraine - Category analysis Headlines Trends Competitive Landscape Prospects Category Data Table 97 Sales of Women s Jeans: Volume Table 98 Sales of Women s Jeans: Value Table 99 Sales of Women s Jeans: % Volume Growth

8 Table 100 Sales of Women s Jeans: % Value Growth Table 101 Sales of Women s Jeans by Type: % Volume Breakdown Table 102 Sales of Women s Jeans by Type: % Value Breakdown Table 103 Women s Jeans Company Shares Table 104 Women s Jeans Brand Shares Table 105 Forecast Sales of Women s Jeans: Volume Table 106 Forecast Sales of Women s Jeans: Value Table 107 Forecast Sales of Women s Jeans: % Volume Growth Table 108 Forecast Sales of Women s Jeans: % Value Growth Women's Underwear, Nightwear and Swimwear in Ukraine - Category analysis Headlines Trends Competitive Landscape Prospects Category Data Table 109 Sales of Women s Underwear, Nightwear and Swimwear by Category: Volume Table 110 Sales of Women s Underwear, Nightwear and Swimwear by Category: Value Table 111 Sales of Women s Underwear, Nightwear and Swimwear by Category: % Volume Growth Table 112 Sales of Women s Underwear, Nightwear and Swimwear by Category: % Value Growth Table 113 Women s Underwear, Nightwear and Swimwear Company Shares Table 114 Women s Underwear, Nightwear and Swimwear Brand Shares Table 115 Sales of Women s Underwear, Nightwear and Swimwear by Distribution Format: % Analysis Table 116 Forecast Sales of Women s Underwear, Nightwear and Swimwear by Category: Volume Table 117 Forecast Sales of Women s Underwear, Nightwear and Swimwear by Category: Value Table 118 Forecast Sales of Women s Underwear, Nightwear and Swimwear by Category: % Volume Growth Table 119 Forecast Sales of Women s Underwear, Nightwear and Swimwear by Category: % Value Growth Footwear in Ukraine - Category analysis Headlines Trends Competitive Landscape Prospects Category Data Table 120 Sales of Footwear by Category: Volume Table 121 Sales of Footwear by Category: Value Table 122 Sales of Footwear by Category: % Volume Growth Table 123 Sales of Footwear by Category: % Value Growth Table 124 Footwear Company Shares Table 125 Footwear Brand Shares

9 Table 126 Sales of Footwear by Distribution Format: % Analysis Table 127 Forecast Sales of Footwear by Category: Volume Table 128 Forecast Sales of Footwear by Category: Value Table 129 Forecast Sales of Footwear by Category: % Volume Growth Table 130 Forecast Sales of Footwear by Category: % Value Growth

10 APPAREL IN UKRAINE - INDUSTRY OVERVIEW EXECUTIVE SUMMARY Recovery of Apparel Market Begins The recent economic recession noticeably affected the Ukrainian apparel market. Almost all brands and product group sales in volume and value terms dropped except those of some premium brands which target consumers who are less sensitive to the impact of recession. In 2010, the apparel market started its way towards recovery due, according to national statistics, to recovering disposable incomes, growing consumer confidence and delayed purchases for more expensive products. Value sales were additionally boosted by increased prices and slow shifting towards modern retail. However, volume sales were still way below pre-crisis levels. Men s apparel (underwear, outerwear and footwear) value sales showed the best performance in 2010, as its target audience was the most solvent. Slow Shift Towards Modern Retail Branded apparel remains expensive for a majority of Ukrainian consumers and low price remains very important to Ukrainians. Most people still purchase clothes at open markets, which is the biggest distr bution channel for apparel, and second-hand stores are still very popular. The recent recession helped to hold strong positions for these retail channels. Despite that, modern retail is developing and the share of clothing and footwear specialist retailers gradually expanded over the review period at the expense of open markets, mainly thanks to citizens of large cities. Expansion of such outlets supported by promotional campaigns combined with general cultural westernisation underpins this switch. State Focuses on Unofficial Imports During the review period, the majority of apparel in Ukraine was imported under various shadow schemes devoted to avoiding taxes. Most often, the value of imported goods was largely underestimated; for example, fashionable apparel was imported as second-hand goods during the process of customs declaration. Usually it was done with the knowledge of corrupt customs officers. Such schemes created a competitive advantage for illegal importers, stimulated corruption and lost the country huge amounts of unpaid taxes. In 2010, the State Customs Administration started changing its approach to unofficial proceedings during clearance, which in the long term should facilitate a more transparently functioning apparel market. However, it is not very likely that illegal import schemes will disappear in the short term. Expansion of New Apparel Specialist Brands Slows Down The Ukrainian apparel specialist retailing market is far from saturated, which allows current operators to set high margins and at the same time keep a big share of price-sensitive consumers switching from shopping at the open markets. The main obstacles for new companies to enter the market are administrative barriers, industry s opacity and poor logistics infrastructure. Imperfect legislation is a key factor, too: a great number of controlling bodies, sophisticated accounting paperwork requirements and unpredictable customs are amongst the main hampering factors. Additionally there are not enough modern shopping malls where retailers can open their outlets, a lack that has resulted in higher rental prices in existing ones.

11 The economic recession caused large multinational brands to postpone expansion or entrance to Ukrainian market even more, which gave additional support for current players development. Despite that, there were some noticeable entrants in 2010 such as New Look and Finn Flarre, and GAP announced about plans to enter Ukraine in Further Apparel Market Development on the Way Ukrainian apparel market value has strong potential for growth over the long term, considering the currently huge share of open markets and second-hand stores operating in this market. This puts Ukraine on the radar of all major international brands. Over the forecast period, many international companies are expected to enter this market, where competition is still not too strong and there is a lack of branded products. On other hand, they are concerned about still relatively low purchasing power of Ukrainians and possible political instability, which has delayed their investments in the past. However, expansion of apparel specialist retailers, followed by promotional campaigns combined with growing consumer purchasing power inevitably will lead to the apparel market growth. KEY TRENDS AND DEVELOPMENTS Slow Recovery From Economic Recession Current Impact Outlook

12 Future Impact Growing Cotton Prices Influence To Ukrainian Apparel Market A cotton supply crisis that originated in Asia caused raw material prices to grow significantly in This increased production cost of domestic apparel, making competition against cheap imported products even more difficult. Current Impact Outlook Future Impact Domestic Producers Look To Specialisation in Order To Compete Current Impact

13 Outlook Future Impact Logistical Obstacles Limit Expansion To Country s Regions Current Impact Outlook Future Impact

14 Current Impact Outlook Future Impact MARKET DATA Table 1 Sales of Apparel by Category: Volume mn units Clothing Footwear Apparel Table 2 Sales of Apparel by Category: Value UAH million Clothing Footwear Apparel

15 Table 3 Sales of Apparel by Category: % Volume Growth % volume growth Clothing Footwear Apparel 2009/ CAGR 2005/10 Total Table 4 Sales of Apparel by Category: % Value Growth % current value growth Clothing Footwear Apparel 2009/ CAGR 2005/10 Total Table 5 Apparel Company Shares % retail value rsp Company Total Table 6 Apparel Brand Shares % retail value rsp Brand Company

16 Total Table 7 Sales of Apparel by Distribution Format: % Analysis % retail value rsp Store-Based Retailing - Grocery Retailers - Non-Grocery Retailers - - Mixed Retailers Department Stores Mass Merchandisers Variety Stores Warehouse Clubs - - Clothing and footwear specialist retailers - - Leisure and Personal Goods Specialist Retailers Sports goods stores Other Leisure and Personal Goods Specialist Retailers - - Other Non-Grocery Retailers Non-Store Retailing - Homeshopping - Internet Retailing - Direct Selling - Vending Total Table 8 Sales of Apparel by Category and Distribution Format: % Analysis 2010 % retail value rsp Store-Based Retailing Grocery Retailers C CW CA H MO MU

17 Non-Grocery Retailers Mixed Retailers Department Stores Mass Merchandisers Variety Stores Warehouse Clubs Clothing and footwear specialist retailers Leisure and Personal Goods Specialist Retailers Sports goods stores Other Leisure and Personal Goods Specialist Retailers Other Non-Grocery Retailers Non-Store Retailing Homeshopping Internet Retailing Direct Selling Vending Total WO WU F Store-Based Retailing Grocery Retailers Non-Grocery Retailers Mixed Retailers Department Stores Mass Merchandisers Variety Stores Warehouse Clubs Clothing and footwear specialist retailers Leisure and Personal Goods Specialist Retailers Sports goods stores Other Leisure and Personal Goods Specialist Retailers Other Non-Grocery Retailers Non-Store Retailing Homeshopping Internet Retailing Direct Selling Vending Total Key: C = clothing; CW = childrenswear; CA = clothing accessories; H = hosiery; MO = men s outerwear; MU = men's underwear, nightwear and swimwear; WO = women's outerwear; WU = women's underwear, nightwear and swimwear; F = footwear Table 9 Forecast Sales of Apparel by Category: Volume

18 mn units Clothing Footwear Apparel Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources Table 10 Forecast Sales of Apparel by Category: Value UAH million Clothing Footwear Apparel Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources Table 11 Forecast Sales of Apparel by Category: % Volume Growth % volume growth Clothing Footwear Apparel 2014/ CAGR 2010/15 Total Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources Table 12 Forecast Sales of Apparel by Category: % Value Growth % constant value growth Clothing Footwear Apparel CAGR 2010/15 TOTAL Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources DEFINITIONS This report analyses the market for Apparel in Ukraine. For the purposes of the study, the market has been defined as follows: Women s jeans Women s outerwear Men s jeans Men s outerwear Women s underwear, nightwear and swimwear

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35 Company Background Controlling stock of production plant PAO Shveina Fabryka Voronin belongs to Mikhail Voronin. Michael Voronin is the most famous Ukrainian fashion designer. He obtained wide recognition thanks to his invention of the unique vest model method of suit tailoring without fitting. Production Competitive Positioning ULTRA-JINS, TOV IN APPAREL (UKRAINE) Strategic Direction

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40 CHILDRENSWEAR IN UKRAINE - CATEGORY ANALYSIS HEADLINES In 2010 volume sales see marginal increase and current value sales increase by 14% Childrenswear suffers the least amongst all clothing categories during the recession, and accordingly demonstrates lower recovery growth rates in 2010 Baby and toddler wear is the prominent category in both volume and value terms, up by 2% and 18%, respectively Unit prices increase by 13% to UAH126 With unsatisfactory number of retail outlets and product assortments, competition in this category is considered not strong Over the forecast period childrenswear is expected to grow at a volume CAGR of 6% and a constant value CAGR of 8% TRENDS In 2010 childrenswear did not show a quick recovery, as growth of volume sales was marginal. Most Ukrainian families are very price sensitive regarding children s clothing, as children outgrow their clothes very quickly. This leads to high popularity of cheap products and second-hand clothes shops. The market was also mildly affected by slightly decreased birth rate. The dominance of positive moods amongst purchasers of girls clothing (resulting in volume sales rising by 1% compared with 2009) could be explained by the natural proportion of girls born amongst newborn babies and traditionally higher average girls wardrobe volume (number of goods bought). Baby and toddler wear showed the best performance inside the category (2% volume growth in 2010). Parents look for more quality clothes, as they consider babies health a higher priority than some other of the family s everyday needs. Boys apparel dropped by 1% in volume sales and in 2010 accounted for 39% of childrenswear. The average childrenswear unit price grew by 13% to UAH126, but the price increase for boys clothing was less (10%) than the price increases for baby and toddler wear and girls clothing (about 17% in both categories). It is worth noting that the average price of baby and toddler clothing is about three times cheaper (by approximately UAH44) than girls and boys clothing (UAH ). Distribution channel structure displays a weak transition to modern retail formats: the value share of clothing and footwear specialist retailers is slowly growing (26% in 2010), however, mostly at the expense of dominating other non-grocery retailers (61% in 2010). At the same time the value share of grocery stores is also increasing (3% in 2010) due to high demand for cheap childrenswear. Share of grocery retailers expected to grow further, as now it is limited by a small product assortment. All these channels additionally have to compete with secondhand stores, which account for a significant market share, but not covered by Euromonitor International research.

41 COMPETITIVE LANDSCAPE The Ukrainian childrenswear market is very fragmented and dominated by inexpensive products, as parents do not want to spend much on clothes that will not be worn for a long time. The branded products segment is relatively small with dominance of well-advertised international brands sold at special departments of existing stores oriented for an adult audience. However, none of the leading brands exceeds even a 2% value share in overall childrenswear. Well-established N ke is the leading brand with a 2% value share followed by combination of brands primarily represented by Marateks DP and adidas. PROSPECTSS Over the forecast period through 2015 childrenswear is expected to demonstrate impressive growth, ignoring the recession s influence. Volume sales are expected to increase at a 6% CAGR and constant value sales are expected to increase at an 8% CAGR over this time period.

42 CATEGORY DATA Table 1 Sales of Childrenswear by Category: Volume '000 units Boys' Clothing Girls' Clothing Baby and Toddler Wear Childrenswear Table 2 Sales of Childrenswear by Category: Value UAH million Boys' Clothing Girls' Clothing Baby and Toddler Wear Childrenswear,,,,,, Table 3 Sales of Childrenswear by Category: % Volume Growth % volume growth Boys' Clothing 2009/ CAGR 2005/10 Total

43 Girls' Clothing Baby and Toddler Wear Childrenswear Table 4 Sales of Childrenswear by Category: % Value Growth % current value growth Boys' Clothing Girls' Clothing Baby and Toddler Wear Childrenswear 2009/ CAGR 2005/10 Total Table 5 Childrenswear Company Shares % retail value rsp Company Total Table 6 Childrenswear Brand Shares % retail value rsp Brand Company Total

44 Table 7 Sales of Childrenswear by Distribution Format: % Analysis % retail value rsp Store-Based Retailing - Grocery Retailers - Non-Grocery Retailers - - Mixed Retailers Department Stores Mass Merchandisers Variety Stores Warehouse Clubs - - Clothing and footwear specialist retailers - - Leisure and Personal Goods Specialist Retailers Sports goods stores Other Leisure and Personal Goods Specialist Retailers - - Other Non-Grocery Retailers Non-Store Retailing - Homeshopping - Internet Retailing - Direct Selling - Vending Total Table 8 Forecast Sales of Childrenswear by Category: Volume '000 units Boys' Clothing Girls' Clothing Baby and Toddler Wear Childrenswear Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources Table 9 Forecast Sales of Childrenswear by Category: Value UAH million Boys' Clothing Girls' Clothing Baby and Toddler Wear Childrenswear

45 Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources Table 10 Forecast Sales of Childrenswear by Category: % Volume Growth % volume growth Boys' Clothing Girls' Clothing Baby and Toddler Wear Childrenswear 2014/ CAGR 2010/15 Total Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources Table 11 Forecast Sales of Childrenswear by Category: % Value Growth % constant value growth Boys' Clothing Girls' Clothing Baby and Toddler Wear Childrenswear CAGR 2010/15 TOTAL Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources

46 CLOTHING ACCESSORIES IN UKRAINE - CATEGORY ANALYSIS HEADLINES In 2010 sales of clothing accessories increase by 4% and 17% in volume and value, respectively Slowly recovering incomes allow consumers to renew their wardrobe in line with domestic fashion trends and own purchasing capabilities With 9% volume sales increase other clothing accessories registers higher growth than other product groups Unit prices grow in line with macroeconomic trends to cover expenses for source materials, as accessories are mainly produced outside of Ukraine Competition remains tough, but average market value of UAH2.1 billion and excessive fragmentation do not allow active promotion Clothing accessories is expected to grow at a volume CAGR of 6% and at a constant value CAGR of 7% over the forecast period TRENDS In 2010 volume sales of clothing accessories increased by 4%, and current value sales grew by 17%. Clothing accessories is one of the smallest apparel categories, representing 8% of the total clothing market in volume terms, and 7% in value terms. Women are the main drivers of clothing accessories sales, as they are influenced by fashion trends much more than men are and in general have a wider wardrobe. Men also do buy accessories, but they do it much more rarely. Clothing accessories is at or nearing the stage of primary saturation in Ukraine, especially in the economy segment. Accessories trading developed despite the economic crisis instability through sales in small stores (or even temporary selling points) operating on streets or similar places with high concentrations of consumer traffic, such as underground passageways. According to industry representatives, accessories sales have seasonal fluctuation. The seasonal peak is from April-September, when 60-70% of accessories are sold. Some premium accessories were sold only before Christmas/New Year holidays, very often as gifts. Nevertheless, accessories remain highly marginal goods with more than average profitability. The fastest volume growth in 2010 was demonstrated by other clothing accessories (up by 9%) due to sporadic marketing activities of small producers and growing demand for cheap uncommon products, such as arm warmers or sleeves. Other categories demonstrated volume growth ranging from 3-4% and current value growth ranging from 14-19%. In all, the category started to recover from crisis with 4% growth in units in 2010, but the absolute level of peak, 2007 sales will not be reached before The majority of small domestic producers of accessories operate in the shadow market to avoid taxes and overall bureaucratic hassle, which helps to keep production costs low. Some of those producers are individuals producing small quantities at home. Such producers mostly make hand-sewn accessories, apparel decorations, handbags and the like. Up to 60% of

47 domestically produced clothing accessories including the type of shadow market accessories are exported. The average unit price of clothing accessories grew by UAH11 or 13% to reach UAH98 per unit in Unit price growth was a result of increasing raw materials costs and other factors influenced by relatively high inflation. Accessory pricing was aimed at reaching some level of profitability rather than at capturing market share: commonly, people buy accessories as a present or as a substitution for a spoiled one. Considering that clothing accessories have a lifetime that is longer than that of other apparel and that buyers are less influenced by fashion trends when purchasing accessories, traders saw good sales volumes with slack attention paid to price. Other non-grocery retailers (open markets and street stalls) still accounts for the highest value share of 65% amongst distribution channels, but shows a trend towards further shrinkage to the benefit of store-based retailing. Clothing and footwear specialist retailers boasted a 22% value share and grocery retailers increased its share to 6% in 2010, thanks to a widening assortment, economy prices and expanding number of chained outlets. In non-store retailing, internet retailing and sports good stores also saw slight upticks in value share in COMPETITIVE LANDSCAPE Obviously, the clothing accessories market is very fragmented due to there being so many different product types covered in this category and so many small producers. Overall, the biggest volumes of sales were achieved by small no-name and domestic producers selling relatively cheap products. PROSPECTS Over the forecast period clothing accessories is expected to grow at a volume CAGR of 6% and at a constant value CAGR of 7%. This will translate to a market size of 29 million units and UAH2.9 billion. Increasing disposable incomes and accordingly growing spending will be the main reasons driving sectors growth. Additionally growth will be supported by expansion and entrance of well-known branded stores such as Zara, Mango, Gap and others.

48 CATEGORY DATA Table 1 Sales of Clothing Accessories by Category: Volume '000 units Belts Gloves Hats/Caps Scarves Ties Other Clothing Accessories Clothing Accessories Table 2 Sales of Clothing Accessories by Category: Value UAH million Belts Gloves Hats/Caps Scarves Ties Other Clothing Accessories Clothing Accessories Table 3 Sales of Clothing Accessories by Category: % Volume Growth

49 % volume growth Belts Gloves Hats/Caps Scarves Ties Other Clothing Accessories Clothing Accessories 2009/ CAGR 2005/10 Total Table 4 Sales of Clothing Accessories by Category: % Value Growth % current value growth Belts Gloves Hats/Caps Scarves Ties Other Clothing Accessories Clothing Accessories 2009/ CAGR 2005/10 Total Table 5 Clothing Accessories Company Shares % retail value rsp Company Total Table 6 Clothing Accessories Brand Shares % retail value rsp Brand Company

50 Total Table 7 Sales of Clothing Accessories by Distribution Format: % Analysis % retail value rsp Store-Based Retailing - Grocery Retailers - Non-Grocery Retailers - - Mixed Retailers Department Stores Mass Merchandisers Variety Stores Warehouse Clubs - - Clothing and footwear specialist retailers - - Leisure and Personal Goods Specialist Retailers Sports goods stores Other Leisure and Personal Goods Specialist Retailers - - Other Non-Grocery Retailers Non-Store Retailing - Homeshopping - Internet Retailing - Direct Selling - Vending Total Table 8 Forecast Sales of Clothing Accessories by Category: Volume '000 units Belts Gloves Hats/Caps Scarves Ties Other Clothing Accessories Clothing Accessories

51 Euromonitoar International from trade associations, trade press, company research, trade interviews, trade sources Table 9 Forecast Sales of Clothing Accessories by Category: Value UAH million Belts Gloves Hats/Caps Scarves Ties Other Clothing Accessories Clothing Accessories,,,,,, Euromonitoar International from trade associations, trade press, company research, trade interviews, trade sources Table 10 Forecast Sales of Clothing Accessories by Category: % Volume Growth % volume growth Belts Gloves Hats/Caps Scarves Ties Other Clothing Accessories Clothing Accessories 2014/ CAGR 2010/15 Total Euromonitoar International from trade associations, trade press, company research, trade interviews, trade sources Table 11 Forecast Sales of Clothing Accessories by Category: % Value Growth % constant value growth Belts Gloves Hats/Caps Scarves Ties Other Clothing Accessories Clothing Accessories CAGR 2010/15 TOTAL Euromonitoar International from trade associations, trade press, company research, trade interviews, trade sources

52 HOSIERY IN UKRAINE - CATEGORY ANALYSIS HEADLINES Volume sales of hosiery grow by 4% and current value sales by 17% in 2010 Open markets (other non-grocery retailers) remain the most common channel for sales of hosiery Other hosiery shows slightly faster growth (up by 4% in volume and 18% in value) in 2010 than socks and tights Average unit price grew by 13% to UAH17 in 2010 Several importers lead in standard and premium segments, while local producers and noname economy production from Asia drives other sales Volume and constant value sales of hosiery, which are everyday usage goods, are expected to increase at CAGRs of 7% and 9%, respectively over forecast period TRENDS Volume sales of hosiery increased by 4% in 2010, whilst current value sales increased by 17%. Due to the low average prices, this segment represented 20% of the total Ukrainian clothes market in volume terms, but only 3% in value terms. Socks, reaching 4% volume growth, remained largest product group in volume terms with 30 million units sold, representing 54% of hosiery sales. Obviously, socks is an essential product, regardless of income or economic situation. However, tights accounted for the highest sales of UAH440 million, or 46% of all hosiery sales in Tights were the sphere of dominance of Chinese producers in the economy segment; Polish and other European ones were active in mid-range and premium segments. Fashion trends touched hosiery only during recent years ( ) when certain products, such as leg warmers or special socks became fashionable attributes amongst sports or fitness fans. Earlier it was an apparel category consumers tried to save money on. Hosiery has a wide representation in different distribution channels, as it has also become a product of impulsive purchase. In 2010 volume sales of socks, tights and other hosiery increased by 4%, following doubledigit declines seen during , which had mainly affected sales of the more expensive. It is important to mention value sales of hosiery overall showed quite another picture: a 9% decline for category in 2009 was converted into 17% current value growth in This resulted from unit price increases caused by high inflation, increased production costs and a slow shift towards shopping in modern retail outlets. Average unit price of socks reached UAH11 per pair in 2010, tights cost up to UAH22 and other hosiery rose to UAH33. The dominant value share of hosiery products 65% is sold via other non-grocery retailers, usually in open stalls, as quality requirements for such products are low and the main purchase factor is low price. Over the review period, this channel saw its value share slowly decrease due to a slow shift towards modern retail outlets. Clothing and footwear specialist retailers accounted for the second highest (19%) value share as it continued to experience

53 the growth trend. Grocery retailers held a growing value share of 7%, which is a higher sales share than this channel has in any other type of apparel. COMPETITIVE LANDSCAPE adidas Ukrayina brands lost value share in 2010, but remained leading brand family on the Ukrainian hosiery market. Company s sales come from sports socks considered as premium hosiery, priced from UAH20-40 per pair. The further development of adidas brand indicates that adidas Ukrayina will be amongst the leaders in the premium hosiery segment during the forecast period, but its overall value share should be decreasing due competition from cheaper products. PROSPECTS Over the forecast period, hosiery will experience tough competition between strong domestic producers and cheap imported brands (especially Chinese ones). This should be beneficial to customers, as it will often lead to a decrease in prices for some promoted goods types.

54 CATEGORY DATA Table 1 Sales of Hosiery by Category: Volume '000 units Socks Tights Other Hosiery Hosiery Table 2 Sales of Hosiery by Category: Value UAH million Socks Tights Other Hosiery Hosiery Table 3 Sales of Hosiery by Category: % Volume Growth % volume growth Socks Tights Other Hosiery Hosiery 2009/ CAGR 2005/10 Total Table 4 Sales of Hosiery by Category: % Value Growth % current value growth Socks Tights Other Hosiery Hosiery 2009/ CAGR 2005/10 Total

55 Table 5 Hosiery Company Shares % retail value rsp Company Total Table 6 Hosiery Brand Shares % retail value rsp Brand Company Total Table 7 Sales of Hosiery by Distribution Format: % Analysis % retail value rsp Store-Based Retailing - Grocery Retailers - Non-Grocery Retailers - - Mixed Retailers Department Stores Mass Merchandisers Variety Stores Warehouse Clubs - - Clothing and footwear specialist retailers - - Leisure and Personal Goods Specialist Retailers Sports goods stores Other Leisure and Personal Goods Specialist Retailers

56 - - Other Non-Grocery Retailers Non-Store Retailing - Homeshopping - Internet Retailing - Direct Selling - Vending Total Table 8 Forecast Sales of Hosiery by Category: Volume '000 units Socks Tights Other Hosiery Hosiery,,,,,, Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources Table 9 Forecast Sales of Hosiery by Category: Value UAH million Socks Tights Other Hosiery Hosiery Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources Table 10 Forecast Sales of Hosiery by Category: % Volume Growth % volume growth Socks Tights Other Hosiery Hosiery 2014/ CAGR 2010/15 Total Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources Table 11 Forecast Sales of Hosiery by Category: % Value Growth % constant value growth Socks CAGR 2010/15 TOTAL

57 Tights Other Hosiery Hosiery Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources

58 MEN'S OUTERWEAR IN UKRAINE - CATEGORY ANALYSIS HEADLINES With 7% volume growth and 18% current value growth, 2010 is the first year showing positive growth for men s outerwear after two years of significant volume declines and one year of current value decline Increased consumer income partially combined with resumption of delayed purchases drives the market Men s suits, jumpers and shirts have highest current value growth and are the most demanded goods because of convenience and practicality for everyday usage Unit prices increase by 10% to UAH237, as affordability remains a key factor when considering a purchase Competition is characterised by oscillating shares of domestic licensees of famous global brands and strivings of local producers to survive Men s outerwear expected to see sales increase at CAGRs ranging from 4-6% in volume and from 5-8% in constant value TRENDS Men s outerwear remained unsaturated, reflecting some demand decrease. The economic crisis did present an opportunity for domestic players to develop: international retail chains are not expected to appear earlier than State Statistics has reported that some domestic operators have started to realise the possibilities: for example, production of knitted clothes rose by 2% and suits went up by 13%in Value sales of domestic producers averaged 5% growth in However, despite this growth domestic companies are not expected to recover their previous positions, as they cannot compete with imported economy products by price, or with imported branded products having the advantages of fashionable designers, brands status and marketing support. In 2010 men s outerwear reached 7% growth in volume and 18% in current value sales. Intensified consumer spending due to higher incomes and resumption of previously delayed purchases of products types such as suits, coats and sometimes jeans, were pushing volume sales up. Inflation caused product prices to increase and this, combined with slow up trading, contributed to higher value sales. Men s outerwear was driven mostly by demand from young men with higher interest in shopping. Men are usually much more realistic when buying new clothes, and only rarely purchase apparel on impulse or after seeing an advert. However, a noticeable share of men s outerwear is bought by their women, especially amongst older adults. A large and still growing part of local production of men s outerwear in Ukraine has been oriented towards filling external orders rather than toward domestic demand, as Ukrainian customers have turned to imported apparel made from cheaper fabric leading to lower prices. Cheap imported apparel (including sports apparel) originating from China/Turkey was mostly sold at markets (bazaars). Despite being of lower (but satisfactory for the most of population) quality and unable to suit professional requirements (sports, tourism) these imports are very

59 popular due to their low prices. Sports apparel in Ukraine is popular to wear not only when exercising, but also during leisure time and at home. Sports fashion in Ukraine is quite conservative, with people, especially younger ones, opting for well-known brands such as Nike or adidas. Such brands in a large part of society remain social status symbols. However, for many Ukrainians original products for these brands are not affordable, so they opt for widely available fake copies. Within men s outerwear, suits showed strongest performance with 9% volume and 23% value growth. Suits are usually worn by consumers with higher than average incomes and level of incomes in this group recovered faster compared to that of average consumers, which contributed to this value growth. Additionally, during the recession some people postponed purchases of suits, one of the most expensive men s outerwear pieces, until better times. Resumption of such delayed purchases contr buted to noticeable suits growth in Sales of premium men s outwear products and most expensive clothing products in general were strongly hurt during the recession. When experiencing demand shrinkage traders optimised and stocked only popular category models. As a result, sales of expensive outerwear were occurred mostly in big cities. In 2010, excluding sales of suits, sales of the more expensive types of men s outerwear in general recovered much more slowly than sales of average men s outerwear, as consumers are more cautious about where and on what to spend. For example wool products were substituted by cheaper textile products. Men s jacket and coats the most expensive outerwear category showed negative growth by -1% in volume terms in Women s jackets, coats and suits experienced the highest unit price growth (UAH45-60 on average) in 2010 compared with that of other men s outerwear products. It was caused by a plenty of factors with an accent on lower men s demand sensitivity to those product groups prices. All mentioned product groups were the most expensive goods in the category with average price (UAH498 and UAH433, respectively). COMPETITIVE LANDSCAPE Nike brand was slightly ahead of adidas in 2010, with each holding a value share of 3%. Both brands success is attributable to widely recognisable brand names, wide distribution networks and substantial marketing support. Adidas expected to meet some troubles in the forecast period due to its decision to change retail format (open more own brand stores) in the Ukrainian market. The company will switch to own store development instead of cooperating with domestic retail chains.

60 PROSPECTS

61 CATEGORY DATA Table 1 Apparel Size Chart for Men: (Mikhail Voronin, Jeans) unit (cm) Measurements/size Waist Internal Stitch Length Height Measurements/size Waist Internal Stitch Length Height Measurements/size Waist Internal Stitch Length Height Measurements/size Waist Internal Stitch Length Height Measurements/size Waist Internal Stitch Length Height Measurements/size Waist Internal Stitch Length Height Mikhail Voronin Table 2 Apparel Size Chart for Men: (Domestic, No-name Brand, Coats & Jackets) unit (cm) Measurements/size Height Weight Measurements/size Height Weight

62 Euromonitor International store check Table 3 Apparel Size Chart for Men: (Domestic, No-name Brand, Sports Shirt) unit (cm) Measurements/size Height Measurements/size Height Euromonitor International store check Table 4 Sales of Men s Outerwear: Volume '000 units Men's Jeans Men's Outerwear (Excl Jeans) - Men's Jackets and Coats - Men's Jumpers - Men's Shirts - Men's Shorts and Trousers - Men's Suits - Men's Tops - Other Men's Outerwear Men's Outerwear Table 5 Sales of Men s Outerwear: Value UAH million Men's Jeans Men's Outerwear (Excl Jeans) - Men's Jackets and Coats - Men's Jumpers - Men's Shirts - Men's Shorts and Trousers - Men's Suits - Men's Tops - Other Men's Outerwear Men's Outerwear

63 Table 6 Sales of Men s Outerwear: % Volume Growth % volume growth Men's Jeans Men's Outerwear (Excl Jeans) - Men's Jackets and Coats - Men's Jumpers - Men's Shirts - Men's Shorts and Trousers - Men's Suits - Men's Tops - Other Men's Outerwear Men's Outerwear 2009/ CAGR 2005/10 Total Table 7 Sales of Men s Outerwear: % Value Growth % current value growth Men's Jeans Men's Outerwear (Excl Jeans) - Men's Jackets and Coats - Men's Jumpers - Men's Shirts - Men's Shorts and Trousers - Men's Suits - Men's Tops - Other Men's Outerwear Men's Outerwear 2009/ CAGR 2005/10 Total Table 8 Men s Outerwear Company Shares % retail value rsp Company Total Table 9 Men s Outerwear Brand Shares

64 % retail value rsp Brand Company Total Table 10 Sales of Men s Outerwear by Distr bution Format: % Analysis % retail value rsp Store-Based Retailing - Grocery Retailers - Non-Grocery Retailers - - Mixed Retailers Department Stores Mass Merchandisers Variety Stores Warehouse Clubs - - Clothing and footwear specialist retailers - - Leisure and Personal Goods Specialist Retailers Sports goods stores Other Leisure and Personal Goods Specialist Retailers - - Other Non-Grocery Retailers Non-Store Retailing - Homeshopping - Internet Retailing - Direct Selling - Vending Total

65 Table 11 Forecast Sales of Men s Outerwear: Volume '000 units Men's Jeans Men's Outerwear (Excl Jeans) - Men's Jackets and Coats - Men's Jumpers - Men's Shirts - Men's Shorts and Trousers - Men's Suits - Men's Tops - Other Men's Outerwear Men's Outerwear Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources Table 12 Forecast Sales of Men s Outerwear: Value UAH million Men's Jeans Men's Outerwear (Excl Jeans) - Men's Jackets and Coats - Men's Jumpers - Men's Shirts - Men's Shorts and Trousers - Men's Suits - Men's Tops - Other Men's Outerwear Men's Outerwear Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources Table 13 Forecast Sales of Men s Outerwear: % Volume Growth % volume growth Men's Jeans Men's Outerwear (Excl Jeans) - Men's Jackets and Coats - Men's Jumpers - Men's Shirts - Men's Shorts and Trousers - Men's Suits - Men's Tops - Other Men's Outerwear Men's Outerwear 2014/ CAGR 2010/15 Total

66 Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources Table 14 Forecast Sales of Men s Outerwear: % Value Growth % constant value growth Men's Jeans Men's Outerwear (Excl Jeans) - Men's Jackets and Coats - Men's Jumpers - Men's Shirts - Men's Shorts and Trousers - Men's Suits - Men's Tops - Other Men's Outerwear Men's Outerwear CAGR 2010/15 TOTAL Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources

67 MEN'S JEANS IN UKRAINE - CATEGORY ANALYSIS HEADLINES Men s jeans recovers from crisis to see 9% volume growth and 17% current value growth in 2010 Standard and premium price categories see highest growth (11% and 15%, respectively in volume, 26% and 21% in value) Men s jeans dominated by imported production In 2010 average unit price is UAH265, up by 8% compared to previous year Levi s brand leads sales in extremely fragmented market dominated by economy and noname products Men s jeans is expected to grow at a CAGR of 4% in volume and a constant value CAGR of 5% over the forecast period TRENDS In 2010 volume sales of the men s jeans showed a noticeable increase of 9%, and current value sales increased even further by 17%. Increased consumer confidence, growth of disposable incomes and delayed purchases drove volume sales. Value sales were boosted by increased prices, and, to a lesser extent, by many consumers opting for jeans of higher quality or which were more fashionable, both of which usually are more expensive. Jeans in the standard price segment showed the most rapid growth with value sales increasing by 26% in It benefited from consumers that are moving back from the economy segment, where they moved during the recession. The standard segment also benefits from a growing assortment due to expansion of well-known international brands such as Zara and Bershka. Moreover, men prefer buying jeans of higher quality so they can wear them longer, as men are not much affected by fast-changing fashion trends. As in most European countries, jeans represent an important part of Ukrainian men s wardrobes, as they have few alternatives when it comes to lower outerwear. Men wear a pair of jeans both at work and in their leisure time. Men s jeans represented 35% of the total men s outerwear market size in 2010 in volume, and 39% in value. In 2010 the average men s jeans price was UAH265, which is 8% higher compared to that of Unit price growth was partially driven by consumers slowly up trading but primarily driven by product price increases due to inflation. Unit price remains one of the most important price factors when choosing jeans. Other non-grocery retailers (mostly open markets) remains the largest distribution channel for men s jeans with a 58% value share of men s outerwear in Open markets are especially popular in rural areas where presence of apparel specialist retailers is very limited. The second largest channel remains clothing and footwear specialist retailers, with a 28% share of value sales; this channel grew over review the period, mostly at the expense of open markets. During the crisis, a number of retailers, such as Jinsy Supercena, developed and expanded small (50 sq m) outlets placed in crowded places, which successfully competed with open

68 markets. Homeshopping holds 2% value share in Internet retailing is available, but remains small with a 1% value share, despite rapid growth over the review period COMPETITIVE LANDSCAPE Levi s is the leading brand of men s jeans, accounting for 4% of total value sales in a highly fragmented market. The brand s success is based on high brand recognition associated with quality, and a wide retail outlets network. Levi s also puts a lot of emphasis on brand communication to its target group. Lack of competition from other strong brands also helps Levi s hold its leading position. PROSPECTS Constant value sales of men s jeans are expected to grow at a CAGR of 5% in constant value over the forecast period, whilst volume sales will increase at a CAGR of 4%. This will bring sales of men s jeans to 16 million worth UAH4.4 billion by 2015.

69 CATEGORY DATA Table 1 Sales of Men s Jeans: Volume '000 units Men's Jeans Table 2 Sales of Men s Jeans: Value UAH million Men's Jeans Table 3 Sales of Men s Jeans: % Volume Growth % volume growth 2009/ CAGR 2005/10 Total Men's Jeans Table 4 Sales of Men s Jeans: % Value Growth % current value growth Men's Jeans 2009/ CAGR 2005/10 Total Table 5 Sales of Men s Jeans by Type: % Volume Breakdown % retail volume Economy Standard Premium Super Premium Total

70 Table 6 Sales of Men s Jeans by Type: % Value Breakdown % retail value rsp Economy Standard Premium Super Premium Total Table 7 Men s Jeans Company Shares Total Table 8 Men s Jeans Brand Shares % retail value rsp Brand Company Total Table 9 Forecast Sales of Men s Jeans: Volume '000 units Men's Jeans Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources Table 10 Forecast Sales of Men s Jeans: Value UAH million

71 Men's Jeans Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources Table 11 Forecast Sales of Men s Jeans: % Volume Growth % volume growth Men's Jeans 2014/ CAGR 2010/15 Total Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources Table 12 Forecast Sales of Men s Jeans: % Value Growth % constant value growth Men's Jeans CAGR 2010/15 TOTAL Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources

72 MEN'S UNDERWEAR, NIGHTWEAR AND SWIMWEAR IN UKRAINE - CATEGORY ANALYSIS HEADLINES In 2010 men s underwear, nightwear and swimwear sees 7% volume growth and 19% current value growth Category grows in line with recovering consumer purchasing capacity and spending Men s underwear demonstrates the highest volume growth, up by 8% Unit prices increase by 11% in 2010 and reach UAH23 per unit Cheap economy products dominate highly fragmented market Sales of men s underwear, nightwear and swimwear are expected to increase at a volume CAGR of 6% and a constant value CAGR of 7% over the forecast period, to reach UAH714 million in 2015 TRENDS In 2010 sales of men s underwear, nightwear and swimwear increased in volume by 7%; current value sales increased by 19%. Ukrainian men still do not pay too much attention to such products, so recovering purchasing power and, accordingly, spending were mainly responsible for increased volume sales. This category represented 8% of the total Ukrainian clothing market in 2010 in volume terms, but only 2% in current value. Average Ukrainian men do not pay much attention to underwear or nightwear products. They are essential items and bought without thinking much about it. In many cases women make decisions about their partners or husbands underwear, nightwear or swimwear, or persuade them to buy a new piece of this type of apparel. Ukrainian men prefer to save on branded underwear, nightwear and swimwear products, considering them as a type of luxurious product. The market is dominated by cheap economy products that are usually sourced from Asian countries. For low price, which is the main advantage, men can choose from a wide variety of models that satisfy most men s needs. Men s underwear showed fastest growth pace in 2010 with volume sales increasing by 8% to 21 million units, which translates in UAH345 million. Underwear was dominated in this category, representing 93% of all units sold within men s underwear, nightwear and swimwear. Men s nightwear, representing only 4% of volume sales, accounted for 17% of current value due to having higher unit prices. It is not popular for Ukrainian men to wear pyjamas when sleeping; they mostly wear just underwear and a T-shirt instead of special nightwear. Accordingly, due to low demand the offer of men s pyjamas and other nightwear is relatively small. Average unit prices in 2010 increased by 11% to UAH23. It was the result of inflation and slow consumer shifting towards specialised apparel retailers. Unit prices were quite different amongst categories, but in all of them growth was observed. Men's underwear price

73 increased by UAH2 (or 12%) to UAH17; men's swimwear saw a similar increase, up by 13% to UAH116 (it was smallest product group with 721,000 units sold); men's nightwear price grew by UAH8 or 9% to UAH96. Amongst distribution channels, grocery retailers held 4% of value sales in 2010, constantly growing value share of clothing and footwear specialist retailers reached up 24% and still dominating leadership of other non-grocery retailers with declining trend to 65% of value sales. COMPETITIVE LANDSCAPE Similar to women s, men s underwear, nightwear and swimwear is one of the most fragmented segments amongst all apparel categories. Highest fragmentation is noticed in underwear dominated by cheap production usually sourced from Asia. In the branded market leading companies were, adidas Ukrayina, ARGO-Torgovelna Merezha and Delta Holding (Nike) all holding a 2% value share. Argo s sales are generated by a large brands portfolio. Nike and adidas shares come from swimwear sales, thanks to great brand awareness and recognition, good distribution networks and good product quality. PROSPECTS Over the forecast period sales of men s underwear, nightwear and swimwear are expected to increase at a volume CAGR of 6% and a constant value CAGR of 7%. Translated into actual sales it would make 30 million units and UAH714 by 2015.

74 CATEGORY DATA Table 1 '000 units Sales of Men s Underwear, Nightwear and Swimwear by Category: Volume Men's Nightwear Men's Swimwear Men's Underwear Men's Underwear, 21, , , , , ,5 6.1 Nightwear and Swimwear Table 2 UAH million Sales of Men s Underwear, Nightwear and Swimwear by Category: Value Men's Nightwear Men's Swimwear Men's Underwear Men's Underwear, Nightwear and Swimwear Table 3 Sales of Men s Underwear, Nightwear and Swimwear by Category: % Volume Growth % volume growth Men's Nightwear Men's Swimwear Men's Underwear Men's Underwear, Nightwear and Swimwear 2009/ CAGR 2005/10 Total Table 4 Sales of Men s Underwear, Nightwear and Swimwear by Category: % Value Growth % current value growth 2009/ CAGR 2005/10 Total

75 Men's Nightwear Men's Swimwear Men's Underwear Men's Underwear, Nightwear and Swimwear Table 5 Men s Underwear, Nightwear and Swimwear Company Shares % retail value rsp Company Total Table 6 Men s Underwear, Nightwear and Swimwear Brand Shares % retail value rsp Brand Company Others Total Table 7 Sales of Men s Underwear, Nightwear and Swimwear by Distribution Format: % Analysis % retail value rsp Store-Based Retailing - Grocery Retailers - Non-Grocery Retailers - - Mixed Retailers Department Stores Mass Merchandisers Variety Stores Warehouse Clubs - - Clothing and footwear specialist retailers - - Leisure and Personal Goods Specialist Retailers Sports goods stores

76 - - - Other Leisure and Personal Goods Specialist Retailers - - Other Non-Grocery Retailers Non-Store Retailing - Homeshopping - Internet Retailing - Direct Selling - Vending Total Table 8 '000 units Forecast Sales of Men s Underwear, Nightwear and Swimwear by Category: Volume Men's Nightwear Men's Swimwear Men's Underwear Men's Underwear, Nightwear and Swimwear Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources Table 9 Forecast Sales of Men s Underwear, Nightwear and Swimwear by Category: Value UAH million Men's Nightwear Men's Swimwear Men's Underwear Men's Underwear, Nightwear and Swimwear Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources Table 10 % volume growth Forecast Sales of Men s Underwear, Nightwear and Swimwear by Category: % Volume Growth / CAGR 2010/15 Total Men's Nightwear Men's Swimwear Men's Underwear Men's Underwear, Nightwear and Swimwear Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources

77 Table 11 Forecast Sales of Men s Underwear, Nightwear and Swimwear by Category: % Value Growth % constant value growth Men's Nightwear Men's Swimwear Men's Underwear Men's Underwear, Nightwear and Swimwear CAGR 2010/15 TOTAL Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources

78 WOMEN'S OUTERWEAR IN UKRAINE - CATEGORY ANALYSIS HEADLINES In 2010 women s outerwear shows 4% volume growth and 15% current value growth after two years of volume and one year of value decline Domestic and CIS products drive advanced growth as women try to save on apparel if it is not related to special functions such as business or weddings Leggings and jumpers attract most attention due to fashion trends and their comfort for everyday usage Unit prices increase by 10% to UAH245 in 2010 Domestic operators of famous world brands such as VF SNG, adidas and Argo lead in women s outerwear Constant value sales of women s outerwear are expected to grow at a CAGR of 6% and volume sales are expected to increase at a CAGR of 5% over the forecast period TRENDS Recovering consumer incomes combined with a generally improved consumer mood helped women s outerwear start recovering after declining over previous two years. Volume sales of women s outerwear increased by 4% and current value, boosted by unit price growth, increased by 15% in Women s outerwear now represented 18% of total clothing volume sales and 39% of clothing value sales. Demand increased for so-called fast fashion products due to expansion of such outlets supported by promotional campaigns. Fast fashion products in Ukraine are often domestically produced and are simplified, cheaper copies of stylish design ideas. However, popularity of fast fashion brands from Western Europe, such as Zara, is rapidly growing and expected to gain significant share from domestic production. Women leggings showed best performance within women s outerwear with 9% volume growth in Leggings success is based on recently developed fashion of wearing leggings. Additionally, relatively low average unit price at UAH126 underpins this category s growth. Women s coats and other outer clothing demonstrated a stable growth rate of sales in big cities, especially Kiev; conversely, retail sales in smaller places were constrained by the population s drop in purchasing capacity. When experiencing such a situation traders tried to maximise their turnover in the capital and other larger cities and resolve the problem in smaller cities by stocking only popular clothes models. As a result, apparel made of wool and other expensive products was moved out of those areas and over to the capital, mainly. Demand for more expensive products such as wool suits, jackets and similar clothes has decreased 3-4 times since the crisis began, according industry representatives. It could be because wool has become too expensive for middle class buyers and they have either refused to buy or postponed purchases to replace such clothing, as the wearing period of wool garments can be prolonged.

79 Women s jackets and coats and women s suits experienced the highest unit price growth in 2010, by UAH47-48 on average. They were the most expensive goods in women s outerwear with average prices of UAH488 and UAH452, respectively. Women s outerwear remains unsaturated in Ukraine. Crisis created a good opportunity for Ukrainian retail brands and designers to battle for development, as entrance of big international market players was postponed to State statistics show that some domestic companies started to realise some of this potential; for example, domestic production of women s dresses grew by 16% and knitted clothes by 2%. Overall, domestic producers achieved 5% growth in production volume in COMPETITIVE LANDSCAPE Women s outerwear is very fragmented in Ukraine, with the 10 largest brands together accounting for only 8% of value sales. The adidas brand was the leading brand with a value share of 2%, thanks to high brand awareness and good availability across the country in many outlets. Adidas is expected to face possible problems in the forecast period due to its owners decision to develop its own chain of stores rather than continuing to cooperate with other chained retailers). VF SNG was the strongest company in terms of value shares with brands Wrangler and Lee possessing 3% jointly.

80 PROSPECTS CATEGORY DATA Table 1 Apparel Size Chart for Women: (No-name Brand, Jackets) unit (cm)

81 Measurements/size Chest Waist Hips Euromonitor International store check Table 2 Apparel Size Chart for Women: (No-name Brand, Jeans) unit (cm) Measurements/size Waist Hips Euromonitor International store check Table 3 Apparel Size Chart for Women: (No-name Brand, Women's underwear) unit (cm) Measurements/size Waist Hips Measurements/size Waist Hips Euromonitor International storecheck Table 4 Sales of Women s Outerwear: Volume '000 units Women's Jeans Women's Outerwear (Excl Jeans) Women's Outerwear Table 5 Sales of Women s Outerwear: Value UAH million Women's Jeans Women's Outerwear (Excl Jeans) Women's Outerwear

82 Table 6 Sales of Women s Outerwear: % Volume Growth % volume growth Women's Jeans Women's Outerwear (Excl Jeans) Women's Outerwear 2009/ CAGR 2005/10 Total Table 7 Sales of Women s Outerwear: % Value Growth % current value growth Women's Jeans Women's Outerwear (Excl Jeans) Women's Outerwear 2009/ CAGR 2005/10 Total Table 8 Women s Outerwear Company Shares % retail value rsp Company Total Table 9 Women s Outerwear Brand Shares % retail value rsp Brand Company

83 Others Total Table 10 Sales of Women s Outerwear by Distribution Format: % Analysis % retail value rsp Store-Based Retailing - Grocery Retailers - Non-Grocery Retailers - - Mixed Retailers Department Stores Mass Merchandisers Variety Stores Warehouse Clubs - - Clothing and footwear specialist retailers - - Leisure and Personal Goods Specialist Retailers Sports goods stores Other Leisure and Personal Goods Specialist Retailers - - Other Non-Grocery Retailers Non-Store Retailing - Homeshopping - Internet Retailing - Direct Selling - Vending Total Table 11 Forecast Sales of Women s Outerwear: Volume '000 units Women's Jeans Women's Outerwear (Excl Jeans)

84 Women's Outerwear Euromonitor International from trade associa ions, trade press, company research, trade interviews, trade sources Table 12 Forecast Sales of Women s Outerwear: Value UAH million Women's Jeans Women's Outerwear (Excl Jeans) Women's Outerwear Euromonitor International from trade associa ions, trade press, company research, trade interviews, trade sources Table 13 Forecast Sales of Women s Outerwear: % Volume Growth % volume growth Women's Jeans Women's Outerwear (Excl Jeans) Women's Outerwear 2014/ CAGR 2010/15 Total Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources Table 14 Forecast Sales of Women s Outerwear: % Value Growth % constant value growth Women's Jeans Women's Outerwear (Excl Jeans) Women's Outerwear CAGR 2010/15 TOTAL Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources

85 WOMEN'S JEANS IN UKRAINE - CATEGORY ANALYSIS HEADLINES In 2010 women s jeans recovers from crisis with 5% volume growth and 15% current value growth Highest growth is in standard and premium price categories (8% and 11% accordingly in volume, 23% and 19% in value) Predominant share (greater than 90%) of women jeans in Ukrainian market is imported Average unit price is up by 10% to reach UAH240 with growth leaders (standard and premium segments) showing higher value growth Market is extremely fragmented, even compared with other apparel categories, but competition between companies is characterised as tough due to product specifics (such as everyday usage, great popularity and unsatisfied demand) Women s jeans is expected to see a constant value CAGR of 5% and a volume CAGR of 4% over the forecast period TRENDS Simple factors such as growing consumer confidence and, according to national statistics, recovering disposable income were the main factors for women s jeans growth by 5% in volume and 15% in current value. In actual terms, this translates to a market size of 13 million units and UAH3.0 billion in However, with rapidly growing food prices, Ukrainians tend to cut back on expenditures. The average women s jeans consumer looks for reliability (long lasting) and fashionable design. Even considering their limited financial resources, consumers try to move out of the economy segment to mid-range jeans. Ukrainians accept jeans as apparel goods with higher resistance to fashion waves than other apparel has, which means they replace jeans mostly not because of changed fashion, but when they are worn out. Ukrainian women s jeans is dominated by imported production. Economy or no-name brands are rolled out directly from Asian countries. Premium brands are sourced from Poland or Italy. Small batches of other jeans products are made domestically. Unit prices varied in range from UAH178 (no-name economy brands) to UAH1,000 (boutique extracts imported from the EU) in The average unit price in women s jeans increased by 10% to UAH240. Unit price remained one of most important purchase factors. Most consumers were less interested in possessing certain brands and looked instead for jeans that were convenient and fit the individual body well. Encrusted jeans continued to be popular in the women s segment. The universal apparel store format gained the most strength in Ukraine during the crisis years. It can be regarded as part of the clothing and footwear specialist retailers channel. Its popularity lies in low prices (the majority of the assortment comprises economy and standard segments) and a flexible approach to trade area arrangement. Mentioned format is oriented to compete with open markets rather than with similar stores. Open markets (other non-grocery

86 retailers) steadily lost value share to clothing and footwear specialist retailers over the review period, while the latter channel went from a 29% value share in 2005 to a 34% value share in Internet retailing was cautious in this category during review period, but its further development is, nevertheless, expected. Other non-grocery retailers (usually open markets) was the largest sales channel (with a 53% value share), but its share is supposed to diminish gradually due to competition from specialised retailers. COMPETITIVE LANDSCAPE In , Ukraine s strong economy encouraged retailers to pursue aggressive marketing policies, which were mainly directed towards increasing brand awareness. Such marketing campaigns was supposed to be supported by credit financing. However, alongside with increasing brand awareness and brand building, retailers neglected (mainly) investments of trade points efficiency improvement. The economic crisis hurt sales (some retailers experienced double-digit shrinkage) making further functioning untenable for a number of outlets. This was especially true if a retailer been issued credit nominated in foreign currency, as exchange rate of Ukrainian grivna shrinked. Debt problems were common for plenty of businesses, which were forced to either sell shares or sell out entirely to finance the debt. g PROSPECTS Despite decreased demand in 2008 and 2009, recovering sales in 2010 indicates that Ukrainian women s jeans will do well over the forecast period, especially for domestic retailers and producers. The crisis gave domestic chains a chance to expand and develop, as most international chains stopped or postponed expansions to other countries. In Ukraine,

87 international chains were active only in limited volumes in the premium or super premium price segments. The domestic producers association reports about 5% volume growth of jeans produced in Ukraine. If the current trend continues in 2011 it is possible to see about 11-15% of women s clothing (including jeans) being produced in Ukraine. CATEGORY DATA Table 1 Sales of Women s Jeans: Volume '000 units Women's Jeans Table 2 Sales of Women s Jeans: Value UAH million Women's Jeans

88 Table 3 Sales of Women s Jeans: % Volume Growth % volume growth Women's Jeans 2009/ CAGR 2005/10 Total Table 4 Sales of Women s Jeans: % Value Growth % current value growth Women's Jeans 2009/ CAGR 2005/10 Total Table 5 Sales of Women s Jeans by Type: % Volume Breakdown % retail volume Economy Standard Premium Super Premium Total Table 6 Sales of Women s Jeans by Type: % Value Breakdown % retail value rsp Economy Standard Premium Super Premium Total Table 7 Women s Jeans Company Shares % retail value rsp Company

89 Others Total Table 8 Women s Jeans Brand Shares % retail value rsp Brand Company Total Table 9 Forecast Sales of Women s Jeans: Volume '000 units Women's Jeans Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources Table 10 Forecast Sales of Women s Jeans: Value UAH million Women's Jeans Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources Table 11 Forecast Sales of Women s Jeans: % Volume Growth % volume growth Women's Jeans 2014/ CAGR 2010/15 Total Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources Table 12 Forecast Sales of Women s Jeans: % Value Growth

90 % constant value growth Women's Jeans CAGR 2010/15 TOTAL Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources

91 WOMEN'S UNDERWEAR, NIGHTWEAR AND SWIMWEAR IN UKRAINE - CATEGORY ANALYSIS HEADLINES In 2010 women s underwear, nightwear and swimwear sees 3% volume growth and 14% current value growth Fragmentation of market and a heap of players delay its development, and category is unlikely to be a primary business direction for big international players anytime soon Women s swimwear demonstrates the highest growth in value (21%) in the category Average unit price increases by 11% in 2010 to UAH42 per unit Current value sales levels are influenced by purchasing capacity more than by other factors, making competition from open markets a major issue Women s underwear, nightwear and swimwear is expected to grow at a volume CAGR of 5% and constant value CAGR of 6% over the forecast period TRENDS Small domestic producers manufacturing no-name products operate in this category along dominating Asian production. Domestic companies benefit from long-term relationships established with Uzbekistan s raw materials producers. Domestic players have used those business connections to import some portion of excess cotton to Ukraine (if Middle-Asia partners had issues with sales at Asian markets they tried to turn their sights to CIS countries) with the obvious goal to process them into textile goods (including underwear and nightwear, for example). State Statistics report that some domestic operators have started to realise crisis positives (mainly, strict consumers inclination to cheaper prices): production of underwear grew by 10% in volume in Domestic producers have established positions in the segment of cheap cotton products with moderate quality. At the same time, technologically reliable products using modern innovative synthetic materials were not produced in Ukraine. Demand for underwear and nightwear in Ukraine is driven more by functional than by fashion pieces, especially since the recession started. Average Ukrainians are interested in branded underwear, nightwear and swimwear products. They are considered luxurious products and the vast majority of people not only middle class consumers, but also many affluent consumers opt to save on them. Production costs of the biggest part of fast fashion underwear were comparatively small when compared with logistics and sales expenses, so retailers tried to use the economy s recovery and raise prices to earn appropriate margins. Women's underwear prices increased by UAH3 (or 10%) to UAH37. Women's swimwear prices increased by UAH12 or 13% to UAH106 (taking into account it was a pretty small product group with three million units sold or 5% of the category s total volume sales), and women s nightwear, the smallest product group in the category (1.4 million units or 2% of total units sold), grew by UAH15 or 12% to UAH134.

92 As seen in other apparel categories, there is a side trend seen in women s underwear, nightwear and swimwear whereby value sales at grocery retailers are increasing; this channel s share of value sales was 3% in The rapidly growing share of clothing and footwear specialist retailers reached 34% in 2010, whereas the other non-grocery retailers continued its declining trend to reach a value share of 55%. COMPETITIVE LANDSCAPE A surplus of cheap and comparatively good-quality goods imported from China (30-40% of total, usually in the economy segment) has caused women s underwear, nightwear and swimwear to be dominated by 4-6 big Southeast Asian corporations whose value shares are covered under others. A lesser combined share (15-25%) of value sales belongs to Turkish producers oscillating along a relatively stable path during the crisis years. Some 5-8% of value shares are still a heritage of Polish firms mainly, those operating in the standard or even the premium price segment. Demand for polish production is supported by good product quality. PROSPECTS Women s underwear, nightwear and swimwear will show characteristics of maturity in the forecast period. During this time, it will remain a source of more than average profitability whilst trending towards slowing down. Volume sales of women s underwear, nightwear and swimwear are expected to increase at a CAGR of 5% between 2010 and 2015 and constant value sales will increase at a CAGR of 9%.

93 CATEGORY DATA Table 1 '000 units Sales of Women s Underwear, Nightwear and Swimwear by Category: Volume Women's Nightwear Women's Swimwear Women's Underwear Women's Underwear, Nightwear and Swimwear Table 2 Sales of Women s Underwear, Nightwear and Swimwear by Category: Value UAH million Women's Nightwear Women's Swimwear Women's Underwear Women's Underwear, Nightwear and Swimwear

94 Table 3 Sales of Women s Underwear, Nightwear and Swimwear by Category: % Volume Growth % volume growth Women's Nightwear Women's Swimwear Women's Underwear Women's Underwear, Nightwear and Swimwear 2009/ CAGR 2005/10 Total Table 4 Sales of Women s Underwear, Nightwear and Swimwear by Category: % Value Growth % current value growth Women's Nightwear Women's Swimwear Women's Underwear Women's Underwear, Nightwear and Swimwear 2009/ CAGR 2005/10 Total Table 5 Women s Underwear, Nightwear and Swimwear Company Shares % retail value rsp Company Total Table 6 Women s Underwear, Nightwear and Swimwear Brand Shares % retail value rsp Brand Company Others Total

95 Table 7 Sales of Women s Underwear, Nightwear and Swimwear by Distribution Format: % Analysis % retail value rsp Store-Based Retailing - Grocery Retailers - Non-Grocery Retailers - - Mixed Retailers Department Stores Mass Merchandisers Variety Stores Warehouse Clubs - - Clothing and footwear specialist retailers - - Leisure and Personal Goods Specialist Retailers Sports goods stores Other Leisure and Personal Goods Specialist Retailers - - Other Non-Grocery Retailers Non-Store Retailing - Homeshopping - Internet Retailing - Direct Selling - Vending Total Table 8 '000 units Forecast Sales of Women s Underwear, Nightwear and Swimwear by Category: Volume Women's Nightwear Women's Swimwear Women's Underwear Women's Underwear, Nightwear and Swimwear Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources Table 9 Forecast Sales of Women s Underwear, Nightwear and Swimwear by Category: Value UAH million

96 Women's Nightwear Women's Swimwear Women's Underwear Women's Underwear, Nightwear and Swimwear Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources Table 10 % volume growth Forecast Sales of Women s Underwear, Nightwear and Swimwear by Category: % Volume Growth / CAGR 2010/15 Total Women's Nightwear Women's Swimwear Women's Underwear Women's Underwear, Nightwear and Swimwear Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources Table 11 Forecast Sales of Women s Underwear, Nightwear and Swimwear by Category: % Value Growth % constant value growth CAGR 2010/15 TOTAL Women's Nightwear Women's Swimwear Women's Underwear Women's Underwear, Nightwear and Swimwear Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources

97 FOOTWEAR IN UKRAINE - CATEGORY ANALYSIS HEADLINES In 2010 volume sales of footwear increase by 6% and current value sales are up by 19% in rapid recovery from negative crisis influence Growing import of Southeast Asian countries keeps economy brands dominating in 2010 Men's non-sports footwear shows most rapid volume growth, up by 8% High inflation and shift towards modern retail increase average unit price by 12% to UAH239 Biggest players such as Intertop, Royal Shoes, Nike, Adidas are rather confident that they can sustain their value shares Over the forecast period footwear is expected to grow at a volume CAGR of 5% and a constant value CAGR of 6% TRENDS According to industry representatives footwear is more resistant to suffering negative impacts from economic crisis than other apparel categories are, as most consumers consider shoes as a necessity. In 2010, volume sales of footwear in Ukraine increased by 6%, and current value sales increased by 19%. Overall, footwear value represents 30% of total apparel value in Ukraine. This share increased by three percentage points from 27% in The Ukrainian footwear market can be split into three parts. The economy segment, usually represented by light spring and summer footwear, is dominated by Asian producers, as consumer requirements for summer footwear are low. Over the review period the share of footwear imported from Asian countries gradually increased. Domestic production is strongest in the autumn and winter shoes segment, where consumers want to buy betterquality shoes, which they expect to last longer and upon which they are ready to spend more money. Shoes imported from Western European countries like Italy and Germany represent the premium segment. For most consumers the label Made in Italy (or Germany) is associated with high quality. According to Euromonitor International definitions, footwear consists of three categories with slightly different growth rates in 2010: children's footwear with 6% volume growth and 20% current value growth; men's footwear with volume growth of 7% and value growth of 20% and women s footwear with 4% volume growth and 17% value growth. Children s footwear category is where people maintain their expenditure the longest and they first prefer to save on footwear of adult persons. At the same time, quality requirement for children footwear are lower as children outgrow their shoes very quickly. In 2010 footwear sales surpassed pre-crisis 2008 s value sales (UAH14 billion in 2010 vs. UAH12 billion in 2008). It is worth noting that s drop was small when compared to declines in other categories/product groups in apparel. Since 2004 the footwear market has moved towards consolidation and further growth and expansion of main players (Intertop, Delta Holding, adidas Ukrayina DP and Royal Shoes). Crisis had slowed down its momentum,

98 but it is obvious that footwear will continue to develop and completely recover earlier than other apparel categories will. Men's non-sports footwear was the fastest-growing product group with 8% volume growth in 2010 as a reflection of realisation of postponed demand and business staff s higher expenditures. At the same time women's non-sports footwear growth was almost two times lower (4%), but still growing compared to the previous year. This is partially because women own a much higher number of shoes, which they rotate, so they do not need new ones when old ones are ruined. On the contrary, sports footwear volume growth was balanced between gender groups (5% for male and 6% for female consumers). Unit prices of men s footwear are more expensive than that of women s footwear on average (UAH276 vs UAH246 in 2010). This is explained by the fact that women buy more pairs of cheaper shoe types (eg sandals), and men tend to buy shoes more rarely but of better quality. Ukrainian footwear manufacturing used to be an important part of the economy, satisfying almost all local demand and exporting to other Soviet bloc countries. In the last decade domestic production declined as locals started losing in competition with Asian manufacturers providing lower-quality but much cheaper products; however, there are number of local manufacturers present. According to the president of the Ukrainian Shoes Association local companies produced 24 million pairs of shoes in 2010, out of which 11 million were exported, mostly to Russia and other CIS countries. On top of that there are smaller local producers operating in the shadow market, whose production capacities not poss ble to track. COMPETITIVE LANDSCAPE Intertop was a clear leader with a share of 11% of total footwear value sales in 2010; it was followed by Delta Holding with 5% and adidas Ukrayina DP (4%) with Royal Shoes (3%).

99 PROSPECTS Over the forecast period volume and constant value sales of Ukrainian footwear are expected to grow at CAGRs of 5% and 6%, respectively. Market size by 2015 will reach 75 million units and value of UAH18.5 billion. Growing Ukrainian purchasing power will allow them to buy better shoes. The market will experience further shifting towards modern retail, which is expected to gain share from open markets. Leading retailers are expected to resume their outlets expansion to regain market shares lost during economic slowdown. With likely entrance of large foreign retailers, more monobrand stores are expected to be developed, selling standard and premium footwear.

100 CATEGORY DATA Table 1 Sales of Footwear by Category: Volume '000 units Children's Footwear Men's Footwear - Men's Non-Sports Footwear - Men's Sports Footwear Women's Footwear - Women's Non-Sports Footwear - Women's Sports Footwear Footwear,,,,,, Table 2 Sales of Footwear by Category: Value UAH million Children's Footwear Men's Footwear - Men's Non-Sports Footwear - Men's Sports Footwear Women's Footwear - Women's Non-Sports Footwear - Women's Sports Footwear Footwear Table 3 Sales of Footwear by Category: % Volume Growth % volume growth Children's Footwear Men's Footwear - Men's Non-Sports Footwear - Men's Sports Footwear Women's Footwear - Women's Non-Sports Footwear - Women's Sports Footwear Footwear 2009/ CAGR 2005/10 Total Table 4 Sales of Footwear by Category: % Value Growth

101 % current value growth Children's Footwear Men's Footwear - Men's Non-Sports Footwear - Men's Sports Footwear Women's Footwear - Women's Non-Sports Footwear - Women's Sports Footwear Footwear 2009/ CAGR 2005/10 Total Table 5 Footwear Company Shares % retail value rsp Company Total Table 6 Footwear Brand Shares % retail value rsp Brand Company Total Table 7 Sales of Footwear by Distribution Format: % Analysis % retail value rsp Store-Based Retailing

102 - Grocery Retailers - Non-Grocery Retailers - - Mixed Retailers Department Stores Mass Merchandisers Variety Stores Warehouse Clubs - - Clothing and footwear specialist retailers - - Leisure and Personal Goods Specialist Retailers Sports goods stores Other Leisure and Personal Goods Specialist Retailers - - Other Non-Grocery Retailers Non-Store Retailing - Homeshopping - Internet Retailing - Direct Selling - Vending Total Table 8 Forecast Sales of Footwear by Category: Volume '000 units Children's Footwear Men's Footwear - Men's Non-Sports Footwear - Men's Sports Footwear Women's Footwear - Women's Non-Sports Footwear - Women's Sports Footwear Footwear,,,,,, Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources Table 9 Forecast Sales of Footwear by Category: Value UAH million Children's Footwear Men's Footwear - Men's Non-Sports Footwear - Men's Sports Footwear Women's Footwear

103 - Women's Non-Sports Footwear - Women's Sports Footwear Footwear Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources Table 10 Forecast Sales of Footwear by Category: % Volume Growth % volume growth 2014/ CAGR 2010/15 Total Children's Footwear Men's Footwear - Men's Non-Sports Footwear - Men's Sports Footwear Women's Footwear - Women's Non-Sports Footwear - Women's Sports Footwear Footwear Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources Table 11 Forecast Sales of Footwear by Category: % Value Growth % constant value growth Children's Footwear Men's Footwear - Men's Non-Sports Footwear - Men's Sports Footwear Women's Footwear - Women's Non-Sports Footwear - Women's Sports Footwear Footwear CAGR 2010/15 TOTAL Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources