The Rise of German in

Dubai, 14th of November 2011

Team 8: - Andie Piddington - Ashish Kumar Rastogi - Zaruhi Tonapetyan - Cheriyan Joseph N - Ankit Lunia - Luis Pinho de Aguiar 1 Index

Why German in the Baden Region? Our products and their adaptation

Market Tendencies in Russia

Why us?

Entry Strategy in the Russian Market

Interviews and Real World Issues

Impacts of our Cross Cultural Point of View

Ethics in our business

Overall impact of culture in our Business

2 Why in the Baden Region?

‡With 15,906 hectares (39,300 acres) under vine in 2008, Baden is Germany's third largest wine region. ‡Winemaking cooperatives are very common in Baden, number around 100, and are responsible for 85% of the region's production. ‡Much of Baden is situated in the Rhine rift, which is protected by the Black Forest and the Vosges mountains to the west of Rhine, and is therefore one of Germany's warmest location. Therefore, its wines are usually more full-bodied and higher in alcohol than wines from many other German regions. ‡Due to its very large north-south length, Baden is divided into nine districts (Bereiche), which is more than any other GermanWith wine15,906 region. hectares (39,300 acres) ‡A large number of grapeunder varieties vine presentin 2008, in Baden the region(eg is Germany's Spätburgunder, , Muller- Thurgau«ect). third largest wine region[

3 Market Tendencies in Germany and Russia

While the German wine industry does not enjoy the same international reputation as that of France or Italy, it has a rich history and has produced award-winning brands.

German wines have already established a foothold in the Russian market, with a market share of 4% in 2009. Our team believes the time is right to build on this success and introduce a unique German wine experience internationally.

Russian consumer goods market has been steadily growing since 1998, and despite the recent financial crisis, is still going strong. The recent trends in Russia, (reported by Business Monitor International) are toward premium products, including high-end wines. The population is huge and its tastes cannot be easily generalized. Several important segments to focus on are identified 4 Our products and their adaptation

We will offer four different wine products, with different levels of customization in order to provide the diversified experiences that Russian consumers want:

How did the business grow nationally? What organization structure was adopted? How has the organization changed over time? What about staffing (team, skills, leadership, etc.)?

Spiced red wine blend, to be served hot Low-alcohol white wine (4-6% alcohol)  Target: lower middle class Russians  Target: Upper middle class Russian women  Season: winter months (October ± March)  Season: Spring & summer (March ± September)  3 varieties: Cinnamon, nutmeg, vanilla  Sweeter & fruity, to be served as an aperitif

Marketing: Marketing:  Sold in larger bottle  Sold in slim, curvy wine bottle  Colorful label with serving instructions  Label will display lower alcohol and fruity flavor  Sold in low-market grocery stores  Sold in wine boutiques and grocery stores

Premium Spatburgunder with gold flakes Mid-priced Pinot Noir  Target: upper class / nouveau riche Russians  Target: middle class Russians  Season: year-round  Season: year-round

Marketing: Marketing:  Sold in black bottle with gold and black label  Sold in standard bottle with silver and black  Sold in expensive wine boutiques & elite label restaurants  Sold in wine boutiques, grocery stores and mid- level restaurants 5 Why us?

Competitive Advantages 1. The Classifications of wines we offer cater to round the year sales. (As it is described in the previous slide). 2. German wine market in Russia is quite untapped and only is represented in the elite wine segment, with the increase in average personal monthly incomes (as per Scottish development international) and our variety of wine offerings, all segments of the Russian market will open to the German wines. 3. The Russian local wine market have been downsizing for the last 10 to 15 years, and now Russian wine market is counting on imported wines growing at around 31% in volume from 2008, giving us the opportunity to make a market entry.

Legal obstacles 1. The Russian alcohol sector is regulated and controlled by at least four Government agencies, most important of these is FSRAM (Federal Service for the Regulation of the Alcohol Market). FSRAM has taken a hard stance on licensing, FSRAM reportedly has a long list of documents and requirements necessary for obtaining a five-year wholesale license, which is required for importers not only to run a warehouse and wholesale operations in Russia but also to acquire excise stamps, which in turn requires additional manpower. 2. Customs duties, fees and taxes (2011, excise tax predicted increase of 10 ± 37%) are calculated based on customs cost of the Wine, i.e.: cost of the Wine plus transportation expenses forcing a cost impact on the wines.

6 Organizational Structure, To Be Modified

Executive Director

Assistant Internal Sales Winemaker

Membership Sales Office Butler Administration

7 Entry Strategy in the Russian Market

‡ Our companies strategy is to enter the Russian market and sell wines that have been developed and adapted to meet with the customers needs. We are going to open a representation initially in Moscow. It will be divided into two different areas. The first will the office where our team (one German expat and his team of Russian sales representatives will be based) and an area with a show room which will allow the costumer to have an unique experience of our region of Baden. People will be able to taste our products and be informed of mission and values. This show room will also be used to organize commercial events, like cocktails for the owners/managers of the most important restaurants/hotels. ‡ We will focus initially in Moscow due to the access to a large number of potential consumers. After acquiring enough experience of the market we will expand to St. Petersburg another important market for the success of our Company. Our commercial efforts will be in these two big cities but we will not be limited to them. Thanks to our partnership with a local importer/distributor (legally required) we will have access to his distributing channels. Our company also will develop a B2B site, where restaurants, hotels, winery shops and supermarkets can order or ask for more details. ‡ One of the main responsibilities for our representative in Russia is to create a good relationship with the local government so that there are no legal barriers. The government will welcome our company because we are bringing foreign investment into the country, we are developing the local market and we are creating jobs for locals. Initially we will create a small number of jobs but the idea is to grow when we expand to St. Petersburg. We will outsource to local companies some of the support services needed (accounting, tax, etc.), while keeping in house some other critical areas (ex. IT, etc.). ‡ On the other hand local inhabitants will also welcome us due to our high quality product and unique features that satisfy their real needs. Our goal is not to sell just wine, but sell the experience of drinking a unique wine that¶s has been developed specifically for the client. ‡ There will be a initial period of setting up our representative in Moscow (we need to choose our location). Now that we have taken the decision to expand to this new market, we will start creating a network with the owners of the most important restaurants, hotels and winery shops in Moscow. We will supply free samples of our product to them in order to start a relationship. We will also be present in the main fairs of the region with stands. 8 graphic slide for business strategy

Russian Government Russian Market

B2B website Service outsource Representation to locals in Moscow Local wine fairs

Jobs Admin Office Restaurants Creation Show room

Shops Local Importer FDI

Directly to customer

9 Interviews and Real World Issues

Interview Targets & Protocols ‡ Svetlana Simonova, F&B consultant in Russia (emailed) ‡ Steffen Christmann, Chairman of German Wine Producers Union ‡ Stephen Jurende, wine consultant in Munich ‡ Andrey Tkemaladze, Russian wine boutique/supermarket owner ‡ Roy Cook, organic wine consultant, spent 10 yrs in Germany, (emailed)

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