Peculiarities of the National business in . 24.04.12 Contents

1.What is business in Russia like? 2.The story of the Siberian company «Inmarko» - ice-cream 3.Market in Russia and its peculiarities. 4.Necessary and sufficient conditions of success in Russia 5.Who are we- Food Union? Why are the Baltic States interested in Russia? 1. The market is a few hundred kilometers away 2. Two largest metropolises and St. Petersburg are located just nerby. 3. Russia – 150 millions of consumers. 4. Growing image of «Made in the Baltic States» What is business in Russia like?

На что похож Бизнес в России?

A good business plan ? Innovative product?

Sex on a motorcycle while the speed is 170 km/h? Idea and inspiration? Company «Inmarko» -ice cream

1. It was founded in 1993, as an ice cream trading company in 2. Founders – 8 junior research associates of Agricultural Academy 3. The first factory was opened in Novosibirsk in 1995, the second one was bought in in 1998, third one in Tula in 2007 4. After the 2 reconstructions performed in 2004 the Omsk factory becomes the biggest in Russia 5. The market share of«Inmarko» in Russia over 20% - it is more than the second place «Nestle» and the third place together. 6. The company sold to Unilever with an EBITDA multiplier of 14 in 2008. Success key factors

1. Inspiration and drive of the founders 2. Experience in sales system building 3. Young workers and managers – the average age is 25 years 4. The lack of the negative work experience at the Soviet Union enterprises 5. Specialists are completing training and internship in Europe. 6. European gurus of technology, marketing and processing come to -a rumor that the young people of Siberia began to make ice cream and decided to become the first spread rapidly through the environment. 7. The desire to become the first is a good force for growth, and the local victories raise the spirits of the winner Where was the help from?

1. There was no oligarchic equity 2. There were no criminal patrons 3. There were no questionable privatizations 4. There was no help from the authorities

There was a desire to win! Inmarko 2008 – the year of acquisition

Sales growth – 31%

Inmarko - number one in sales growth among all companies of Unilever Global Enterprises Network Inmarko 2008 – 2011

2008 2009 2010 2011

USG Growth%

Market Share

Profit (mil Euro)

Worse and worse every year … Investing continues

Increase investments into 50 % marketing by 50%

Increase investments into trade- 20% marketing by 20%

Increase investments into 20% trading equipment by 20%

Драйверы роста Food product retail in the Russian Federation According to A.T. Kearney, Russia is a second most attractive place for the foreign retail players (the appraisal of GRDI – Global Retail Development Index).Dynamic growth of retail turnover. Trade Structure

Successful development of the brands,new product launch, the most successful development of communication with consumers takes place in modern trade places. The market shares of specific trades are constantly decreasing in the Russian Federation, network sales increase faster. The emphasis on National Networks

More than 50 % of network sales is shared between 8 national leading networks. RPK will be focusing on developing relationships with these organizations Local network sales There are regional consumer markets in Russia, where the share of local trade networks in a trade turnover is crucial. The emphasis on developing relationships with 37 leading local area trade networks. Territorial trade structure

Federal districts share It is necessary to develop sales throughout Russia, focusing attention on the work in Far Eastern FD 3,7% the 24 biggest cities of Russia Siberian FD 11,6% (approximately 70% of all retail trade Urals FD 10,8% turnover). Volga FD 18,4% Southern FD 12,8% Central FD 33,5% Northwestern FD 9,2%

NORTH-WEST FAR-EAST CENTER RUSSIAN URAL FEDERATION VOLGA

SOUTH SIBERIA The market is not consolidated - there are many small players with Volume MS 1,5—2,5%

VOLUME VALUE № Company SHARE SHARE 1 INMARKO/NOVOSIBIRSK 17.6 20.1 2 NESTLE 5.9 9.4 3 ICEBERRY GK 6.7 7.1 4 TALOSTO ZAO/SPB 6.5 6.9 5 RUSSKIY KHOLOD/MOSKVA 6.3 6.0 Petrokholod, Sam-Po, 6 PRIVATE LABELS MANUFACTURES 5.4 3.1 Penzakholod, Chistaya Liniya 7 PETROKHOLOD 2.4 2.4 8 SAM-PO OOO/SAMARA 2.4 2.4 are players of top ten brands 9 PENZAKHOLOD/PENZA 3.0 2.3 with Volume MS 1,6—3%; they PRODUCT CHISTAYA LINIYA 1.6 2.3 produce 8 000-12 000 tons per 10 OOO/MOSK.OBL year – approx. the same 11 MARS 0.6 2.2 number of tons as a factory we 12 CHELNY-KHOLOD/TATARSTAN 2.4 2.1 13 YANUS GK/CHELYABINSK 2.4 2.0 plan to have. 14 ALTERVEST ZAO/MOSKVA 2.1 1.9 KHLADOKOMBINAT 2.3 1.8 15 N3/EKATERINBURG 16 KHLADOKOMBINAT N1/SPB 1.6 1.8 AO BELGORODSKIY 1.8 1.7 17 KHLADOKOMBINAT/BELGOROD 18 AGAMA TRADE OOO/MOSKVA 0.8 1.6 19 NOVOKUZBASS KHOLDING 1.7 1.6 20 POSPEL GK/NIZHNIY NOVGOROD 1.9 1.4

* Data: MS, Total National Russia, May‘11, Nielsen Portrait of key Competitors

Market leader still weak in Western part but historically strong in Ural and Siberia Strong Western Strong brands in OOH but Russia and Modern weak proposition in TH Trade Prices higher than average Strong brands, but Strong in Moscow and in insufficiently kiosks channel Strong in North West and supported Traditional Filyevskoe brand in Modern Trade Prices higher than power usage and credentials Non exclusive freezers average Size of business insufficient Reduced investments in Cross category for national support TV, cabinets brands usage Building umbrella brand All plans and activities are Unbalanced portfolio targeted to get best Big own kiosks chain investor Co-packers for private labels Regional marketing activities

Top 5 Concerns. Value MS, Total National Russia, Nielsen, 2011 The market is weakly branded – no strong national brands. Top 10 brands own only 2–2,5%.

Value MS, Total National Russia, Nielsen, 2011 What is necessary to succeed in Russia?

1. The Baltic States brand loyality is GROWING 2. Creative brands– DZUGAS, ROKISHKIS - 10 mil Euro 3. It is not just about finding distributor. He must believe in you and your product. Russian market entry risks

1. Administrative resources 2. National peculiarities 3. Distributors 4. And the most important…. > The whole Latvia is standing in tension Everyone is at risk!

Estonian fish Who are we? Food Union is a group of companies, bringing together professionals in FMCG production and marketing that have already reached outstanding results and have decided to create something greater than anything before.

Aitäh!