The Company made a strategic decision to launch production of basic and most popular products in Russia. The choice of a particular country was due to the availability of local raw materials. Finished products could be shipped duty-free not only within Russia, but also to Kazakhstan and Belarus, as they are members of the Customs Union.
The Company built a plant in a small city, because modern and automated equipment eliminated the dependency on availability of qualified professional in the local labor market. In that small city the Company managed to find very cheap premises, and the cost of electricity (this is a very important part of the cost of production) was relatively low.
The Company took into account the experience of local manufacturers and immediately began to establish direct relationships with chain stores, large corporate customers and retail stores. Of course, the Company continued its cooperation with the dealer network, but subjected it to a significant revision (from now on only those companies and entrepreneurs who agreed to strictly abide by the terms of the Company could become part of the dealer network). Today, the sales department of the Company consists of 18 employees who constantly travel to target countries and meet with customers in order to promote the brand and products of the Company. Finally, end-consumers purchase products from local distributors. Direct deliveries from Europe remained only in Ukraine, since it is almost impossible to ship goods from Russia for political reasons.
The Company also actively interacts with end-consumers, developing its website and actively using the opportunities provided by social networks to promote the brand.
So far, the plant in Russia produces only a limited product line, as the Company develops new markets with reasonable care. Some of the products are still supplied from Europe. Nevertheless, the steady growth of volumes by 25–30% annually inspires the Company, and its managers are already working out a business plan for expanding local production.
During two years of our customer’s operation in Russia, two local competitors went bankrupt. One of them got too many credits in good times, and could not pay off debts when the crisis came. Another competitor suffered because of poor quality products and too low prices—he hoped for sales growth and offered too much discounts to dealers, which eventually led to complete devastation.