2007 - Bulgaria

2004 - Cyprus*

2004 - Estonia
2004 - Hungary
2004 - Latvia
2004 - Lithuania
2004 - Malta
2004 - Poland
2004 - Slovakia
2004 - Slovenia
---------------------------------------------

maintain market lead over nestle?

invest in own chain for retail?
how compete with regional producers without price war?
how attract talent?

Russia:
ice-cream - on the go
consumption - 2.5 kg/capita; us-16,france-17;ca-18
ice-cream - less sweet, more aerated
consumers - concerned about preservatives than fat
competitors - beer, soda, yogurts, chocolate
advtg - ice-cream - <5m - 1% sales;
ice-cream trend decreasing (2000 - prod down 3.5% yoy; conf - up 8%; soft drn -
25%; beer - 23%)

1991 - opening up of market

B&J's, Baskin, Nestle, Unilever;
some manu partnered with local dist cos, selling foreign ice cream prods, expand
ed into new mkts
Financial crisis - 1998
redn in imports; nestle - reduced shock by boosting local ice-cream prod; invest
ors stayed away frm russia; affected ice-cream prod who relied on imports of mat
ls used in ice-cream prod.

Ice-filli
capability - 200 tons/day

Product - Russian producers - 240 diff ice-cream prods; baskin - 650 varieties
2002 - ice filli - 170 diff ice-creams and added abt 20 new prod/year
previous innova - ice-creams for diabetics(140000 in moscow);
2002 - american style ice cream products - vanilla and dried fruit;product of ye
ar award - "Eralash"
Brands - lakomka - 3 most recog brands in russia;
2001 - lakomka - 30% of sales vol
leningradskaya - another well known product; other cos also prod these product

Price:
Domestic ice cream prices - 2.5 rubles - 15 rubles
Ice filli - approx. 6 rubles
nestles - premium brands - 10 rubles and more
regional prod - low price - 3 - 4 rubles.
elasticity - 10% change in retail price would not make significant diff -> 50% w
ould

2002 - bulk ice-cream in boxes,containers,buckets became more popular -> home co

nsumption segment of the market became more important.

during stagnant periods - other manu -> leveraged infrastructure -> frozen food,
meat

Manufacturing:
1999 - profit margin - 15-20%
VAT - 20% in 2000;
Raw matls:
varying % of milk fat: affected palatability; smoothness, consistency, color, te
xture, digestability and energy value;
Icefilli - high quality natural ingredients; no artificial preservativs/colorant
s.
nestle - use palm/coconut oil and preservatives as cost savings; not all milk ba
sed ingredients
foreign prod - used chemical preservatives to increase shelf life of products fr
m 6 to 18 mths.
traditional russian ice-cream makers - used all natural ingredients, making it d
ifficult to store
depended on imports for sweet cream butter, pacakagin matls, stabilizers and coc
onut oil

Icefili - used 3-4 suppliers for major ice cream ingredients

Eqmt:
2002 - all eqmts were newly imported; exceptions: four brands using older genera
tion eqmt; accounting for 25% of prod capacity.
Dist:
Retail: kioks,min mkts, grocery stores, supmkts, restaurants
ice cream kiosks: 11,000 outlets; 1600 ice cream only kiosks. observer - street
mkt saturated with kiosks selling ice cream on every street corner.
Mini markets: slightly larger; conveniently located near subway stations;
Gastronoms: dominant retail chain in less wealthy and remote areas
super markets: fastest growing channels in late 1990s

restaurant and cafes - dominated by foreigners such as BR and HD - 3% of ice cre

am sales.

2002 - 80% ice cream sales -> kiosks and mini mkts.
Ice fili - contracted with dozens of cos. which had kiosks, carts and hired own
people
Ice fili -> also dozens of small dist cos-> gastronoms, mini marts.
Ice-fili -> not participated in dist activities-> because of huge investment ->
director-"ice fili has greatest variety but likelihood of finding nestle product
is twice that of fili"
Marketing:
90% of mktg dollars spent on tv advts -> foreign nationals -> 3/4 of this.
fili ran advtg campaign on russian tv channels in 2001 but ads barely mentioned
fili's name or products. mktg director -> "need to min. products and focus on di
fferentiating products we already have". - $ 500,000 per year.
Corp org and culture:
Functional org stucture: Finance, prod, commercial, tech and HR
since 2000 -> focus on restructuring; Fixed costs high, eg. salary structure rat
ionalisation.
Future growth:
raising $50 m in bonds for financing growth; no presence internationally; only s
old in some parts of california;

Competitors:
100 in 96 to 300 in 2002.
Association of russian ice cream - grp formd by leading russian ice cream produc
ers to pool resources and improve consumer demand.; GOST standard.
regional producers:
newly established players no heritage using new manu facilities having significa
nt cost advantage. accounted for 30% of market.
Foreign cos:
B&Js: entered in 1992 as JV Iceverks; 1997 withdrew frm jv citing hig op cost, l
ack of modern wholesale dist sys;
unilever - entered ice cream mkt in 1998-> estimated tht russians consumed 1000-
1500 tons of algida ice cream/year. dist - bought - 3000 kiosk stalls; 1/3 in mo
scow. advtsg - 1.2 m in 1999 and 6.2 million on algida. withdrew in 2001.
BR- entered 1990; 60 flavors to russian mkt; price - 30 rubles; all imported ing
redients only sugar localy produced; franchise system; new factory - 16,000 tons
/year; 2001 - cap utilization - 7-12%; 106 cafes - 35 in russia.
Nestle -
invested in local prod and devel of food and beverage prods tht fit russian tast
es; locally supplied components, invested early in a domestic infrastructure, de
veloped its own independent storage facilities, distribution, mktg networks - ki
osks and branded refrigerator displays; to maintain low prod costs using local p
rod for its heavily branded product. significant investments in training and dev
elopment of its local staff.
invested 20m between 96-2000. 2000 - second largest market share after fili, pro
duced 16k-17k tons.
non-traditional ice-creams;

------------------------------------------------

Porter's 5 forces:
Bargaining power of suppliers: not an issue- commodities have big seasonal varia
tions, limited local sources of high quality butter, high availability of import
ed raw matls, specialist eqmt must be imported.
Bargaining power of buyers - low disposable income, distributors have power- man
y suppliers,growth of supermkts - they may have more power in future, cafes and
restaurants can dictate which ice-cream consumers will choose, consumers dont ha
ve access to all prods
Competitor rivalry - low growth, no strong brands, seasonality overcapacity, mar
gins decreasing, more players coming into the market(300)
Barriers to entry - low, existing meat producers can easily diversify as they ha
ve refrigerated capacity, no strong brands to compete with, fragmented market, n
o government policy restricting ice cream makers, no strong distribution links t
o break into, distributors willing to take another brand at right price.
Threat of substitutes- beer and chocolate.
solution:
Increase barriers to entry - scale, rationalise products and longer runs, create
brand identity and invest in marketing, vertically integrate with kiosks and di
stributors, push for regulation of ingredients labelling on packaged ice-cream;
Decrease buyer power - increase brand identity, vertically integrate, differenti
ate ice cream products from substitutes by creating VFM.
REduce competition: acquire regional players
Decrease supplier power - local eqmt supplies, local high quality butter supplie
s, by improving brand suppliers will demand the product, strong relationship wit
h suppliers
Position their product differently in western markets - premium??
Positioning: neither cost leadership approach nor differentiation approach, uncl
ear value proposition - high cost and low prices, they are not niche and they do
not reach the market; somewhere in between serving few regions, large variety o
f products and some market specialization - diabetic ice cream.
strategy: reduce number of products, allocate money to profit making brands, gai
n economies of scale, spread their high fixed costs.
1. cost leadership approach to attack nestle
2. invest to improve competitive positioning - focus on differentiation strategy
.

------------------------------------------

Sustainability approach:
costs drivers: Identify ways to extend shelf life of the product without comprom
ising the value to customer

change the rules: invest in new technology

invest to enter in new markets
Focus on fastest growing segments - super markets,
product rationalization
alliance with alter-west - 40% ownership in ice fili - specialize in distributin
g to supermkts and restaurants - they can limit access to dist channels for othe
r competitors. strengthen relationship with distributors