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TRANSASIA, Ltd. A successful Russian regional FMCG distribution company. Boston , МА October 29, 2003. Retail Business in Russia. The Past, 1993-1998. “Wild Times”…. How we started our business. Time: 1994 Location: Krasnodar

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transasia ltd a successful russian regional fmcg distribution company

TRANSASIA, Ltd. A successful Russian regional FMCG distribution company

Boston, МА

October 29, 2003

how we started our business
How we started our business
  • Time: 1994
  • Location: Krasnodar
  • Core business: Wholesale Distribution of FMCG (fast moving consumer goods)
  • Partners: Western Manufacturers
  • Johnson & Johnson, L’Oreal, Procter & Gamble
what was the market
What was the market

Retail market – total chaos!

  • Death of old Soviet system
  • Empty counters in the state stores
  • Outside kiosks & tables (open-air), flea markets
  • Flood of low quality or fake goods
  • Chaotic pricing
  • Quick (several days) money turnover
what were transasia s differences
What were Transasia’s differences

Start of creation a Western distribution system according to common business practices!

  • First distribution company in the city
  • Quality goods and products
  • Western brands
  • Advertising support
  • High quality customer service
  • Credit lines for retail outlets
current business environment 1998 2003

Current Business Environment 1998 - 2003

Grow Market Share as fast as Possible Hyper Growth Period

the present period started in 1998
The present period started in 1998…

Economic crisis in Russia – August 1998

  • Consumer purchasing power decreased 3-4 times
  • Some Western companies left Russian marketplace
  • Russian manufacturers began to gain market share
  • Many banks and distributors went bankrupt
transasia facts
  • Covers Southern Russia – 12 million people (8% of the total Russian population)
  • 1 HQ + 8 regional branches
  • Over 1,000 employees
  • 141 delivery vans and trucks
  • 95 automobiles used by sales representatives
transasia s suppliers
TRANSASIA’s Suppliers
  • Total number of suppliers 46
  • “Procter & Gamble”
  • “Kraft Foods”
  • “Nestle”
  • “Mars”
  • “Wrigley”
  • “Chupa Chups”, “Bic”, “Cadbury”
  • Numerous leading Russian manufacturers
transasia operations
TRANSASIA – Operations
  • Our key business – distribution of fast-moving consumer goods (FMCG) to open markets and small shops (50 to 100 sq. m.)
  • Sales representatives get orders from clients
  • All orders are delivered in 24 hours
  • Our clients are spread all over the region, both in urban and rural areas
  • Revenues come mostly in cash
transasia logistics
TRANSASIA – Logistics
  • During the daytime sales representatives visit our clients to get new orders (use handheld computers)
  • In the evening these orders are processed and sent through Internet to main office
  • At night time orders are loaded into the big trucks in the distribution center and shipped to the branch offices
  • In the morning our vans deliver the goods to the clients
transasia p g experience
TRANSASIA – P&G experience
  • P&G products comprise 60% of total revenues
  • During the period between 1996-98, P&G corporate loaned Transasia $4 million dollars for capital expenditure purchases (e.g. vans, autos, machinery, etc.). Transasia paid back the capital to P&G in 4 years.
  • Working together Transasia and P&G have enabled P&G’s products to capture leading market share positions in the Russian marketplace.
p g s competitors in russia
P&G’s competitors in Russia
  • All main P&G competitors work in Russia: “Henkel”, “Unilever”, Kimberly Clark”, “Johnson & Johnson”, “Colgate”, “L’Oreal”
  • Low investments into distributors’ development resulted into smaller market share, sales inefficiency, and lack of brand recognition
conclusions on current marketplace
Conclusions on Current Marketplace
  • Markets will continue to grow
  • Small players will disappear and others consolidate
  • Retail chains are here to stay, their market share will continue growing quickly
  • Western retail companies have just recently come to Russia, mostly to Moscow and St-Petersburg
  • Open-air markets and small shops still have 70% market share inthe regions
  • Many opportunities still exist for manufacturers, distributors, and retailers in the Russian retail marketplace. Capital investment is critical.
the future for retail business in russia

The Future for Retail Business in Russia.

90% of Russia’s population lives outside Moscow & St. Petersburg. Wal-Mart started in the “region” of Arkansas while Target started in the “region” of Minnesota

future of retail in russia what we start from
Future of Retail in Russia – what we start from
  • The large territory of Russia and scattered population significantly increases the importance of logistics for retail, especially in the regions
  • Although competition currently among distribution companies is fierce, only those companies with technological focus and investment will survive
  • Although the opportunities in Russia are huge, it’s critical for Western manufacturers to have local partners to help them navigate the “risks” of Russia.
what will happen in russia s regions
What will happen in Russia’s regions?
  • Purchasing power will increase
  • Sales volume in each category will grow annually
  • Rapid growth of the civilized retail channels: shopping malls, hypermarkets, etc.
  • Barriers to entry to late players will increase. All the good locations will be taken.

Additional important information

  • Middle class in Russian provinces – ready consumers for your products
  • Russian consumer market – moneymaker for number of multinationals (a new ones to come to Russia)
  • Krasnodar region – safe, stable and dynamic = “Russian California”
  • My other business ventures – how I diversified
  • Leisure business: “Strike” and “Orange Fitness” = great success. Payback period less than 3 years.