Since Russia put the ‘R’ in the BRIC emerging-market acronym, few of the foreign companies that have flocked there can say they’re succeeding, Coca-Cola Co.‘s president for Russia, Belarus and Ukraine said Oct. 23 in Atlanta.
With 15 years of experience in the country, Coke has the benefit of hindsight, but more important in the past few years has been the ability to adapt to profound changes, Zoran Vucinic said at the U.S.-Russia Business Council‘s annual meeting at the Four Seasons Hotel.
In a panel discussion on Russia’s consumer class, Mr. Vucinic laid out some waypoints on the road to winning in the country’s post-crisis landscape.
The first step is to realize that unlike the 1990s and early 2000s, products have stopped selling themselves, he said.
“The big implication for the organization – if you think you were really great by growing each year 12 percent, you were really actually not because in 2009 when the crisis hit, we realize and many realized, it’s all about selling versus producing and distributing,” Mr. Vucinic said.
Russian consumers have now become more discriminating, and brands can no longer drop their leftover products on the Russian market and expect to see success.
“The era of product is over; the era of brands have arrived. People make a clear, conscious choice in category by category what their brand is about, what is it offering, why it is different and special than everything else that is on the market,” said Mr. Vucinic.
At the same time, at least for products outside the luxury sector (like a bottle of Coca-Cola), affordability is paramount. Foreign brands can’t charge as much of premium for imported products, so they have to wring margins out of their supply chains, not their prices.
And even that process has changed. While Coke previously used networks of hundreds of trucks and roadside vendors, distribution channels have become more consolidated, Mr. Vucinic said.
In the 1990s, only 5 percent of Coke’s volume was handled by a process he called “modern” or “organized” trade with distribution companies. Today that figure is 42 percent, and it will soon climb to 80 percent, he predicted. That means instead of just dropping off drinks, Coke will have to add value by giving its retail customers new marketing insights that will boost their profitability.
Lastly, companies must understand that their products aren’t being sold in a monolithic market.
“Everyone who thinks of Russia is a country is also mistaken. It is a continent” with industrial towns, cosmopolitan metropolises, varying ethnic groups and huge swaths of unsettled land, he said.
Coca-Cola has invested $2.1 billion in Russia and plans to invest $3 billion more over the next few years. The company’s presence was one of the main draws for the U.S.-Russia Business Council meeting, which was held in Atlanta for the first time Oct. 22-24.
The organization often goes where it has a strong patron like Coke and other members, such as AGCO Corp. and Global Payments Inc., but Atlanta surprised Ed Verona, the president and CEO of the council.
“I made the choice not even realizing just how engaged Atlanta is with the global economy,” Mr. Verona told Global Atlanta. “I can’t tell you how excited I am. If I could do my meeting twice in a row in one place, I’d happily come back.”