Detailed overview of Russian companies, operating in the food industryIf to analyze Russian top food producing companies from the perspective of internationalization process, we should say that among the list of 11 analyzed by our team companies only 5 have internationalization history (which is mainly export), while others are relatively young and have the capacities sufficient to serve Russian market only. The detailed analysis on Russian largest food producing firms is provided below. It should be noticed that the majority of the companies presented on the Russian food market are subsidiaries of international food giants, while the majority of Russian companies, being strongly competitive on domestic market, don't see internationalization in their plans. We would like to start our analysis with vodka market, as for Russia it has always been not only an inherent part of the most important life events, but also a significant element of the trade. Thus, Synergy company, founded in 1998, today is the 2nd largest company in the Russian alcohol market (after Polish CEDC). The Holding comprises 16 companies in seven regions of the Russian Federation - 7 distilleries, and a number of food industry businesses. The company is private-owned, and cooperates closely with industry and government agencies (the Union of Alcohol Producers, the Federal Service for Alcohol Market Regulation). Moreover, JSC "Synergy" places emphasis on the development of relations with Russian and foreign partners, among which can be named Sberbank Russia, VTB Group, Reneissance Capital and Russian public Business Russia organization. Company's representatives are members of Public and Expert Advisory, created by the Federal Service for Alcohol Market Regulation, which coordinates Russian alcohol market. Thus, the company, together with the state is involved in the elaboration of the most important decisions aimed at constructive regulation of alcohol market in the country. Synergy is also a member of a RF leading professional industry organization – Distillers UNION. As a part of this association, the company expresses consolidated opinion upon the industry development and improvement in control mechanisms, which are aimed at creation of equal conditions for the success of all industry's legal players.[2] Starting from 2008 Synergy has been actively developing its exporting activity: there was launched a successful partnership for BELUGA brand distribution in Europe, CIS, countries of Central Asia and the Pacific Region, and duty free. The company also has opened a representative office in the USA. Today Synergy has its products presented in more than 50 countries. In addition to the effective development of its own brands, the company also involves world-known and popular brands in its portfolio (in 2011, the "Synergy" enters into an exclusive distribution agreement with the company William Grant & Sons - one of the global leaders in the production of premium alcohol, and in 2012 its portfolio was updated by line of products of world-renowned cognac house Camus). In a short-term perspective Russian vodka market is currently a priority for the company (now market share of the Holding is estimated to be 15%). Among foreign countries, USA market, due to significant consumption of premium segment vodka, represents the market of strategic importance for the company. In 2011 the company opened its representation office for controlling all the operations through local distributors. Apart from that, the company successfully sells its products in nearly all the European countries (especially using the duty free and HORECA channels), several countries in the Middle East and Asia, as well as in many CIS countries. Total export turnover of the Company in 2011 has increased by 42% [3]. Governmental regulations in this industry like minimum prices establishment (2013) or order to increase the production volume (2012) are mainly aimed at fighting against counterfeiting on federal and local markets. However, when it comes to export, government policy has an opposite effect – for instance, due to amendments of GOST made by Rostechregulirovanie on March 6th, 2013, no Russian vodka producers can export their products abroad in bulk (tanks, barrels and specialized containers) anymore[4]. This amendment, implemented with a goal of criminal elimination, indeed does restrict the exporting capabilities of Russian firms, as bulk is a typical way of exporting in this industry.
One of the most impressive examples of the internationalization of Russian food companies is Baltica Breweries. For them, the main mode of operations is exporting. It operates in this sense in more than 75 countries of the world. Though there is no information in the annual reports on which exact portion of the annual sales are attributable to foreign operations, we are certain that Baltica is very positive about this direction. We have information, that in the year 2007 the sales attributable to export outside CIS countries was equal to less than 1%. Now the figures have changed, the positive change of 2011 is 6% growth. The first time Baltica actually established facilities abroad by the means of licensing was in the year 2011, when the company decided to produce on the factory Brauerei Koenigshof in Krefeld, Germany.
Another top Russian food producing company - Uniconf Holding, founded in 2002, now is not only the leader of Russian confectionery market (market share was 16% as for 2012), but also is the largest confectionery company in Eastern Europe, bringing together 19 Russian factories. The Holding's confectionery enterprises own the most popular brands like Alenka, Babaev, Inspiration and many others, which are well recognized and perceived abroad. The products are distributed through an extensive distribution network throughout Russia, and also are exported to the USA, Europe, Israel, CIS and a number of countries in the Middle East. The Russian government along with Moscow cityhall and Moscow patriarchate are regular consumers of Holding's confectionery as well[5]. In 2011 the UniConf Holding bought cocoa plantations in Côte d'Ivoire, which is the world's largest supplier of raw materials for the production of chocolate. So, having their own plantations, "UniConf" has a substantial competitive advantage (because of the difficult political situation in Côte d'Ivoire in 2010-2011 there was an embargo on exports of cocoa beans). Thus, the Holding is now able to fully meet its needs in cocoa beans (which equals to 60 tons per year).[6] The Holding is controlled by Guta Group with 26,58% of shares belonging to Moscow government. In spring 2012, Sergey Sobyanin's administration has attempted to sell this package for 10,75 bln rubles, but no trade took place as the only contender – Guta Group – hasn't applied. The formal reason was the Group's lack of time to receive credit for participation in the auction (more than 1 bln RUR), but Guta is said to be trying to bring down the price[7].
Another interesting example is EFKO Group of companies. Founded in 1992, it is now a Russian largest vertically-integrated manufacturer of grease used in the food industry. The company is also a leading manufacturer of mayo and oil in Russia, operating with such well-known brands as Sloboda and Altero. The group is actively pursuing foreign trade, including the export of agricultural products. A key role in this field plays its own oil filler terminal "EFKO", located in Taman port on the Black Sea. This unique for Russia port complex with a tank farm capacity of 47 000 tonnes provides the company with significant logistical advantages over its competitors, and also ensures raw materials guarantee. Company's export geography covers the following countries - Turkmenistan, Turkey, Egypt, Saudi Arabia, Italy, Sudan and Iran. From 2005 to 2011, the company has been developed in a strategic partnership with the American Bunge food corporation, with the latter acquiring a blocking packages of numbers of EFKO enterprises[8]. Analysts had predicted the takeover of the russian company by american, but in February 2011 it revealed that Bunge declined further cooperation with EFKO by selling back previously purchased shares.[9] The company is a member of the Russian Grain Union - the organization responsible for issues related to the state regulation of the grain market and the prospects for its development[10]. Russian Grain Union primarily has an aim to protect and represent the interests of RGU members in government, to increase the competitiveness of Russian firms in the industry (this market is strategically important for the country) and of course, to develop export[11].
Another food company, "Orimi Trade", was founded in 1994 and has quickly achieved success: now every third cup of tea drunk in Russia, is produced by the "Orimi Trade" company. It has internationalized successfully and having it’s subsidiary in Kiev and main facilities in Russia, they have enough capacity to export products in CIS and other countries.
Another strategically important for Russia market is meat products market with Cherkizovo JSC as a biggest player on it. Founded in 2005, now the Group is among Top-3 companies on Russian market of chicken, pork and processed meat. Apart from that, it is the country's largest producer of animal feed. The main shareholders of the company are JPMorgan Chase Bank and MB Capital Partners with31,9% and 58,74% of shares respectively. Thoughnow the company's strategy is pursuing expansion and assets consolidation on the domestic market, company's management believes that in years 2015-2016 it will be able to start active exporting activities. The company will be able to supply poultry products anywhere, because the production has been designed according to the relevant EU regulations, which in future will allow to conduct certification for export. Strategic advantage of the company will be not only usage of new format to build a modern business model of meat production, but also the fact that the company is close to the main markets[12]. In October 2012 the company has also announced its plans for development in the Far East – namely China, South Korea and Japan. Cherkizovo finds both brownfield and greenfield strategy possible for developing in this market[13]. Company's management believes that in the foreseeable future government will create favorable opportunities for export with the creation of Russian Beef Intervention Fund and governmental support of export activities: "We can see how it has been successfully implemented in the EU - the excess meat from the fund, using export subsidies is sold to third countries", - said the head of the Group[14]. As for other companies presented on the Russian food market, we should notice that though some of them do possess opportunities for outward expansion, it is not a part of their short-term strategy: KDV Group: The company has five food processing factories in Minusinsk, Kemerovo, Yashkino, Nizhny Tagil and Vladimir and an extensive retail network based in different regions of Russia. On the 4th of March, 2013 it has acquired CJSC Krasnaya Zvezda Confectionery Factory. So, we can conclude that the company is now is in it's growth stage and seeks to gain a foothold in the Russian market and only then go international. OJSC "Ostankino Meat Processing Plant": is now a leading manufacturer of processed meat and convenience food in central Russia. As of April 2012 the main shareholders of the company were: company Bellmar Capital Investment Limited (47,46% of ordinary shares), ABSI Enterprises Limited (19,66%) and Renova Investment Limited (15,73%). The company's strategy is aimed at increase in sales volume, expansion of the sales network in Moscow and the Moscow region and rotation of product line. NO info about internationalization plans is available. NMGK Group: being a leading manufacturer of margarine and mayo products in fats and oils market in the country, the Group has a strategy aimed at attracting new customers and strengthening the position of brands in the regions. "NMGK" has valuable political connections - it is one of the leading participants in the "Fats and Oils Union"- an organization established to develop common rules and defending common interests of the industry within the government. Also CG "NMGK" has a relationship with the authorities of all the regions in which its companies operate. This helps the company to solve many problems at a regional level. However, again NO info about internationalization plans is available Vamin: went bankrupt on 13.03.2013 Sun Products Holding: is one of the three largest manufacturers of mayo in the country with a market share of 15% and recycles 13% of sunflower crop in Russia and the second largest producer of margarine. The strategy of holding is to gain the substantial share on internal market. Again, NO info concerning internationalization plans is available.
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