The FINANCIAL — According to 2009’s data, Nemiroff sales in Kazakhstan have increased by 40%. The company has had 5% growth in sales in Azerbaijan and 2% in Georgia. Recently the company started marketing of its new product Vodka Delikat, the next representative of the so called “white vodka” segment. Georgia now holds third place among former Soviet countries in Nemiroff’s sales rating.
Alexander Glus, Chairman of the Board of Directors of Nemiroff Holding, explains to The FINANCIAL how the company managed not only to survive the global recession but to increase its new markets.
Kazakhstan is the largest market in terms of vodka consumption out of all the CIS (except for Russia), which accounted for 45% in total sales of some premium vodka brands of the company. In second place is Azerbaijan, and third – Georgia.
Ukrainian vodka company Nemiroff is the biggest alcohol producer in Ukraine. Production facilities are located in the city of Nemiroff, Ukraine. The construction of a new distillery took 5 years and cost USD 50 million with the capability to issue 72 thousand bottles an hour.
“We’re in the minority segment of companies in the post Soviet Union region who met the economic crisis with strong potential. During the crisis the company continued working according to a normal regime and implementing all strategies that had been set before the crisis. We believe that that is our main value today. The main proof of my words is our sales growth, which has not decreased despite these difficult times,” Alexander Glus.
Q. How did you manage to solve this problem and what did you do to prevent the effects of the crisis?
A. We started restructuring of the company in 2006 and met the crisis completely prepared. This is a very interesting point and might even be considered good business intuition. When I became the head of company Nemiroff in 2003 I realized that we are unable to control this huge machine working under the name Nemiroff. It was also impossible to manage certain people working there who were using the different accounting services and different directors to achieve their own personal ambitions.
Everything was confused. That’s why we decided to change everything. We began to integrate all the small companies that served the company and made it into a large Holding with well-defined duties of all departments. By the end of 2005 we had clear understanding of what we had to do to reach our goals.
The first step was to separate strategic and operational management levels. This step instantly removed the possibility of one manager getting directions from two bosses, which has a very negative influence on business efficiency. Two new bodies were created: the Board of Directors – responsible for strategic development of the company, and the Managing Company – responsible for realization of this strategy and managing the business processes. Today the Board of Directors takes decisions for the company’s 5 year development plan, including budgeting and distribution issues.
Today I can assure you that it was the right decision to make as we came up with the most effective model for the company. One year is a very short period for such fundamental changes to take place in, but it worked for us.
Q. How did employees react to the reorganization?
A. People are the main value of the company. That’s why we didn’t deliberately lay off a certain percentage of employees. There were some staff who didn’t accept the changes. They didn`t want to ruin the comfort zones that they had built up for themselves after many years of work. Those specific people had to leave us. But the rest stayed with us and continued to work in accordance with well-defined responsibility – this is very important as in this case people have clear-cut vision of their tasks to be done. This way step by step we got closer to the international business model. And today we can clearly see the results. Now I can say with confidence that this model can be made of any company in any country if there’s a will.
According to FoodBizDaily magazine currently Nemiroff remains one of Europe’s largest alcohol producers. The growth of more than 40% enabled the company to move up from 33rd to 13th position in the world alcohol producer's rating in just over three years. After that Nemiroff climbed to 4th position, being outsold only by Smirnoff, Stolichnaya and Absolut.
As for Ukraine, 92% of the vodka market is occupied by this type of vodka. This novelty of Nemiroff Holding, which is targeted at average-price consumers, will appear on the international markets at the beginning of 2010.
Q. What strategies and what opportunities is the company seeing in other countries?
A. One of the biggest problems for the company’s operations in Belarussia is the quota issue within the country, which is an obstacle for brand development. Our sales structure could be divided into several main directions: naturally they would be Ukraine, Russia, and Poland. Also we’re focused on: Kazakhstan, Azerbaijan, Georgia, Armenia and the Baltic countries including Moldova. As for other countries there’s no big demand on vodka and logically we have no detailed plans in this reference.
Free zones are also important segments for us (duty free and travel retail). People who travel frequently can find Nemiroff products in the airports of 55 counries all over the world.
According to the last 9 months of 2009, we got 2% growth in Russia compared to last year’s results. This is a rather tough and complicated market. The crisis changed the indicators of many companies and only a few can claim increased sales. In the Baltic countries for example the situation is quite different as they have a high level of inflation and it’s true for other countries as well as Armenia where the excise price was increased to 30% while in Baltic countries it was 15%. All this is further burdened by increased taxes.
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