Doing business in russia all presentations (final)

Tuesday, 10 December 2013

The Caledonian Hotel, Edinburgh

Doing Business in Russia

AGENDA

09:30 – 11:10 Presentations

11:10 – 11:30 Networking break

11:35 – 13:10 Breakout sessions

Group A: Dornoch Suite

Doing Business in Russia

Group A: Dornoch Suite

Group B: Glamis Suite

Group C: Boardroom

13:10 – 13:30 Networking lunch

13:30 Start of one to one sessions

Welcome and Introduction

Yuri Andreev

Country Manager

Doing Business in Russia

Country Manager

SDI Russia

Sergey Krutikov

Doing Business in Russia

Introduction and Visa considerations

Sergey Krutikov

Consul General of the Russian Federation, Edinburgh

Consulate General Consulate General Consulate General Consulate General of the Russian Federation of the Russian Federation of the Russian Federation of the Russian Federation

in Edinburghin Edinburghin Edinburghin Edinburghin Edinburghin Edinburghin Edinburghin EdinburghDoing Business in Russia

10th December 2013

• Notarial Services

– Consulate General

• Visas

Russian Consular Services in Edinburgh

• Visas

– Visa Application Centre

Notarial Services

• Mr Timofey Kunitskiy

Consulate General of the Russian Federation

58 Melville Street, Edinburgh EH3 7HF

0131 225 34 84 visa@edconsul.co.uk0131 225 34 84 visa@edconsul.co.uk

• Consular Certification Equal to Russian Notary

Public Certification

• ‘Legalisation’ Question

Notarial Services

• Attestation of Signatures

• Verification of Translations

– NB: No Translation Service

• Attestation of Copies

• Witnessing Powers of Attorney

Visas – Stereotypes and Opinions

• “Closed Country”

• Complicated Procedure

• “Travel Agencies Only”

• High Costs

• “Shopping” Approach

• Facts:• Facts:– 13 000+ visas issued annually

– Effectively 100% approval rate for submitted applications

– No processing-related delays

– “Walk-In” approach enables applicant to discuss the procedure with the Centre’s Staff

Visas – Visa Application Centre

Russian Visa Application Centre

In Edinburgh

Monday - Friday

16 Forth Street, Edinburgh EH1 3LH16 Forth Street, Edinburgh EH1 3LH

http://ru.vfsglobal.co.uk

0905 889 01 49

Visas – Application Process

• Fixed list of documents required

• Fixed application assessment time

• Relatively quick assessment

– 7 days– 7 days

– Next day

• No appointment required

• Submitting applications by post or by proxy allowed

Visas - Business Visitors

• Business Visa– Single/Double/Multiple Entry, Up to 1 year

– Invitation from Federal Migration Service (FMS)

– Telex (digital) Invitation

– Single Entry, 7 Day Processing - £77.60

– Multiple Entry, 7 Day Processing - £227.60

• Special (Special Purpose) Tourism Visa– Single/Double Entry, Up to 1 month

– Hotel or Travel Agency Voucher/Confirmation

– Single Entry, 7 Day Processing - £77.60

– Double Entry, 7 Day Processing - £92.60

Visas - Business Visitors

FMS

Invitation

Visas - Business Visitors

• Business Visa for the Schengen Zone nationals

– Single/Double/Multiple Entry, Up to 5 years

– Invitation From a Company Registered in Russia

– Next Day Service Not Available– Next Day Service Not Available

– Single/Multiple Entry, 7 Day Processing - £57.60

Useful sources and links

Russian Visa Application Centre (Edinburgh, London)

http://ru.vfsglobal.co.uk

Embassy of the Russian Federation in the United Kingdom /

Consulate General of the Russian Federation in EdinburghConsulate General of the Russian Federation in Edinburgh

http://rusemb.org.uk

Russian Trade Delegation in the United Kingdom

http://rustrade.org.uk

Russian market overview and business context

Yuri Andreev

Doing Business in Russia

Yuri Andreev

Country Manager

SDI Russia

Yuri AndreevScottish Development International

December 2013

Russian Market Highlights

INDEX

SDI Moscow – Role, Place, Difference

Q&A, discussion

Russian Market Highlights - GEO, DEMOGRAPHICS, ECONOMY

•World’s largest country = Scotland x 217

•143 million population – within top 10 in the world

•Nearest BRIC – GMT + 3 (+4 winter)

Russian Market Highlights - GEO, DEMOGRAPHICS, ECONOMY

1. CentralMoscow

6. UralsYekaterinburgChelyabinskTyumen

3. NorthwesternSt. Petersburg

Region Population

(million)

% Total Population

Area

(000s km)

Density/ sq km

Share of Urban Population

Central 37.12 26.2% 650 57.1 80.9%

Southern 22.97 16.2% 591 38.8 56.8%

North-Western 13.44 9.5% 1,687 8.0 82.5%MoscowRyazanTulaTwerVladimirVoronezhYaroslavl

7. VolgaNizhniy NovgorodSamaraPermUfaSaratovKazan

5. SiberiaNovosibirskKrasnoyarskOmskIrkutsk

2. SouthernKrasnodar Rostov-on-DonVolgogradStavropol

4. Far EastVladivostok

North-Western 13.44 9.5% 1,687 8.0 82.5%

Far-Eastern 6.44 4.5% 6,169 1.0 74.3%

Siberian 19.56 13.8% 5,145 3.8 70.9%

Urals 12.28 8.6% 1,818 6.8 79.3%

Volga 30.12 21.2% 1,037 29.0 70.3%

Russian Market Highlights - GEO, DEMOGRAPHICS, ECONOMY

1. Central

6. UralsYekaterinburgChelyabinskTyumen

3. NorthwesternSt. Petersburg

Rank Cities Population Rank Cities Population

1 Moscow 10,563,038 11 Ufa 1,030,812

2 St. Petersburg 4,600,276 12 Perm 986,497

3 Novosibirsk 1,409,137 13 Volgograd 979,6171. CentralMoscowRyazanTulaTwerVladimirVoronezhYaroslavl

7. VolgaNizhniy NovgorodSamaraPermUfaSaratovKazan

5. SiberiaNovosibirskKrasnoyarskOmskIrkutsk

2. SouthernKrasnodar Rostov-on-DonVolgogradStavropol

4. Far EastVladivostok

4 Yekaterinburg 1,372,800 14 Krasnoyarsk 962,466

5 Nizhni Novgorod 1,271,045 15 Voronezh 847,620

6 Kazan 1,136,566 16 Saratov 827,193

7 Samara 1,133,754 17 Tolyatti 721,752

8 Omsk 1,127,675 18 Krasnodar 713,426

9 Chelyabinsk 1,095,909 19 Izhevsk 610,633

10 Rostov-on-Don 1,048,124 20 Yaroslavl 606,880

Russian Market Highlights - GEO, DEMOGRAPHICS, ECONOMY

2007 2008 2009 2010 2011

GDP (Nominal €bn) 949 1,137 878 1,148 1,272

GDP (Real) Growth (%) 8.1 5.2 -7.9 3.4 4.3

GDP per Capita (€) 6,675 8,027 6,213 8,141 9,055

Unemployment 6.1 6.3 8.4 7.6 7.1

CPI Inflation, yr/yr av. % 9.0 14.1 11.7 6.8 6.1

Russian Market Highlights - GEO, DEMOGRAPHICS, ECONOMY

Russian Market Highlights - GEO, DEMOGRAPHICS, ECONOMY

2007 2008 2009 2010 2011

Consumer Spend (€bn) 455.83 547.33 479.99 593.98 712.78

Total Retail Market (€bn) 310.23 382.10 330.33 399.19 479.03

Grocery Retail Market (€bn) 139.46 174.17 160.70 193.61 231.85

Grocery Retail Spend / Capita (€) 981 1,227 1,137 1,379 1,657

Grocery Retail as a % of Retail 44.9% 45.6% 48.6% 48.5% 48.4%

Grocery Retail MarketEurope TOP 10

T/o (€bn) Grocery Retail MarketGlobal TOP 10

T/o (US$bn)Europe TOP 10

1. France 208.17

2. Russia 193.61

3. Germany 162.46

4. United Kingdom 161.96

5. Italy 129.56

6. Spain 97.05

7. Turkey 67.73

8. Switzerland 39.77

9. Poland 38.43

10. Belgium 34.92

Global TOP 10

1. USA 881.84

2. China 789.91

3. Japan 359.96

4. India 350.38

5. Brazil 289.92

6. France 276.04

7. Russia 256.38

8. Germany 215.43

9. United Kingdom 214.60

10. Italy 171.80

Russian Market Highlights - GEO, DEMOGRAPHICS, ECONOMY

1,657

1600

1700

Grocery Retail Market/Capita EUR

5,095

5,000

5,500

Consumer Spend/Capita EUR

Consumer and Grocery Retail Spend Dynamics

Per Capita (Euro)

1,137

1,379

700

800

900

1000

1100

1200

1300

1400

1500

2009 2010 2011e

Grocery Retail Market/Capita EUR

3,359

4,232

2,000

2,500

3,000

3,500

4,000

4,500

2009 2010 2011e

Consumer Spend/Capita EUR

Russian Market Highlights - GEO, DEMOGRAPHICS, ECONOMY

Global oil consumption

Crude & condensate production by Ru majors

Russian Market Highlights – UK-RU trading relations

UK-Russia trading context

UK TOP 20 MARKETS 2011 (GOODS)

Country of export £ millions £ millions Rank 2011 Rank 2010 Change in CountryShare CountryShare

2011 Jan-Dec 2010 Jan-Dec % change Jan-Dec Jan-Dec ranks 2011 Jan-Dec 2010 Jan-Dec

UNITED STATES 38,949 37,413 4 1 1 0 13.2% 14.3%GERMANY 33,038 28,539 16 2 2 0 11.2% 10.9%FRANCE 23,056 20,262 14 3 4 1 7.8% 7.7%NETHERLANDS 22,671 20,537 10 4 3 -1 7.7% 7.8%IRISH REPUBLIC 17,219 16,375 5 5 5 0 5.8% 6.2%BELGIUM 15,354 12,946 19 6 6 0 5.2% 4.9%

UK EXPORTS TO RUSSIA

2011 2010 % Change % Share of

Trade in Goods Total Exports Total Exports in Exports 2011 Exports

GBP GBP

Total 4,781,127,609 3,450,708,224 38.6%

01 Road vehicles 1,745,031,882 1,090,323,767 60.0% 36.5%

02 Medicinal and pharmaceutical products 304,291,029 294,222,979 3.4% 6.4%

Source: BIS analysis of data from HM Revenue & Customs

BELGIUM 15,354 12,946 19 6 6 0 5.2% 4.9%ITALY 9,888 8,798 12 7 8 1 3.4% 3.4%SPAIN 9,449 9,700 -3 8 7 -1 3.2% 3.7%CHINA 8,773 7,225 21 9 9 0 3.0% 2.8%SWEDEN 6,141 5,408 14 10 10 0 2.1% 2.1%INDIA 5,411 3,952 37 11 15 4 1.8% 1.5%SWITZERLAND 5,375 5,218 3 12 11 -1 1.8% 2.0%HONG KONG 5,062 4,202 20 13 13 0 1.7% 1.6%CANADA 4,848 4,318 12 14 12 -2 1.6% 1.6%RUSSIA 4,781 3,451 39 15 18 3 1.6% 1.3%

UAE 4,715 3,892 21 16 16 0 1.6% 1.5%JAPAN 4,395 4,101 7 17 14 -3 1.5% 1.6%POLAND 4,187 3,676 14 18 17 -1 1.4% 1.4%AUSTRALIA 4,179 3,175 32 19 20 1 1.4% 1.2%TURKEY 3,698 3,074 20 20 22 2 1.3% 1.2%

02 Medicinal and pharmaceutical products 304,291,029 294,222,979 3.4% 6.4%

03 Specialised industrial machinery 271,927,800 167,236,095 62.6% 5.7%

04 Power generating machinery and equipment 242,371,585 180,363,348 34.4% 5.1%

05 Miscellaneous manufactured article nes 228,649,387 147,428,114 55.1% 4.8%

06 Other transport equipment 184,066,100 106,353,407 73.1% 3.8%

07 General industrial machinery and equipment, and parts nes 180,058,838 128,213,591 40.4% 3.8%

08 Chemical materials and products nes 147,057,214 63,511,277 131.5% 3.1%

09 Essential oils, resinoids, perfumess and cleansing prep. 130,849,460 121,370,109 7.8% 2.7%

10 Professional, scientific and control instruments 128,760,003 93,955,400 37.0% 2.7%

11 Articles of apparel and clothing accessories 126,286,792 103,467,077 22.1% 2.6%

12 Electrical machinery, nes and electrical parts thereof 120,663,955 102,740,939 17.4% 2.5%

Telecoms and sound recording and reproducing apparatus 85,811,792 58,012,036 47.9% 1.8%

Russian Market Highlights – Scottish industry ranking

Export markets ranking by Scottish industries

Russian Market Highlights – Customs Union

Russian Federation

• Capital City: Moscow

• Population: 143 million

• GDP (PPT):

Total $1.9 trillion

Per capita $16,6

Customs Union

Russia, Belarus, Kazakhstan

• Capital Centres: Moscow, Minsk, Astana

• Population: 167,5 million

• GDP:

Total $2.42 trillion

Per capita $14.5

Russian Market Highlights – SUMMARY

• Healthy macro-economic situation

• Strong performance – heavy industry and consumer

• Parliament and presidential elections are over

• Accession to WTO – Aug 2012• Accession to WTO – Aug 2012

• Customs Unions with Kazakhstan and Belarus – Jan 2012

• Impressive UK-RU trade dynamics

• Good match of SCO-RU key sector strategic goals

Russian Market Highlights - CHALLENGES

• Product/services not concept/idea

• Local certification/standards compliance/registration

• Packaging/labelling

• Language

• Customs/import duties• Customs/import duties

• Payment terms, credit insurance

• Marketing communications

• Length of time to secure business

• Finding the right partner

• Visits to market essential – group & individual

Russian Market Highlights – WHY RUSSIA?...

Russian Market Highlights - WHY RUSSIA?...

Russian Market Highlights – WHY RUSSIA?...

20000

25000

Why Russia?... Views from Volvo Cars,

inclusive of years 2009-11

0

5000

10000

15000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Russian Market Highlights – WHY RUSSIA?...

why Russia?... Views from Ayrshire

2004 - 3 clients with 4-5 orders through the year and low volumes

2005 - Showcase event in Moscow

2006 - detailed market research through OMS

2007-08 - two in-market sales visits and two Heimtextil exhibitions

2008-09 - sales picked 5 times to the level of 20042008-09 - sales picked 5 times to the level of 2004

Higher additional margins over standard goods prices. Russia is currently MYB’s second biggest export

market worldwide.

“…this success is fundamentally due to the research and ongoing market support from…the SDI office

in Moscow” John Glen, MYB Director Sales

Russian Market Highlights

• MYB – Additional £190k sales per annum from exhibiting at Heimtextil and working with SDI

Moscow

• Follow up meetings arranged at European shows with Russian buyers

• The company have recently taken on an agent in the Russian market and are looking to channel

new customers through the agent.

• Sales in Russia were only slightly hit by the financial crisis of 2008, not effected really as

why Russia?... Views from Ayrshire, inclusive 2009-2011

compared with how their sales in the USA were affected.

• At the moment MYB are having a very healthy growth in sales in Russia and are fully satisfied

with their Russian business.

“Without SDI input and support we would not have been able to make Russia our second largest

market “ – Margo Graham, Design Director, Morton Young and Borland

SDI Moscowthe Network

SDI Moscowhow we fit SE network

SDI Moscow field office key functions:

•Customer specific market research

•Marketing communications

•Verified advise on setting up & doing business in Russia•Verified advise on setting up & doing business in Russia

•In-market visits’ and programmes’ arrangements

•Exhibitions, seminars, networking events, learning journeys

•Inward/buyer missions activities

•Market awareness activities (sector & cross-sector)

•Globalscot network engagement

SDI EMEANumber of co’s serviced by EMEA field

115131

229

149

150

200

250

Total 2010/11 – 483 CO’S

Total 2009/10 – 414 CO’S

11597 97

42 36

0

50

100

150

Duseldorf -

Central Europe

London -

Northern

Europe

Moscow -

Russia & CIS

Paris -

Southern

Europe Middle

East & Africa

SDI Moscow - product delivery2009 - 2012

2010-11

2011-12

Unique co's / OpportunitiesOpportunities

Unique co's

0 20 40 60 80

2009-10

2010-11

SDI Moscow -Products & Services, Sectors

SDI Moscow - product delivery

2011-12 Opps by product type

2011-12 Product and Engagement Type

Product Name Number of opps

OMS 37

EMLJ 17

Int Specialist Engmnt 7

Int Strat W/shop 3

OMIS 4Globlascot 1

2012 Unique co's by sector (54 total)

Food & Drink 14

Textiles 16

Energy 11

ICT 5

Whisky 4

Financial services 1

Education 1

Forestry 1

Tourism 12011-12 Opps by product type

Tourism 1

2012 Opp's by country

Russia 49

Ukraine 4

Kazakhstan 4

Azerbaijan 1

SDI MoscowProducts & Services

Mission:

To deliver high quality value add products and services aimed at winning new market business opportunities in Russia and CIS

Products & services:

Standard and bespoke, focused on customer needs

• OMS - Overseas Market Support

• EMLJ - Exhibitions & Missions, Learning Journeys

• Ministerial visits (with Scottish Government)

SDI Moscow Products & Services - OMS

CONCEPT

• Support to companies to target overseas markets

• Flexible, Tailored and Joined-Up

• Brings together assistance from

IMPLEMENTATION

• All enquiries are channelled via SDI Scotland office to field office

• Brief/terms agreement

• Report/presentation of market research • Brings together assistance from regional SE/SDI representatives & Scottish Development International field offices

• Maximising the use of UK PLC exposure and SE networks/partners

• GlobalScot network

• Report/presentation of market research and target identification

• Visit programme arrangement and formal introduction to the market participants, regulators, networks

• Assistance on market communications

• Feedback analysis, follow up and further advice

SDI Moscow OMS

OUTPUT

• Market research report, presentation or/and detailed face-to-face discussion

• In-market visit programme arrangementarrangement

• Hand-holding in-market visit assistance

• After-sales support

SDI MoscowProducts & Services - LJ

CONCEPT

• 3-4 days in-market visit for first-time exporters, newcomers usually timed along with major in-market event (exhibition, conference)

• Doing business in … market brief and Q&A’s with market participants and Q&A’s with market participants and regulators

• Access to UK Plc and SE networks

• Visits to key targets / individual meetings

• Cultural icebreaking

SDI MoscowProducts & Services - Exhibitions

CONCEPT

• Scotland stand with individual spaces for companies

• Pre-visit market brief

• Individual companies enquiries (under OMS or OMIS terms)(under OMS or OMIS terms)

• Marketing communications

• Shipment logistics

• Visitors traffic coordination and management

• Post-event follow up and business development

SDI MoscowProducts & Services - Missions

CONCEPT

• Scotland’s key sector strength focus, e.g. Subsea Technology

• 2-3 strategic in-market targets

• High-level communication & engagement with key decision-engagement with key decision-makers

• Partnership with UK-Scotland industry/trade associations

• Platform for individual sales pitches strengthened by mission critical mass

• Often – cultural link

SDI Moscow Staff responsibility

Yuri Andreev

Regional manager

Sector - Oil & Gas

ICT

Svetlana Simonova

Senior executive

Sectors:

Food & drink

Textiles

Anna Kravtsova

International Admin

SDI Moscow -Planning & Way Forward

• Keep the quality of service & speed of reaction to meet customer expectations

• Manage resources, ADE integration Q2

• Set and achieve ambitious targets in key sectors:

– Energy - focus on off-shore sectors in Russia and Kazakhstan

– Premium Textiles - interior sector & fashion beyond Moscow market

– Food & Drink – Ru 10 implementation, individual co work

– Life Sciences, medical - individual company work, refresh strategic outlook

– DMET – formulate market strategy

– Inward investment from watching brief to active projects

• Key other CIS geographies – Ukraine, Kazakhstan, Azerbaijan

Bilateral Trade

Alan Thompson

Russia Director, Russo-British

Doing Business in Russia

Russia Director, Russo-British Chamber of Commerce

An introduction and overview to

The Russo-British Chamber of The Russo-British Chamber of

Commerce

Alan Thompson

Edinburgh

10/12/2013

The Russo-British Chamber of

Commerce

• Economic Environment Update

• History of the RBCC

• Where we are today?• Where we are today?

• Strategic direction

• Russians: Vladimir Putin. 3.08.2012

– We should confess we have a very modest volume of trade [between our two

countries] : it is all of 21 billion [dollars], whereas with Germany we have 72. It is

obvious that the United Kingdom and Germany have different sizes of their

national economies but still this size difference is not 21 billion. I am certain that

we can relatively easily achieve at least in the region of 50 billion in the near

Economic Environment

we can relatively easily achieve at least in the region of 50 billion in the near

future.

• British: John Cridland 27.11.2012

– “We’ve identified a potential £30 billion export prize by 2020 if the UK creates the right

business environment for our industries to thrive, and mid-sized businesses will be at the

heart of this. Russia is a significant trading partner for British businesses, with more than

600 UK companies already operating there and UK exports totalling £5 billion. In the last

two years, the value of British goods exported to Russia has increased by over 80%.

This is expected to grow further as Russia opens its economy up to more international

trade and investment.

Economic Environment ‘08-’13

2008 г. 2009 г. 2010 г. 2011 г. 2012 г.Янв. – март2013 г.

млрд.долл.

прирос

т в %млрд.долл.

прирост

в %млрд.долл.

прирос

т в %млрд.долл.

прирост в

%млрд.долл.

прирост

в %млрд.долл.

приро

ст в %

Оборот 22,5 34,8 12,6 -44,0 15,9 25,9 21,2 33,3 23,2 9,6 5,6 15,6

Экспорт 14,9 34,8 9,1 -39,0 11,3 24,7 14,0 23,8 15,0 7,3 3,7 22,2

Импорт 7,6 35,0 3,5 -53,6 4,6 29,0 7,2 56,9 8,2 14,1 1,9 4,4

The Russo-British Chamber of Commerce

RBCC is a not-for-profit company that has worked to promote trade and cooperation between the UK and Russia since 1916.

The RBCC:

– works to promote trade and cooperation between the UK and Russia, helping companies in both countries to find trading partners and representing the interests of its member companies of all sizes.

– aims to be the first point of contact for Russian companies wanting to do business – aims to be the first point of contact for Russian companies wanting to do business in the UK and for British companies wanting to do business in Russia.

– is governed by a high-level Board of Directors, who between them have many decades’ experience of doing business between our two countries.

RBCC Members include multinational corporations, but also Small and

Medium Sized Enterprises working in all sectors of the economy.

The RBCC derives its income from membership fees and sponsorship of

various activities and events held in both countries.

The RBCC Today

• 550 companies

• 15 bi-lingual employees• 15 bi-lingual employees

• 3 offices: Moscow, London, St.P

•A unique trade newtork

RBCC Fundamentals

� The provision of up to date, information and

advice

• Quarterly Magazine «The Bulletin», The Observer, And a

monthly news letter

� Trade delegations – Kaluga� Trade delegations – Kaluga

� Promotion:

• Companies, Regions Oblasts, Republics, Products

� Events – for business people to meet:

Seminars, Industry specific Conferences,

Investment Forums, Film viewings,

Examples of successful

investments

Succesful SME projects:

Over the last 6 months the RBCC has:

1. A min of 25 requests with a positive outcome –

introductions to distributors with a view to market

entry (products/services) to Russia

2. 3 companies “entering the market”

3. M&A- two major acquisition contracts faciliated3. M&A- two major acquisition contracts faciliated

4. Bringing British businesses to the Regions of Russia

with RBCC trade missions – Nizhny Novgorod, Kaluga

Approximate ROI:

For every 1 GBP invested into membership or the RBCC,

companies on average obtain 5 GBP of value from

business development, services;

Strategic Aim/ RBCC Ambition

By 2016, the 100th Anniversary of the establishment of the Russo-

British Chamber of Commerce, the organisation will be regarded as

the foremost authority on establishing trade links between Russia and

the United Kingdom in both commercial and non-profit spheres; the

RBCC will achieve this by concentrating on the following three

strategic areas:

- Through the stimulation of dialogue and interaction of both - Through the stimulation of dialogue and interaction of both

communities through the organisation of events;

- Through the support and further growth of its commercial

network of members – themselves both Russian and British

businesses representing a wide cross section of industries and

service providers through improved satisfaction for services

received to individual members;

- By contributing net 10bn+ GBP to the external trade between

UK and Russia

Main aim:

Thank you for your attention:

Alan Thompson Director, RBCC

Alan.Thompson@rbcc.com

+7 495 961 2160

Setting up sales / distribution channels in Russian market

David Cant

Doing Business in Russia

David Cant

Managing Director

Albion (Overseas) Ltd.

Doing Business in Russia10th December, 2013, Edinburgh

David CantDavid CantAlbion (Overseas) Ltd

www.albionoverseas.com

About Albion (Overseas)

• We only work in Russia

• Exporter (Distributor)

• UK/Russian office, warehouse, staff etc

• “Consultancy” help for other exporters

• Certification

• “Outreach” activity (Events, Training, Publications, Online Services)

• We are not theoreticians. We’re dirty!

Why Russia?

• Increasing number of companies.

• Less expensive than you think.

• Geographical proximity.

• Increasing political stability.

• Here, we are all competing for the same business.

• “Russia is one of the most industrialised of the former soviet Republics.

However, years of very low investment have left much of Russian industry

antiquated and highly inefficient.” (economywatch.com)

400

500

600

Killer Facts (1.5): Economy

0

100

200

300

1999 2000 2002 2004 2005 2006 2007 2008 2009 2010 2012Foreign Exchange Reserves (US$bn.)

Source: CIA World Factbook

Largest Country in the world.

That’s a lot of opportunity...

Why Russia? –

9 Time Zones. 70 UKs would fit into Russia.

Perceived Problems:

• Mafia

• Finding people who understand

your product

• Corruption

• Non-Payment

• IPR

• Demographic crisis

• Weak military

• Inflation

• Brain Drain

• Capital Flight

• IPR

• Corp. Governance

• FDI Slow

• Accountancy Standards

• Entrepreneurship

• Legislative and Political Issues

• High Cost of Market entry (T+M)

• Weak Banks

• Climate/Size

• Lack of infrastructure

• Language difficulties

• Cultural barriers

• Economic Instability

• Security Issues

Real Problems:

• Difficulty in finding reliable and tested

distributors

• Expense

• Lack of knowledge of what the

distributor is doing

• Difficulty in making forecasts or

• Poor communication

• Language barriers

• Complicated customs procedures

• Difficult to

recruit/retain/administer/replace

staff.

sticking to targets

• Export documentation

• Corp. Governance

• Lengthy sales cycles

• Missing opportunities in the regions.

• Stifling bureaucracy.

• Time constraints to develop full

potential.

Where companies go wrong:

• Too many seek an easy way in.

• It is bad to try to develop a market with zero expenditure.

• You are not pioneers; the Board should be proactive.

• Take advice and help wisely.

• Don’t just replicate what your company does in other markets.• Don’t just replicate what your company does in other markets.

• Don’t appoint a distributor, then go home and wait.

• Don’t expect to do business by email.

• Don’t leave export documents to Brian downstairs.

• Don’t assume your product is too technical to be understood.

Routes to market:

DO’s

• OMIS report

• Product Certification

• Literature and website in Russian

It is important to spend money WISELY:

DONT’s

• “Fact-finding” trips (a.k.a

unplanned trips).

• “Market Research” (a.k.a

procrastination).• Literature and website in Russian

• Planned trips

• Building a sales pipeline

• Planned exhibition participation.

procrastination).

• Sending of samples, emails etc

to unknown distributors.

Routes to Market:

• Agent

• Distributor

• However:

• They are no longer queuing up to represent you. You must find them

and put forward your case.and put forward your case.

• Russia is moving fast. Choose them wisely, or you may lose control, time

and money.

Consider why a distributor would wish to represent YOU.

Routemap - (Reactive: Zero Cost):

• Desk Research:

• Internet, databases, libraries e.g. IOD.

• Register with www.UKTI.gov.uk

• Meet your ITA (quiz them on their experience!).

• Use specialist help (Bank, Freight Forwarder, etc)

• Plan and budget. “Free stuff” is not always helpful. Google translate is a

good example of this.

• Identify all your options: DIY, Distributor, Footprint, Presence, etc

• Consider reports, such as OMIS.

Routemap - (OMIS)

...OMIS

• A report to establish the market for your product and to list potential

buyers.

• Do you really need a report?

• Plans for what you will do with it.

• OMIS v Commercial report.

• The advantages and disadvantages of each?

• There should be nothing in the report that you can ‘Google’!

Routemap - (Reactive: Zero Cost):

• Question the board on their commitment.

• How much time can be devoted to this? The falsehood of “EMEA”....

• Now consider: Product Certification, Travel, Reports, Samples, Translation,

Interpreting, Couriers, Trade Fair Participation.

• Establish competition. Deconstruct their prices.• Establish competition. Deconstruct their prices.

• Find possible margin, then compile the pricelist

• What foreign currency should you be selling in? Probably not Sterling.

• Make it easy for your Buyer, not just EXW Sterling! Put EXW into CIF.

Consider DDP. Can you offer the product for Roubles?

• PREPARE A BUDGET!

Routemap - The Spending Zone:

Language: Translate your homepage (at least), produce a Russian brochure / leaflet, and

have cards in Russian (not a UK address)...

Consider how to follow up (ie not just by email, and in Russian).

Consider certification

Plan trips round a trade fair. Don’t just walk round it; set up meetings in advance.

Visit and visit again! Minimum 4 times a year if via distributor/agent.Visit and visit again! Minimum 4 times a year if via distributor/agent.

Support your partner with trade fairs, literature, samples.

Get above the Power Line. It’s all about relationships!

Routemap - The Spending Zone:

4-Day Moscow Trip:

Return Flight UK-Russia £ 200.00

Subsistence £ 300.00

Taxis, UK + Russia £ 240.00

Hotel, 3 nights, incl tax £ 900.00

Interpreter £ 400.00

2-day Follow up £ 400.00

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

£ 2,440.00

Other Costs:

Report £3,000.00

Couriers, samples etc £ 800.00

Translation £1,500.00

Professional Fees £2,500.00

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

£ 7,800.00

Certification (UK) £9,500.00 *£ 2,440.00

x 4 trips / year £ 9,760.00

One Multi visa £ 600.00

One colleague trip £ 1,680.00

Colleague’s single visa £ 300.00

2 Regional flights £ 500.00

=========

£12,840.00

=========

16 Days UK time £ 2,560.00

4 Days Colleague’s time £ 640.00

=========

£16,040.00

Certification (UK) £9,500.00 *

========

Total £17,300.00

Add other costs: £16,040.00

=========

TOTAL COST YR1 £ 33,340.00

*It is extremely difficult to give an average

price.

This is the cost, whether you use a distributor or do it

yourself. Either way, you must visit the market several

times per year. You sell to people, so build relationships.

Footprint – In Brief:

• Infrastructure (office, warehouse, salesperson)

• Instant. Fast entry and exit strategy

• Russians, talking to Russians, in Russian, in the right time zone

• Control over your Russian Business. Pricing, end-users, everything. • Control over your Russian Business. Pricing, end-users, everything.

• Increased margins for the manufacturer

• Access to Russian Rouble sales

• Zero bureaucracy (almost)!

• Troubleshooting (currency transfers, freight routines)

• Consignee Address

Footprint (cont’d):

• No lock in period – only pay as long as it works.

• Savings (interpreters, docs, fees, time)

• We won’t work with your competitors.

• Faster deliveries, item replacements (local suppliers etc).

• Clear communication with UK Albion• Clear communication with UK Albion

• Hands-Free administration of local expenses.

• Management is freed up to develop other markets

• Objective presence – intelligent feed, and control over products and price. Russians speaking to Russians

Footprint – Costs saved:

Report, Couriers, Fees, Translation £7,200.00

GOST Certification (RF) £3,500.00

2 Trips to Russia £4,800.00

8 working days not spent in Russia £1,440.00

==========

£16,940.00

Your 1-year costs (£33,340.00) minus above savings = £16,400.00

Add cost of Footprint One Year: £20,400.00

Projected over one year, total cost of: £36,800.00

Having a Moscow office and salesman costs the exporter £3,460.00

Now consider the additional wins:

10 days gained: 10/252 working days = Co. T/O + 1/25

Russian presence = relentless prospecting: Return + x%

Access to internal Rouble market Return + y%

Margin gained by making sales direct to customers: 40%

Footprint Clients:

Allen Gears, Alphatech, Arefco, Asahi Seiko, Avalon Sciences, Barwell Global, Bennet

Opie, BOCM Pauls, Brand Search, Canyon Europe, CG Europe, Chelsom Lighting,

Chesapeake, Coltrad, Delmatic, Esschem, Global Protein Solutions, Good Food and

Wine Company, Grace Foods, Greenwood, Hart Doors, HH Print, Hubcast, IDS, Jacob

White, Juratek, Katsu OY, Ken Read & Son, Kestrel Thermoplastics, Kovil OY, Linatex

(Weir Group), Lucy Zodion, Lucy Switchgear, M&I Materials, MacAlpine, Marley, (Weir Group), Lucy Zodion, Lucy Switchgear, M&I Materials, MacAlpine, Marley,

Miller, Montracon, Munster Simms, NJO LEDs, Owen Mumford, Powell Craft, Sea-

Band, Sly Filters, Smart Beauty, Spline Gauges, Tideland Signal, Titan Europe, Unison

Colour, Velcro, Verder Pumps, VisiTech, White House Products

Some Final Thoughts:

• Size doesn’t matter. Russia is for everybody, especially SME’s

• Russia is not usually difficult. Scary stories are the exception!

• Meetings may be difficult to arrange. Be patient.

• Use specialist help.

• This is not Poland, China, Europe. Not Asia, Eurasia, FSU or CIS

This is Russia/This is Russia/

• Consider your product or service. Adaption needed?

• Understand and enjoy Russia; Learn something in Russian!

Thank you!

David Cant

Albion (Overseas) Ltd

+44(0)1732 783555

david@albionoverseas.com

Twitter: @Albion_Overseas

www.albionoverseas.com

Smart Exporter – outline of the programme

Isabelle Henderson

Doing Business in Russia

Isabelle Henderson

International Trade Adviser

Smart Exporter

WHAT IS SMART EXPORTER?

• Smart Exporter is an international trade skillsprogramme designed to increase exporting skills and knowledge amongst Scottish businesses

• This initiative is delivered by SDI and funded by ESF• This initiative is delivered by SDI and funded by ESF

• Smart Exporter services are available on a free or subsided basis to businesses and individuals across Scotland

EXPORT ADVISOR SUPPORT

Access to support from an Experienced Export Advisor which includes:

• A one to one meeting to discuss your international plans and how the Smart Exporter programme can help your businessExporter programme can help your business

• Help with market research about the market potential for your product or service or information about your competitors

• Access to free export training through workshops or online

• Practical advise on how to be paid from an overseas sale to help with distributor agreements via Smart Exporter’s technical support

SMART EXPORTER – WHATS COMING UP

Market Awareness events

• Doing Business in India (31st October 2013, Edinburgh)

• Access Europe 2013 (6th November 2013, Edinburgh)

• Doing Business in Japan (28th November 2013, Glasgow)

• Doing Business in Russia (10th December 2013, Edinburgh)

• Emerging Europe 2014 (5th February 2014, Glasgow TBC)

Exporting workshops

- Introductory Programme (New Exporters) – Edinburgh (November 2013)

- Introductory Programme (New Exporters) – Glasgow (January 2014)

- Intermediate Programme (Inexperienced in international trade), Glasgow (Jan to March 2014)

- Intermediate Programme (Inexperienced in international trade), Stirling (Jan to March 2014)

Future International E-commerce events and workshops to be scheduled

All Smart Exporter Events: http://www.sdi.co.uk/Events.aspx

Networking Break

20 min.

Sign up for one to one meetings at

Doing Business in Russia

Sign up for one to one meetings at the registration desk

Breakout sessions

• Opportunities and challenges in the market by sector

• Product Accreditation and Certification requirements

Doing Business in Russia

• Product Accreditation and Certification requirements

• The practicalities of doing business in Russia:

Contracting & payments: reducing risk & liability

Networking Lunch

Followed by one to one meetings in the boardroom

Doing Business in Russia

the boardroom

(see registration desk for availability and schedule)