Jennifer Flannigan
Meredith Green
Jon McEvoy
Meg Shannon
Economic State
• Russia’s Financial Crisis of 1998 devalued the
ruble and left the country to rely on the US
dollar.
• With a recent return of confidence, Russia’s
population has discovered a new-found sense of
wealth and recovery.
• The population’s wealth has
become highly concentrated.
Economic Conditions
• Venturing outside of the cities, the “real” Russia
is revealed. Life for the largest percentage of
the population remains grim and reminiscent of
the Soviet Era.
• The economic status of Russia leaves pricing
considerations:
– Price high, attract the small wealthy percentage of the
population.
– Price low, find new ways to cut costs and expect low
profits.
Material of Packaging
The material would need to be
changed from glass to plastic
because of:
• Rough transporting methods
• Consumer methods of getting
to and from grocery stores
Consider the cost of using glass vs.
plastic.
Design of the Lid
• The metal lid should be
changed to plastic because of
poor storage conditions and the
possibility of rusting.
• It would need to have more
ridges to ensure no leakage of
the product when in transport.
• Consider the cost of
making plastic lids as
opposed to metal lids.
Size of Packaging
• The competitors offer both large and small
sizes of bottles of ice tea.
• Russians do not drink cold beverages so
refrigerator space is not an issue to consider.
• Storage space in Russian homes is limited.
• The bottle would have to be
almost completely reengineered
which would be costly to Lipton.
• However, if Lipton used the
same design as its Brisk Iced
Tea bottle, then extra money
would not have to spent on
designing a new bottle for the
Russian market.
Labels of the Competition
UniJuice and Nestea labels picture fruits which
appeal to Russian consumers.
Color and Graphics:
• Lipton uses the color yellow on all of its labels to
symbolize brightness, vitality and fun.
• There are no negative connotations with the color yellow
in Russia, so this can remain consistent with the brand as it
moves into Russia.
• Images on the labels would have to be chosen carefully
because Russians do not put ice in their drinks.
• Adding pictures of fruit would make the product look more
appealing at first glance.
Language on the Label
• It would be very beneficial for the company’s image to
change the wording on the label to Russian.
• This flatters Russian consumers and the Lipton company
will be better respected.
• By placing “Made in the USA” somewhere on the
product, Russians will associate it with being of high
quality.
Caffeine Content of Product
• Do not need to change this because
Russians are already accustomed to drinking
large amounts of caffeine.
• Keeping the caffeine content the same
would not be an added cost for Lipton.
Product
Serving Size
Caffeine
(mg)
Lipton Natural Brew Iced Tea Mix, unsweetened
8 ounces
25-45
Lipton Tea
8 ounces
35-40
Lipton Iced Tea, assorted varieties
8 ounces
9-20
Lipton Natural Brew Iced Tea Mix, sweetened
8 ounces
15-35
Flavor Variations
• Don’t care for sweet beverages
but they really like fruit flavors.
• Juices and nectar are some of
the top sellers in the beverage
market.
• Competitors offer fruit-flavored ice teas.
• Some flavor variations have already been produced
by Lipton and these could be introduced first into the
Russian market.
•No extra expense to develop these fruit flavors.
Food Supply & Logistics
Since the collapse of Communism, food
supply and logistics have been a major
political and economic issue in the states of
the former USSR.
3 Fundamental Characteristics
of Soviet Supply Chains:
•Massively scaled
•Centrally controlled
•Scarce competition
Russia’s 2 largest cities, Moscow and
St. Petersburg, are supplied by a
small number of large organizations.
Vertical Command Structure
•Organized food committees estimate a
city’s demand for a particular good.
•Information is sent directly downward
to the processors.
•Producers are instructed as to how
much product to ship to the processors.
No Horizontal Communications
Producers cannot share information with
other producers and processors cannot form
strategies with other processors.
Competition
•Each processing plant is served by a
particular group of farms and the product is
supplied to designated retailers.
•No competition exists between alternate
supply chains or any sector within the
supply chain.
Factories
•Russia is not well equipped to handle
mass amounts of distribution.
•Most facilities are very old
•Factories have no excess capacity
Warehousing
•There are a small number of large
warehouses dating all the way back to
before WWII.
•Warehouses are controlled by municipal
authorities.
•Small chambers and multi-level
construction create inefficient warehousing.
•Corridors and lifts can waste up to 30% of
available space
•High and inefficient use of labor
•Bottleneck in the supply chain
Retailing
•Most major cities in Russia are moving from traditional
shops to modern supermarkets.
•St. Petersburg has 30 supermarkets that serve
200,000-250,000 people.
•Stores have surprisingly under- developed means of
quality and stock control.
•Small locally owned shops are disappearing due to
poor management and communication with suppliers.
•Moscow has 700 bread shops that are supplied by
1 bread factory. Bakeries cannot order more product
because the factory has only 2 telephone lines.
Transportation of Goods
Waterways
•95,000km of suitable water routes
•33 major workable ports
•553 cargo ships, 21 refrigerated cargo
ships
+ Pros: many ports suitable for docking,
ease of transferring ship cargo onto rail
- Cons: Rivers flow north-south, limited
refrigerated cargo ships for food
Road Shipping & Trucking
•Adequate passage between distributors and
producers
•Poor quality trucks
•Average speed limit of 40km/hr
•Small load capacity
•Low repair standards
•Urban delivery is difficult
Trucking Inadequacies
No. of Vehicles
AVG carrying
capacity
Rosagroprom
711,000
2.5 tons
Rosavotrans
25,000
3.8 tons
Centralsoyuz
50,000
N/A
Railways
•The 87,157km of railways link every major
city within Russia.
•The average distance covered by a multiproduct train is 230km/day.
•While a major source of transportation,
the railway system has
proven to be unreliable
and outdated.
Media Forms
• The available media forms are: radio, with 420 total AM stations
and 447 total FM stations, television, with 7,306 stations
countrywide and internet with 6 million users.
• Print and billboard media are good opportunities to advertise in
the Russian market, especially Russian trade journals and
general interest magazines and newspapers.
• Trade shows are a very good way for a company to enter the
Russian market.
• Telemarketing is common but not particularly effective because
of the poor state of telecom infrastructure.
• Other direct marketing channels, such as catalogs, e-commerce
and regular mail are still new and underdeveloped, but growing.
The Agricultural Trade Office
• The agricultural trade office in Moscow, with the
support of satellite offices in St.Petersburg and
Vladivostok, works closely with companies to
promote the sale of U.S. food, beverage and
agricultural products throughout Russia.
• The ATO also conducts promotional activities to help
introduce new products and promote U.S. food and
agricultural products already available in the Russian
market.
Legal Issues
• Advertising tax is a local tax levied on all enterprises
that have advertising activity.
• Professional services in Russia are expensive, but
with complicated tax and legal issues it is necessary
to contact and attorney and accountant early on.
• Business registration in Russia is regulated by
numerous laws and Government resolutions.
Conducting business without registration is illegal.
Competitor Advertising
• Due to a return to culture, Coca-Cola has developed a
marketing strategy that will weave the brand into the local
culture. In preparation, a creative and planning team from the
agency was dispatched to live with Russian families and meet
people to get an idea of what was needed to connect with the
Russian people.
• Coca-Cola is also re-launching its Minute Maid fruit juices.
Promotional activity for this brand will be handled in-house with
little advertising spending.
• Another marketing strategy used by Coca-Cola is to give the
Russian consumer a chance to create his or her own TV
commercial.
• Pepsi is launching two new herbal and fruit drinks under
Russian names. These drinks will be promoted primarily with
TV commercials and point-of-sale materials.