Just the Answer - Dmitry Kistev
In this month's Just the Answer interview, Dmitry Kistev, exports director at Russian beer company Baltika, discusses the Russian beer brand's international growth and plans for the future, a week after the brewer, owned by Carlsberg/S&N joint venture Baltic Beverages Holding, reported record sales for 2005.
J-D: What does Baltika have to offer above other imported beers?
Kistev: It depends on the market. We export to eight different types of market, and we must highlight our advantages according to the market. We use our awareness of each market. For example, in the CIS (former Soviet republics), we emphasise our modern, high quality beer, and the fact that it comes from Russia. In Central Asia, we pay more attention to the origin of the beer. In consumers' minds there, that is very important. In all markets, we position ourselves as a premium, sometimes super-premium beer. A strong Russian image is important to us everywhere. The image of Baltika internationally depends on the market. It's quite difficult to find out which key elements we should emphasise.
J-D: Which markets do you currently export to?
Kistev: There are several groups of countries. Firstly, there are our neighbours, the CIS countries. Secondly, the Baltic States of Latvia, Estonia and Lithuania. Then we are in the US and Canada, particularly in the New York area - including New Jersey - and in San Francisco in California. We try to sell our beer in each state but it's difficult as each state has special laws. In Europe, we're in the UK, Germany, Greece, and (have) a small profile in France and Portugal. Lastly, we're in the Asia Pacific region, with China as our main future target. We started exporting to China last year, and we estimate this year to double our size in the country. So, currently we are in about 38 countries.
J-D: How will Baltika approach the 'difficult' US beer market?
Kistev: Our main aim is to be present in both Russian-speaking and so-called 'native population' sectors in the US. Our first target is the Russian speakers' market, where we currently dominate. Our main competitors are Polish brands, but we're number one from Russia. In the 'native American' sector, it takes time and money. At the moment, we're selling most of our volumes in Russian-speaking communities. We are realistic, and understand that outside of here, it is highly competitive. Distribution is where we shall look next - it's a question for next year, to get a good presence in all of the US.
J-D: What other markets are you targeting for future growth?
Kistev: We're definitely sure that the Chinese market is very promising. In China, we pitch Baltika at the super-premium level. Again, it takes time to find the right distributor in each province and to register the brand in the country. It's typical for new brands to take a long time to get registered with local authorities. It took us one year to register our product and get it distributed. Sometimes it takes even longer. Believe it or not, it works out cheaper to ship our product overseas from St Petersburg to Harbin (in the north of China) instead of overland across the border between Russia and China - because of poor road communications and infrastructure.
Belarus, where we have more than 10% of the market, also has potential for Baltika. We have established a subsidiary to control the distribution chain, to control wholesale and retail prices and to deal with local authorities in the country, who are quite unpredictable at times. Kazakhstan, where we are brand number one by volume, is also where we see future growth, as well as Ukraine, where we exported 290,000 hectolitres last year.
Looking at new markets, we have only recently started exports to Finland. I call it government protectionism - they were afraid of us, but not anymore! We are also new in Norway and Ireland and we are optimistic. So this year, we're hoping to increase the number of countries we export to from 38 to around 42.
J-D: How has Baltika performed on the export front?
Kistev: The growth of Baltika in exports has risen from 0.11m hectolitres in 2000 to a projected 1.64m hectolitres this year, making roughly 5% of Baltika's total production. In 2004, Baltika had about 80% of all Russian beer exports with SUN Interbrew far behind us in second place with 19%.
Kistev, right, photographed last month with London Mayor Ken Livingstone
J-D: What is Baltika's view on the legislation on drinking in public in Russia?
Kistev: I would say that, before that, the prohibition of TV advertising for beer had a greater impact. We were the first company who started working to federal law levels before the laws were introduced, so we had been preparing for this law change. Now we have to work within the new (public drinking) laws, and it is not in our interest for our product to be associated with law-breakers - we represent Russia in many countries throughout the world.
J-D: If a bottle of Baltika costs RUB20 (US$0.71) on the streets of St Petersburg, how can your company market it as a premium product abroad?
Kistev: I suppose you can't compare these figures. The cost of living in Russia and the UK, for example, is absolutely different, as is the cost of labour. Then there are the transportation costs. So it's not really fair to draw these comparisons.
J-D: What sort of export targets do you have in place for 2006, and how do you plan to achieve them?
Kistev: We are aiming for 1.64m hectolitres in volume and over US$85m in value this year, and we plan to achieve that in the same way that we achieved our targets last year. We've got eight subsidiaries that help us in local markets, so we'll start with them - they know how to get the most from their markets. We are quite flexible, so we are able to react quickly to changes in the market and changes in competitor activity.
J-D: What plans do you have to increase Baltika's range of beers abroad?
Kistev: There are some plans, but they will be announced in a couple of months!
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