Jennifer Flannigan

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Jennifer Flannigan Meredith Green Jon McEvoy Meg
Shannon
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Economic State

• Russias Financial Crisis of 1998 devalued the
  ruble and left the country to rely on the US
  dollar.
• With a recent return of confidence, Russias
  population has discovered a new-found sense of
  wealth and recovery.
• The populations wealth has
  become highly concentrated.

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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.

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Material of Packaging
The material would need to be changed from glass
to plastic because of Consider the cost of
using glass vs. plastic.

• Rough transporting methods
• Consumer methods of getting to and from grocery
  stores

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• 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.

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• 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.

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• 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.

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Labels of the Competition
UniJuice and Nestea labels picture fruits which
appeal to Russian consumers.
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• 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.

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• 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.

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• Language on the Label
• It would be very beneficial for the companys
  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.

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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
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Flavor Variations

• Dont 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.

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• 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.

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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.
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• 3 Fundamental Characteristics of
  Soviet Supply Chains
• Massively scaled
• Centrally controlled
• Scarce competition

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Russias 2 largest cities, Moscow and St.
Petersburg, are supplied by a small number of
large organizations.
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Vertical Command Structure

• Organized food committees estimate a citys
  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.

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No Horizontal Communications
Producers cannot share information with other
producers and processors cannot form strategies
with other processors.
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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.

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Factories

• Russia is not well equipped to handle mass
  amounts of distribution.
• Most facilities are very old
• Factories have no excess capacity

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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.

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• Corridors and lifts can waste up to 30 of
  available space
• High and inefficient use of labor
• Bottleneck in the supply chain

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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.

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Transportation of Goods
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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
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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

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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
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Railways

• The 87,157km of railways link every major city
  within Russia.
• The average distance covered by a multi-product
  train is 230km/day.
• While a major source of transportation, the
  railway system has proven
  to be unreliable and
  outdated.

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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.

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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.

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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.

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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.