The Trade between the Leading Slovenian Companies and Russia
The situation in Russia is far from ideal, but it is stable. Starting from February 2016, rubble shows a positive growth dynamics.
The exchange rate of the Russian rubble as compared to the same period last year has stabilized. Many Slovenian companies reacted positively to this fact.
Last year Slovenia reduced its export to the seventh important selling market in the world by one fifth, which is 792 million euros. For the first four months of 2016, Slovenian companies exported goods worth 196 million euros to Russia, which is 15% less than for the same period last year.
The Director General of the Iskratel Company, Željko Puljić said, “The depreciation of the Russian rubble makes the greatest difficulties for Slovenian companies. As a result, our customers allocate fewer resources to invest into the network development. Therefore, we are observing a drop in sales and marginal revenue.”
Gorenje operates in excess of plan
“This year, the domestic situation in the Russian Federation has stabilized, that did not fail to affect the turnover,” the representatives of Gorenje note. In the first quarter of 2016, the company achieved more than 30% growth and exceeded the planned volume of revenues.
“In the Russian Federation, we increase sales of premium products, especially under the Asko name of the highest price segment. The Russian market is also focusing on the design line of devices that are being developed in collaboration with the world-renowned designers. In the current year, this will be the Gorenje by Starck line. To date, we have achieved significant growth in sales volumes of small-sized household appliances,” the experts of the company-manufacturer of household appliances from Velenje explain.
Due to heavy business conditions, the Iskratel Company, according to Puljić, conducted a systematic localization of traditional products and projects in the Russian Federation. “In addition, we decided to establish a local partnership network, through which we plan to expand the sales network for the segments, in which small business previously did not compete with the large companies,” the Director General of the Company says.
According to him, Iskratel plans to insure its business by organizing a strategic local partner network for the period of 2017–2020 and achieving a moderate but steady growth. “The overarching objective is to increase the sales market in the Russian Federation, Iran and the Caspian region. The Russian Federation will further remain the most important business strategic partner for the Iskratel Company,” Puljić notes. He expects that the volume of investments in the second half of 2016 will continue growing. The Company plans to gain 30 million euros of sales revenues, and next year, to increase this figure by at least a quarter.
The Krka Company and its status of a domestic manufacturer
The Krki Company also believes that the demand for their products in the Russian Federation will at least remain at the current level. The Company has the status of a domestic manufacturer and possesses an advanced marketing sales network from Kaliningrad to Vladivostok.
Krka has been historically linked with the Russian Federation for more than 50 years—since 1965, when it first came to this large market by introducing and successfully selling its pharmaceutical products at the exhibition in Moscow, and to the present day. Still in 1992, the Company opened its representative office in Moscow, and later founded several branches. In 1999, the Krka Rus, LLC Company was established in a similar manner in the RF capital, and in 2000—the Krka Farma, LLC distribution company.
The Russian federation trade product groups in 2015 (from left to right, the export/import share is given in parentheses). Export—pharmaceutical products (37%), nuclear reactors, boilers, machinery and mechanical appliances and their accessories (15%), electrical appliances and equipment, their accessories, devices for audio and video recordings and their accessories (13%), organic chemicals (7%), paints and varnishes, thickeners, enamels (4%), and various chemical products (3%). Import—mineral oils and fuels, the products of their processing, bituminous materials, mineral waxes (70%), aluminium and articles thereof (12%), tools, knives, spoons, forks of base metals, utensils of base metals (2%), cellulose made of wood or other cellulosic fibre materials, paper and cardboard wastes and residues (2%), pharmaceutical products (2%), raw hides and skins with/without hair (except fur; 2%).
As an important step in the development of business, the Company representatives name the construction of a modern pharmaceutical Krka Rus plant and a distribution centre within the industrial area at the north-west of Moscow in 2003. Later, in 2013, the Krka Company invested in the new Krka Rus 2 plant in the amount of 135 million euros, having increased its production capacity.
“Today the Krka Rus plant produces half of all products sold on the Russian market. Our high-quality, effective and safe products enjoy a good reputation in Russia, because they are sold in pharmacies across the country,” the representatives of the pharmaceutical plant in Novo Mesto note.
Achieving results also depends on the local partner
Matjaž Mušič from the SID Bank explains that with regard to the Russian Federation, Slovenian companies are interested in small projects, because domestic exporters with their production capacity could not meet the demand on this large market. However, of course, there are exceptions.
“It is not easy to get a contract in Russia given an abundance of competitors. This also applies to the companies that have many years of presence in the Russian market,” Matjaž Mušič says. “Reaching the final result depends, among other things, on the skills of a representative, that is, a Russian partner, who is to find a potential buyer and to conclude a mutually beneficial agreement.”