Danes Grown Into Urals Market With Premium Brands

27.11.2009 — Analysis

New economic conditions have affected the sales of premium class products the least. This is why companies from the Kingdom of Denmark which offer this kind of products feel quite confident in the Urals. Representatives of these companies told the RusBusinessNews observer about their plans for the expansion in the region.

There are not that many Danish companies cooperating with Urals partners on a long term basis and selling their products in the Urals, their number is a few dozen. Virtually all of them stand out even amongst European companies with their innovative designs, high quality, and appropriate pricing policies. They were entering the market extremely slowly in previous 3 to 5 years as this required conquering the very narrow consumer segment of the premium class.

Alexei Storozhenko, the manager of the only Bang & Olufsen store in Ekaterinburg, pointed out the fundamental differences in consumer preferences between the Urals people on the one hand and Muscovites and Europeans on the other. "85% of Danish homes and offices have audio and video equipment by Bang & Olufsen. These people understand what this TV has inside and what they get for their money. It is manual assembly which has to be paid for. Our Urals buyers have an entirely different attitude. We have to make much more effort to convince them in the unequalled quality of our products. A Bang & Olufsen TV price is about a half of that of a D-class car. Of course, wealthy people in the Urals would rather take the car," Alexei Storozhenko told RusBusinessNews.

It was difficult to start but today Danish equipment has loyal customers in the Urals. The Bang & Olufsen store has been working in Ekaterinburg for 3 years. In this time the company has opened two more outlets in the Urals region - in Perm and Tyumen. At the moment Russia takes the world leading position in terms of sales of Bang & Olufsen products.

Alexei Storozhenko pointed out that during the current crisis the reduction of sales of Bang & Olufsen products in the Urals is less tangible than European audio and video equipment of the lower price segment.

The Ekaterinburg office of Ferrosan International A/S (the maker of Multi-tabs vitamins, Bifiform preparations, and Imedeen beauty products) does not see any serious reduction in sales either. "Our products are designed for people in medium and above medium income bracket. People who have been buying vitamins having quality and not the price as the priority are still buying them today. Sales of our products are down, but the decline is no bigger than the market average. Moreover, the drop in sales in the Urals has turned out not as tangible as in other Russian regions," Natalya Alekseyeva, the regional Ferrosan International A/S expert, informed RusBusinessNews. The company plans broadening the product line offering new preparations for the Urals market including medicines for women.

BoConcept is also expanding sales activities in the Urals, the company makes premium class furniture and accessories; BoConcept is planning to open the third (after Ekaterinburg and Perm) shop in Tyumen by selling a franchise. "The Danes are actively helping us to promote their products," said Irina Sirotina, the Director of the Ekaterinburg BoConcept shop in an interview to RusBusinessNews. "They have a strong marketing platform which stipulates everything clearly and engagingly. New style solutions are offered to customers every year. Various presentations and advertising campaigns are conducted. There is a schedule for these in all 50 countries where the company is present. Everything is done the same way - common advertising materials, posters, banners, the same concept. This is done so you could recognise BoConcept in any shop in the world."

Ekaterinburg has a very competitive furniture market and it is very hard to find your "place in the sun" here. "Our key foreign competitors are Italian companies which are actively present in the Urals. But the Danes are developing the design and the quality of furniture, BoConcept is trying to follow the urban design style. Our customers are in love with this style," Irina Sirotina pointed out.

In the conditions of the crisis the demand for hi-tech industrial products from Denmark still remains high in the Urals market. For instance the office of Grundfos (design and production of pumping equipment) has been working in Ekaterinburg for 11 years. 2008 and 2009, however, are referred to as years of peak sales here. "High sales of our equipment were due to the summit of the heads of the Shanghai Cooperation Organization member states held in the summer 2009. We started sensing the pull starting from the previous year when many sites were being constructed in preparation for the summit. Such significant events stimulate the development of the infrastructure which means that pumps are being sold more actively," Yuri Linnik, the Head of the Ekaterinburg Grundfos office told RusbusinessNews.

According to him Grundfos is considering the Urals market as a market with good future. The company is planning to actively participate in services modernization and energy saving programmes being implemented here. "There is a good future for us here. We will do everything in our power to be present in this market with out product. We are also counting on the active construction of new urban sites. For instance, virtually all modern business centres have out pumps installed," Yuri Linnik pointed out.

The Scandinavian banking group Nordea which has acquired the Russian Orgesbank in the end of 2006 and reorganized it into OJSC Nordea Bank will be able to provide a significant assistance to activities of Danish companies in the Urals. "Just a week ago the Ekaterinburg branch of Nordea Bank has put up the appropriate sign," Peter Thomsen, the Head of the Trade Council of the Kingdom of Denmark in Ekaterinburg, told RusBusinessNews. "Now the Bank works in the Urals in the full format which includes issuing loans to local companies for purchases of Danish equipment. This means that the opportunities of the Kingdom of Denmark in trading with the Urals region are expanding as all business transactions are becoming much easier."

The Danes and the Urals representatives of Danish companies are not making a secret of the fact that they are going only to trade here not planning to set up production lines here. However, the rooting of their businesses in the Urals is fairly tangible which will inevitably lead to further development of the bilateral economic relations once the crisis is over.

Pavel Kober