This presentation presents an market entry analysis and recommendations for Indian tea companies looking to expand into the growing Russian tea market.

1. Market Entry Opportunities for
Indian Tea Companies in Russia
Aginsky Consulting Group
October 7, 2009 www.aginskyconsulting.com 1

2. Presentation Outline
Who is ACG?
Project Objectives and Approach
Company Analysis
Why go Global?
Global Outlook for Tea (2007)
Why Russia?
Analysis of the Russian Tea Market
Analysis of the Indian Tea Market
October 7, 2009 www.aginskyconsulting.com 2

3. Presentation Outline
Comparison of Russian and Indian Tea
Markets
Cost Benefit Analysis of Different Sales
Channels
How to go Global
Approach for Selecting the Best Market
Entry Strategy
Case Studies
How can ACG Help You?
Conclusion

4. Who is ACG?
 Truly international boutique firm
 Focused on emerging markets, particularly
economies of Russia and the CIS
 Staffed with graduate-degree holders from top-
tier schools (Harvard, Yale, Thunderbird,
Columbia, etc.)
 Customized project teams for each individual
client engagement
 Entrepreneurial!

5. ACG Service Offering
Wide range of consulting services
custom-tailored for each client
 Strategic market entry
 Primary and secondary research
 Customer mapping and field research
 Competitive landscape analysis
 Comprehensive market research
 Business strategy and marketing planning
 Distribution and channel partnership building
 Cross-cultural communication and integration
 Sales and channel management
 Emerging markets product/service launches

6. Project Objectives and Approach
Objectives:
1) Market Entry Evaluation
 Understand tea companies’ current distribution footprint
 Examine acquisition best practices
 Examine joint venture best practices
 Examine licensing best practices
2) Russian Market Analysis
 Russian business environment
- Opportunities
- Challenges
3) Strategic Entry Recommendation

7. Project objectives and approach
Approach:
 Develop best entry strategy based on tea
companies’ priorities and future plans
 Consider the opportunities and challenges of
the Russian business environment
 Examine and incorporate best practices
derived from practical experiences of other
firms and industry experts

8. Why go global?
 To increase sales, revenues, and profits
 To grow the company’s global market share
 To achieve greater economies of scale
 To reduce costs
 To reduce risk
 To establish a foothold in a promising market
 To learn from a leading market
 To build a global brand
 To respond to competitors
 To receive investment from VCs
October 7, 2009 www.aginskyconsulting.com 8

9. Why go global?
To increase sales, revenues, and profits
 Limited or declining home market
 Excess capacity
Competitive advantages in new markets:
 Russia: top location for global retail - A.T. Kearney 2007
 70% of Russians' income is disposable vs. around 40% in the West
 Lower costs and higher prices - opportunities for profit
 Global consumers' tastes are converging. Easier to offer a globally
standardized product
October 7, 2009 www.aginskyconsulting.com 9

10. Why go global?
To grow the company’s global market share
 It is not enough to grow with the market. You need to
grow your market share globally if you want to be a
leader.
To achieve greater economies of scale
 Efficient operations and increased production to reduce
cost per unit.
October 7, 2009 www.aginskyconsulting.com 10

11. Why go global?
To reduce costs
 Fixed costs vs. variable costs
 Labor-related vs. non-labor-related costs
 Competitive advantage
To reduce risk
 Decreasing dependence on domestic market and any
individual client minimizes overall risk profile
October 7, 2009 www.aginskyconsulting.com 11

12. Why go global?
To establish a foothold in a promising market
 Fragmented or less competitive markets. EX.: P&G in Russia.
To learn from a leading market
 Participate in highly-competitive markets to improve products
and marketing. EX.: Koc in Germany, the world's leading market
for dishwashers, refrigerators, freezers and washing machines.
To build a global brand
 Build a more powerful image of your brand: global marketing
exposure, more investment dollars, long-term growth.
October 7, 2009 www.aginskyconsulting.com 12

13. Why go global?
To respond to competitors
 Domestic competition entering international markets.
“Competitive response.” Eg: Tata Tea’s entry in to the U.S.,
China, and other global markets; J.V. Gokal’s entry in to the
Russian market.
 Competition coming from international players.
“Offense as defence.”
To receive investment from VCs
 Prerequisite for venture funding: very large market.
Global firms received more than twice as much funding from VCs
October 7, 2009 www.aginskyconsulting.com 13

14. Global Outlook for Tea (2007)
 Market size in terms of retail value:
$23,323 millions
 Market size in terms of retail volume:
1,765 million kg
 Growth rate in terms of retail value
(2006-07): 4.5%
 Growth rate in terms of retail volume
(2006-07): 3.5%
 Per capita consumption: 0.3 kg
 Average retail price: $13.2 per kg
 Growth in retail price: 0.9%

15. Global Outlook for Tea (2007)
Majorproducers of tea: China, India,
Kenya, and Sri Lanka
Major importers of tea: Russia, U.K.,
U.S., Pakistan and Japan

17. As seen above, from 2004 to 2007 the world supply for tea has far exceeded
demand.

18. Though, India is the second largest producer of tea in the world, the domestic
consumption of tea is quite high, resulting in India’s exports being only the fourth
largest.

20. Prices of Tea at different World auctions (Q3)
Prices in US $
Regions
2008 2007% Change
North India 2.21 1.73 27.75
South India 1.53 1.2 27.5
All India 1.99 1.58 25.95
Colombo (Sri Lanka) 3.03 2.38 27.31
Chittagang (Bangladesh) 1.61 1.15 40
Mombassa (Kenya) 2.3 1.64 40.24
Jakarta (Indonesia) 1.52 1.36 11.76
Limbe (Cameroon) 1.36 1.02 33.33
Sri Lankan tea had the highest price per kg in 2008, followed by India and Bangladesh
at their respective auction houses.

21. Highest Per Capita Markets in 2007
3
2.7 2.7
2.5
2.1
2
kg
1.5 1.3 1.3
1
0.7
0.5 0.3
0
Turkey Ireland U.K. Poland Russia India Global
As can be seen from the graph, the average per capita consumption of tea in Russia
was 1.3 kg, which was far greater than the average per capita consumption of tea
both globally (0.3 kg) and in India (0.7 kg).

22. Current statistics and trends in the Tea
Industry (2008)
Tea production and export statistics until Q2 (in millions of kg)
India China Kenya Sri Lanka
2008 (E) 2007 2008 (E) 2007 2008 (E) 2007 2008 (E) 2007
Production 599.73 576.07 nil nil 181.69 221.52 199.6 169.82
Export 124.04 106.64 203.05 191.76 210.82 216.74 204.52 191.08

23. Current Statistics and Trends in
the Tea Industry (2008)
 Tight supply due to a projected decrease in Kenyan
tea production. Continuation of upward trend in
world tea prices. (FAO report)
 FAO composite price, (a world indicator price for
commodities) has increased 6.5% to US$1.95 per kg
in 2007.
 For the next 10 years to 2017
1. World black tea production is expected to grow at 1.9%
annually to reach 3 million tons
2. World green tea production is expected to grow at 4.5%
annually to reach 1.6 million tons (FAO projections)

24. Current Trends in the Tea
Industry (2008)
 Possibilityof an oversupply of black tea in the
coming years in the global tea market (FAO)
 A growing health and wellness trend boosting
the sales of specialty tea varieties such as
fruit/herbal tea, green tea, and other tea
 Higher disposable incomes in many developing
economies such as China, India, and Russia
prompting a shift from unpackaged to
branded and specialty tea varieties

25. Why Russia?
Surging Economy
 Real GDP Growth ↑ 8.1% to $1.3 trillion
 The fastest growing economy in the G8 group of industrialized
nations
 Investors pouring money into improved storage facilities,
infrastructure, and logistics
 Improving financial services, rule of law, and banking
infrastructure
 FDI into Russia to reach $58 billion in 2008, an increase of about
16% compared to the value in 2007
 “Even as the financial crisis shows no signs of abating and
deleveraging continues, Russian economy will remain strong
because of very low levels of public debt.”
- Yuri Soloviev, CEO of VTB Capital

26. Why Russia?
Wealthier Consumers
 140 million consumers
 Price conscious consumers but willing to pay for
quality
 Disposable income increasing, consumers willing to
spend on brand names
 Real wages ↑ 16%, increased consumer spending
 Per Capita GDP reached $14,800 in 2007 (CIA World
FactBook)
 Consumers more health conscious than ever
 Russian consumers are now the fourth biggest
spenders on high end goods behind the U.S, Japan
and China (Business Week)

27. Why Russia?
Government
 Government seeking to streamline customs and
taxation regimes to attract more FDI
 Supporting the E-Russia program, designed to
stimulate growth of e-commerce, including B2B e-
commerce
 New reforms targeting bureaucracy and corruption
 Government focus on expanding manufacturing base
and improving infrastructure development
October 7, 2009 www.aginskyconsulting.com 27

28. Why Russia?
Deals in Russia 2006 - 2007
 Measured by dollar volume, M&A activity in 2007 in
Russia rose 61% in 2006, registering an estimated
$179 billion
 M&A activity equaled a robust 14% of GDP and
contributed to Russia’s continued strong economic
growth
 2,151 M&A deals in 2006 – 2007; 146 in the food &
beverage industry
 249 JVs formed in 2006 – 2007; less than 10 in the
food & beverage industry
 Increasing middle class demanding more premium
products.

29. 29
Market Overview
Russian Market Overview
 140 million consumers “Dollar income per capita
 140 million consumers
has risen by nearly 29%
 2007 Real GDP Growth: 8.1% to $1.3 trillion
 2007 Real GDP Growth: 8.1% to $1.3 trillion per annum [2001-2006]…,
 Remains relatively dependent on oil, gas, natural faster even than in China.
 Remains relatively dependent on oil, gas, natural
…70% of Russians'
resources
resources income is disposable, vs.
 Government attempting to build manufacturing
 Government attempting to build manufacturing around 40% for a typical
base Western consumer. "We
base
have 13% flat income tax,
 Federal budget surplus of $72 billion
 Federal budget surplus of $72 billion subsidized housing and
 Sovereign credit rating; investment grade utilities, and 10% savings.
 Sovereign credit rating; investment grade
The rest of it is pretty
 Foreign currency and gold reserves: $400 b
 Foreign currency and gold reserves: $400 b much out there being
spent," says Natalia
Zagvozdina, a consumer-
goods analyst at Moscow
investment bank
Renaissance Capital.
Business Week 2/06

30. Distribution in Russia
• Limited geographic coverage
• Well-organized: Western Russia – Moscow, St. Petersburg (large scale retail
stores, shopping malls)
• Rapidly developing: Southern Russia – the Volga region, Urals, Siberia, Russian
Far East
• Direct Marketing is very effective outside of developed distribution regions
• Multiple channel options:
a) Agents – not common practice
b) Distributors –variety but not suitable for advertising and
promotion (products from multiple suppliers)
c) Branch/Representative Offices – direct contact with end-users and
control over promotion and distribution
d) Foreign Subsidiaries – full control of supplier over distribution

31. Private consumption and GDP

32. Foreign Direct Investment in to Russia
FDI in Russia(Billion US$)
50
50
40
30.827
30
FDI in Russia(Billion
20 US$)
12.885
10
0
2005 2006 2007
October 7, 2009 www.aginskyconsulting.com 32

33. Success stories of International firms in Russia
“From the business side, we have such a combination of high potential, high growth and fast
change that there is no question in my mind, that this is the most dynamic and exciting place in
the world to work.”
Xyzard Smyth
General Manager, Russia and CIS
The demand for professional services is growing at a rate of up to 40% a
year, fueled by a booming economy, the development of the capital market
and significant changes in Russian business culture.
Mike Kubena
Senior Partner for Central and Eastern Europe, Russia and the CIS
Russia has been a strong performer for Wrigley and now ranks in
the top 5 among the 180 countries in which we do business
around the world.
Ralph Scozzafava
VP – Worldwide, Commercial Operations
Russia is an important emerging market with significant potential in
the agri-food arena.
Andrew Glass
Head of Representation, Cargill Russia
Source: American Chamber of Commerce in Russia

34. Reasons for Indian Tea Companies to
enter the Russian market
 Grow revenues
 Lower fixed costs per unit
 Higher prices + lower costs = greater margins
 Mature home market and/or excess capacity
 Global competition
 Gain access to a distribution network
 Broaden existing products portfolio
 Global branding, exposure, and geographic reach
 Diversify business risks
October 7, 2009 www.aginskyconsulting.com 34

35. Opportunities for Indian Tea Companies in
the Russian Tea Market
Categories Global India Russia
Market size in terms of retail value (in millions of US$) 23,323 876.4 3,266
Market size in terms of retail volume (in millions of kg) 1,765 226.04 161.44
Growth rate in terms of retail value (2006-07) 4.50% 3.50% 12%
Growth rate in terms of retail volume (2006-07) 3.50% 2.60% 2.30%
Per capita consumption (per kg) 0.3 0.7 1.3
Average retail price (in US$ per kg) $13.20 $3.90 $20.20
Growth rate in retail price (2006-07) 0.90% 0.90% 9.50%

36. Opportunities for Indian Tea Companies in
the Russian Tea Market
 Largest importer of tea in the world. The total
value of Russian tea imports in 2007 was $308.97
million, which is nearly 14% of the global
market.
 Retail volume growth rates of 15% and 12% in
black standard tea bags and black specialty tea
bags respectively, in 2007.

38. Forecast of Tea Volumes in Russia by Sub-sectors: 2007-2012
Tonnes 2007 2008 2009 2010 2011 2012
Tea 161,441 164,962 168,206 171,286 174,318 177,255
Black Tea 141,450 143,382 145,098 146,741 148,351 149,892
Green Tea 17,420 18,814 20,131 21,338 22,512 23,638
Fruit/herbal Tea 2,237 2,415 2,611 2,825 2,060 3,317
Other Tea 334 351 367 381 395 409

39. Competitive Landscape Analysis of the Russian Tea Market
Market shares of major players (as %
of retail value) 2006 2007
Orimi Trade OOO 12.5 13.1
Ahmad Tea Fabrika OOO 13.4 13
Unilever SNG OOO 10.5 9.9
Mai Kompanya OAO 9.2 9.6
Akbar Bros Ltd 3.8 3.8
Douwe Egberts Russia 2.1 2.4
Dilmah Moscow Ltd 2.1 2.1
Moskovskaya Chaynaya Fabrika OOO 2.2 2.1
Riston Teas (Pvt) Ltd 1.8 1.8
Mlesna Ltd 1 1.1

40. Supply and Demand of Tea in India
kg (in millions) Demand (consumption) Supply (production & imports)
2005 757 963
2006 771 1006
2007 786 961
2008 (estimate) 802 1000
As the global supply of tea has consistently outstripped global demand, major tea
producers have been pursuing differentiated marketing strategies and focusing only on
those markets that have high rates of growth. Given the dynamics of the global supply
and demand for tea, understanding market needs and developing niche or specialty
tea products becomes crucial for market players.

42. Forecast of Tea Volumes by Sub-sectors: 2007-2012
Tonnes 2007 2008 2009 2010 2011 2012
Tea 226,045 231,273 235,790 239,745 243,099 245,822
Black
Tea 222,724 227,769 232,111 235,900 239,101 241,683
Green
Tea 3,321 3,504 3,679 3,845 3,999 4,139

43. Competitive landscape analysis of the major players in the Indian Tea market
Market shares of Major Players (as % of Retail Value) 2006 2007
Hindustan Unilever Ltd N/A 32
Tata Tea Ltd 22.5 23.8
Duncans Industries Ltd 6.6 6.5
Tea player Ltd 2.9 2.9
Goodricke Group Ltd 1.7 1.6
Golden Tips Tea Co Pvt Ltd 1.4 1.4
Gimar Food and Beverages Pvt Ltd 1.3 1.3
Twinings Pvt Ltd 0.8 1
Jay Shree Tea & Industries Ltd 0.9 0.9
Gopaldhara Tea Co Pvt Ltd 0.7 0.7

44. Listed below are the selling prices for various sales options
Price per Kg (2007)
Auction price $1.62
Export price $2.45
Retail price in India $3.90
Retail price in Russia $20.20

45. Cost Benefit Analysis of the Different Sales Channels
Auction Export Local sale to retailer Sale to Russian distributor Sale to Russian retailer
cost (E) $1.25 cost (E) $1.25 cost (E) $1.25 cost (E) $1.25 cost $1.25
revenue* $1.62 revenue* $2.45 revenues (E) $2.90 revenues (E) $7 revenue (E) $10.5
profit $0.37 marketing (E) $0.25 trade promotions(E) $0.25 import duty* $1 import duty* $1
profit $0.95 other promotions(E) $0.25 shipping charges** $0.01 shipping charges** $0.01
profit $1.15 middlemen expenses (E) $1 middlemen expenses (E) $1
trade promotions (E) $0.25 trade promotions (E) $0.25
profit $3.49 other promotions(E) $0.25
profit $6.74
Estimate
* from Russian tea customs
** from freight carriers

46. How to go global?
New market entry strategies (Risk vs. control)
 Low involvement
 Medium involvement
 High involvement
October 7, 2009 www.aginskyconsulting.com 46

47. Risk vs. Control Level of involvement,
marketing control, risk
High
 Entering a new market= Production and sales
start-up situation: Direct sales
no sales, no marketing, Local acquisitions
no knowledge of the JV
market. Representative office or
branch or sales office
 Low intensity modes of
Franchising
entry minimize risk and
control. More financial Piggybacking
involvement gives more Licensing
marketing control. Export through trading Low
companies and distributors
October 7, 2009 www.aginskyconsulting.com 47

48. Low involvement
 Export through trading companies and distributors
Low They understand the market, have built-in distribution channels.
PROS: for companies with little international experience.
CONS: no commitment from distributor to your products.
 Licensing
Distinctive and legally protected asset. Strong innovation.
PROS: low involvement, legal protection.
CONS: low control; creates local competitors; plagiarism.
 Piggybacking
Taking advantage of a particular and temporary situation.
High PROS: use somebody else’s experience; short-term effectiveness.
CONS: high medium-term risks, dependence on one client.
October 7, 2009 www.aginskyconsulting.com 48

49. Medium involvement
Low  Franchising
Increasingly able to adapt to different markets. EX.: McDonald's, YUM
PROS: low costs, brand recognition, wide exposure.
CONS: not suitable for all businesses; difficult to adapt the brand to
local tastes.
 Representative office or branch or sales office
Represent and promote the company in the foreign market.
 Joint Venture
PROS: Foreign partner’s relationships with, and experience of, the
local authorities, suppliers and consumers. Reducing the risk of
High the foreign partner competing.
CONS: Knowledge of legal issues and people.
October 7, 2009 www.aginskyconsulting.com 49

50. High involvement
Low
 Local acquisitions
Acquire locally-oriented brands to cover more market
segments. Other resources: distribution assets.
EX.: Coca-Cola in Japan. P&G in Russia.
 Direct sales
EX.: Any retail business
 Production and sales
High
October 7, 2009 www.aginskyconsulting.com 50

51. Level of INVOLVEMENT, RISK and MARKETING CONTROL
Production and sales
High
Direct sales
Local acquisitions
JV
Representative office or branch or sales office
Franchising
Piggybacking
Licensing
Export through trading companies and distributors
COST-SAVING STRATEGIES
Low
Own outsourced facility
Outsourcing production or service to third party
October 7, 2009 www.aginskyconsulting.com 51

52. Approach for selecting the best market
entry strategy
 Identify market segment opportunities
 Due diligence through local partners and
experienced consultants
 Focus on long-term benefits
 Connect with other successful foreign firms in
the market
 Budget plan, entry marketing and promotion

53. Approach for Selecting the Best Market Entry Strategy
High
• Analyze the four market entry
dimensions (marketing, finance,
market environment, and strategic
Exte nt of In vestm en t a nd R isk
flexibility)
• Receive client’s feedback on
six sub-categories (control,
profitability, market penetration,
customer feedback, financial risk,
cash required) and order them using
a weighed average
• Assume a long-term presence and
planning horizon
Low
Low Degree of Ownership and Control High

54. Strategy Selection Criteria

55. Evaluating the Different Market Entry Strategies
 Establishing a Subsidiary
a) Subsidiary best practices
b) Case studies
 Establishing a Joint Venture
a) Joint-venture best practices
b) Case studies
 Establish Licensing Agreements
a) Licensing best practices
b) Case studies

56. Establishing a Subsidiary
 Advantages of a subsidiary
1. 100% of control and profits
2. Access to new customers and markets
3. Expanded control over value chain elements
4. Company maintains corporate goals, strategic vision and
culture
 Subsidiary best practices
1. Thorough due diligence on potential partners
2. Know and understand Russian business practices
3. Must have a strategic fit with the Russian company to
move forward with minimal friction
4. Focus on cross-cultural integration in post-deal
environment

57. Case Study on Unilever & Inmarko
Acquisition: Unilever has signed a deal to buy 100% of Inmarko, leader of Russian
ice-cream market, which has 16.2% share of the market.
-April,2008
Unilever Inmarko
•Unilever has been operating in Russia since 1992 and now •Founded in 1991 isis the largest ice cream business in
•Unilever has been operating in Russia since 1992 and now •Founded in 1991 the largest ice cream business in
has over 2,000 employees central and Eastern Europe.
has over 2,000 employees central and Eastern Europe.
•Four factories in the Russian Federation (Moscow, Tula, and •Turnover approximately €115 in 2007
•Four factories in the Russian Federation (Moscow, Tula, and •Turnover approximately €115 in 2007
two sites in St-Petersburg,). 16.2% share of the market
two sites in St-Petersburg,). 16.2% share of the market
•• The total volume of Unilever's investments in the Russian
The total volume of Unilever's investments in the Russian 33 factories (Novosibirsk, Omsk and Tula)
factories (Novosibirsk, Omsk and Tula)
economy isis over $600 million
economy over $600 million •Capacity:50,000 tones of ice cream per year
•Capacity:50,000 tones of ice cream per year
•Over 4,500 employees
•Over 4,500 employees
Source:www.unilever.com

58. Unilever & Inmarko
“Unilever will keep Inmarko’s Odintsovo production facility
“Unilever will keep Inmarko’s
managers and invest in its brands,
Unilever acquired
Odintsovo production facility
managers and invest in its brands,
supply chain and advertising”
supply chain and advertising” PRODUCTION & DISTRIBUTION
Herman Verstraeten,
Herman Verstraeten,
General Director for Russia
General Director for Russia
Inmarko production plant
What are they key factors played aa
What are they key factors played
role in this acquisition?
role in this acquisition?
“Proper due diligence, investment
“Proper due diligence, investment
banker, advisors on the ground, local
banker, advisors on the ground, local
team ””
team
Advice: “key is to quickly integrate
Advice: “key is to quickly integrate
the business”
the business”
Interview :Oscar Lanner
Interview :Oscar Lanner
Inmarko warehouse
Unilever M&A
Unilever M&A
“Unilever's experience and resources will provide significant impetus for Inmarko's brands."
“Unilever's experience and resources will provide significant impetus for Inmarko's brands."
Dmitry Dokin
Dmitry Dokin
Inmarko Chairman
Inmarko Chairman
Source: just-food.com/article.aspx?ID=101120
www.inmarko.ru

59. Establishing a Joint Venture
 Advantages of a Joint Venture
1. Provides access to government contacts and existing distribution network
2. Provides local help minimizing problems associated with bureaucracy and
corruption
3. Sharing of profits and risks
4. Pooling of resources
5. Time-to-market advantages
 Joint Venture Best Practices
1. Establishing a JV in Russia demands meticulous planning and sustained
commitment
2. Thoroughly explore whether a potential partner shares your priorities and
expectations
3. Conduct due diligence as much as possible on partner before committing
4. Spend time and get to know the partner

60. Case Study on JV CCL-Kontur
Joint Venture: CCL-Kontur March 2008
The Deal: CCL Industries paid Cdn$16 million to acquire
a 50% stake in the assets of two label businesses owned
by Ilgar Mamedov
CCL Industries CCL-Kontur
•Canadian (Toronto) packaging and
•Canadian (Toronto) packaging and
label firm •Kontur owned by Ilgar Mamedov,
•Kontur owned by Ilgar Mamedov,
label firm
•Pressure sensitive, shrink-sleeve and Entrepreneur
Entrepreneur
•Pressure sensitive, shrink-sleeve and
in-mould labels for food and beverage •Two State-of-the-Art facilities:
•Two State-of-the-Art facilities:
in-mould labels for food and beverage
firms Kontur Plus (Moscow)
Kontur Plus (Moscow)
firms
•Operates 51 production facilities in N. Asterix (St. Petersburg)
Asterix (St. Petersburg)
•Operates 51 production facilities in N.
America, Europe, Latin America and •These two businesses generated
•These two businesses generated
America, Europe, Latin America and
Asia Cdn$26 million in sales in 2007
Cdn$26 million in sales in 2007
Asia
•Customers include Heineken, Coca-
•Customers include Heineken, Coca-
Cola, Knorr
Cola, Knorr

61. CCL Industries & Ilgar Mamedov
"Russia is another important step in establishing aaglobal footprint for our
"Russia is another important step in establishing global footprint for our
company."
company."
--Donald Lang, CEO, CCL
Donald Lang, CEO, CCL
"We have known Mr. Mamedov and his management team for some time and
"We have known Mr. Mamedov and his management team for some time and
have high regard for them and their knowledge of both the Russian label
have high regard for them and their knowledge of both the Russian label
industry and the business climate of the country in general. We consider them
industry and the business climate of the country in general. We consider them
excellent partners to introduce CCL label products and technologies into one of
excellent partners to introduce CCL label products and technologies into one of
the fastest growing markets in the world."
the fastest growing markets in the world."
--Geoffrey Martin, president and chief operating officer of CCL
Geoffrey Martin, president and chief operating officer of CCL

62. Case Study on JV- United Food Technologies
Joint Venture: United Food Technologies 2002
The Deal: Joint Venture between J.V.Gokal and Avalon group to build a 12,000-tonne tea
packing facility in the town of Serpukhov near Moscow
J.V.Gokal & Co Avalon Group
•Indian based conglomerate with group
•Indian based conglomerate with group
companies active in tea, sugar, power,
companies active in tea, sugar, power, •Privately owned, Russian
•Privately owned, Russian
investments, and real-estate.
investments, and real-estate. investment group
investment group
•One of India’s largest tea exporters,
•One of India’s largest tea exporters, •Diversifies interests in projects
•Diversifies interests in projects
annual shipments greater than $13
annual shipments greater than $13 across Property Development,
across Property Development,
million
million Contract Logistics, FMCG
Contract Logistics, FMCG
•Strong network in all tea growing
•Strong network in all tea growing Distribution & Brand Management,
Distribution & Brand Management,
regions including own presence in India,
regions including own presence in India, and Industrial Production
and Industrial Production
Sri Lanka and China
Sri Lanka and China •Leading joint venture partner for
•Leading joint venture partner for
•Major markets- Russia and Kazakhstan.
•Major markets- Russia and Kazakhstan. international corporations
international corporations
Rapidly expanding in the Far East,
Rapidly expanding in the Far East,
Africa, Europe, and North America
Africa, Europe, and North America

63. J.V.Gokal and Avalon Group
“Tie-up between Russian company Avalon and Indian company J.V. Gokal in recent years
“Tie-up between Russian company Avalon and Indian company J.V. Gokal in recent years
has expanded to become one of Russia’s top six tea producers."
has expanded to become one of Russia’s top six tea producers."
--Ramaz Chanturia, ,Head, Roschaikofe (Association of Russian tea and coffee companies)
Ramaz Chanturia Head, Roschaikofe (Association of Russian tea and coffee companies)
"The investment within Tea Processing and Packaging is realized through the project
"The investment within Tea Processing and Packaging is realized through the project
“Unifoods” in the form of an operational joint venture plant between Avalon Group and
“Unifoods” in the form of an operational joint venture plant between Avalon Group and
J.V.Gokal from India. This project was founded in 2000 with the investment into aa“brown
J.V.Gokal from India. This project was founded in 2000 with the investment into “brown
field” site in Serpuhov, Moscow Region and it’s redevelopment into one of the top 55tea
field” site in Serpuhov, Moscow Region and it’s redevelopment into one of the top tea
processing plants in Russia and establishing itself as aabenchmark investment case study
processing plants in Russia and establishing itself as benchmark investment case study
for the tea industry."
for the tea industry." Tea Processing and Packaging
--Avalon Group
Avalon Group

64. Establishing a Licensing Agreement
 Advantages of a Licensing Agreement
1. Avoids risks
2. Related to investments in physical assets of the firm (equipment)
3. Gain and develop valuable experience in marketing sphere
4. Allows licensees to establish long-term relationship with licensors
5. Advantageous for the newly internationalized company, because
the need for research of target market is decreased
6. Encourage the licensee to support the product in the host country
 Licensing Best Practices
1. Evaluate the abilities and creditability of the licensee
2. Contract must includes all rights, obligations, lawsuits-as detailed
as possible
3. The company scale of the licensee should be comparable to that
of licensor.

65. Case Study on Licensing- Kirin Europe & NWD
Licensing: North Winds Distribution Ltd. 2007
The Deal: The production of KIRIN ICHIBAN for the Russian market will entrusted by NWD to Ivan
Taranov Breweries in Karliningrad, which is a subsidiary of Heineken Russia.
North Winds Distribution
& Ivan Taranov Breweries
Kirin Europe
•$450 million net income in 2006 •North Winds Distribution Ltd. Is part
•North Winds Distribution Ltd. Is part
International sales focus on lager and of the Ivan Taranov Breweries (5% of
of the Ivan Taranov Breweries (5% of
Ichiban Russian beer market share)
Russian beer market share)
•Brewed at plants around the world ••Heineken bought the ITB group for
Heineken bought the ITB group for
(USA, Taiwan, Germany, Australia, $560 million in 2005
$560 million in 2005
China and Philippines) ••ITB had three breweries in
ITB had three breweries in
•Aiming to generate 30% of sales and Kaliningard, Novotroitsk and
Kaliningard, Novotroitsk and
operating income from overseas Khabarovsk
Khabarovsk
operations in 2015

66. 66
Licensing Goals:
Kirin Europe•• Improve cost competitiveness
GmBH (Germany)
Improve product freshness
• Expand sales of Kirin brand products in
Russia, where there is double-digital growth in
order to improve product freshness
•In 1992, Kirin Japan signed aa
•In 1992, Kirin Japan signed Kirin Europe
production and licensing agreement
production and licensing agreement
with Charles Wells Ltd., which is Contract
with Charles Wells Ltd., which is
based in UK
based in UK North Winds Distribution
•In 1993, started to produce,
•In 1993, started to produce,
brewing and packaging in UK
brewing and packaging in UK North Winds Ivan Taranruv
Distribution Breweries
•In 2006, licensed with North Wind
•In 2006, licensed with North Wind Company (A subsidiary of
Distribution Ltd, to brew and
Distribution Ltd, to brew and Marketing, Distribution Heineken Russia)
package Kirin Ichiban in Russia
package Kirin Ichiban in Russia Brewing from 2006
66

67. How can ACG help you?
 Geographic specialization in the Russia/CIS market.
 Provide new market entry assistance including product launches,
service launches, facilities outsourcing, labor outsourcing,
investments and divestitures assistance and global M&A.
 Help with market research, feasibility studies, strategy
development, and business planning.
 Help you to procure the two most crucial resources in new
market entry namely lack of physical capital (PP&E, cash, hard
assets, etc) and human capital (relevant managerial expertise).
 Help you to overcome language and cultural barriers through
cross-cultural communication and integration.
October 7, 2009 www.aginskyconsulting.com 67

68. Conclusion
 The time for cooperation between India and
Russia has never been better
 Plenty of resources on both sides to be taken
advantage of
 Have a clear strategy and an end result in mind
 Know the process and requirements for getting
to that end result
 Rely on experts who can “bridge” the needs and
wants of all parties internationally
October 7, 2009 www.aginskyconsulting.com 68

69. For a copy of this presentation please contact us directly.
Thank you
AGINSKY CONSULTING GROUP, LLC.
WEB: www.aginskyconsulting.com
EMAIL: info@aginskyconsulting.com
TEL: 503-546-4049
October 7, 2009 www.aginskyconsulting.com 69