Produkty Pitania Distributed
— 2005-06-14 —

Interview with Produkty PItania Vice-President Damir Imamovic

The need or initial marketing data prompts manufacturers to create their own supplementary distribution systems. Damir Imamovic, Produkty Pitania Vice-President talks about distribution in his company.

Founded in 1994, Produkty Pitania Company is Russia’s largest frozen convenience foods and poultry-based products manufacturer. It offers over 39 types of frozen convenience foods in various categories with its Zolotoy Petushok and Domashniaya Skazka brands. The company has its own plant in Kaliningrad and its own distributions system encompassing all of Russia, CIS and former USSR. The company employs 1,800 people with 1,500 of them working in the production process.

Before we founded our first production facility in Kaliningrad, we used our distribution system to deliver products from other manufacturers.

At this time the traditional wholesale system was meeting general developments of the market. Starting in 1996, positive changes were observed in the distribution market and notwithstanding the financial crisis of 1998,  it provided an impetus for development of correct distribution.

Before August 1998, as the market growth was steady, relations with trade chain participants were spontaneous. Organized growth followed after the crisis shock.

Our production plan scheduled for 1997 was only implemented at the height of the 1998 crisis and we selected Kaliningrad as production venue due to its geographical and economic advantages.

Eventually we managed to create a nationwide distribution system: our company is present in all cities with a population of a million or more and it is expanding its presence in other strategic locations with populations less that a million residents thousand residents). In all other areas we outsource distribution.

Today the company has three distribution centers, one in Kaliningrad, Brukhovetskaya village of Krasnodar Territory and Staraya Kupavna in the Moscow region.

The market demonstrates steady development but it still not sufficient yet. As older freezers used in distribution are replaced with newer ones, the sector develops but given our production capabilities we are forced to build our own freezing facilities from the very start.

The main transportation for our products  in Russia is by rail. We only use railroads to distribute our products and the last mile is automobile is necessary. Every distribution center we have built from the very start is near a railroad. Products are delivered from Moscow to Novosibirsk within only one week.

From distribution and promotion point of view each region of Russia has specific difficulties for us to overcome. For instance we look at Yekaterinburg, Chelyabinks and Tumen as one of those territories.

The food industry structure and concentration is very similar in many parts of Russia, but what differs is consumer preference. That is why we are trying to set up our offices in all cities.

I believe our model is very simple and I am proud that two or three companies working in our sector have copied our structure. As a rule a representative office is no larger than (60 m) with “fast” access to the Internet. These offices are equipped with three PCs, a regional trade representative with a car and two local trade representatives (wholesale and retail).

Regional trade representatives supervise the performance of the regional trade representative, who then reports their findings to the commercial operations director.

I believe that successful distribution is based on active performance at the local (regional) level. We should not only understand what is going on but also why and what will it look like in the future.

As the product range expands more difficulties will appear. With only 10—15 products, failure was nearly impossible. However, now that we have 50—70 product names we cannot work based on generalized international experience. We must conduct market research for any new product we offer. Only if we can predict its future, then it will be delivered and thus we will minimize our risks.

Logistics in Russia uses western models and standards. We use these models without any innovations. At the same time, we feel like guests from the future in a sense that we can predict a lot of developments beforehand. This helps us a lot.

We also use American and European experience in production, which has  worked so far, as we offer no products that would fail to succeed.

We also work in the food service segments with Rostiks Network of Restaurants and we ship ready-made products directly to these restaurants. We are also positive that our distribution system will allow us to cooperate with smaller clients of about 20-30 outlets.

We will also rely upon our distribution partners depending on the local market experience.

For distribution it is highly important that there are no extra links between manufacturer and retailer. The current trend is not removing distribution as it is, but reducing the number of intermediaries.

Interview by Katerina Chinarova