Russian Market Gains Additional Brands

At first sight it is difficult to tell whether the Tires & Rubber show, held for the ninth time in Moscow recently, is a show for the industry or the trade. Compared with the number of new tyre manufacturers, material suppliers, machinery and equipment providers, the tyre trade seems to have gained some ground at this year’s show compared to 2005. This statement applies to Russian as well as European companies.

For example this year Dutch company Van den Ban Autobanden was exhibiting in Moscow for the very first time. The goal was to introduce the company and sound out the market. “First we want to present ourselves here,” explains commercial manager Cyril Versteeg in an interview with Tyres & Accessories. In fact, there have been business contacts with Russian companies in the past but Van den Ban concentrated mainly on the Eastern markets of the recently enlarged European Union. “These markets are more accessible,” Versteeg adds. At Van den Ban’s headquarter in Hellevoetsluis there are sales personnel that speak all the local languages of these markets, he adds.

All the same, Van den Ban firmly believes that in the future Russia too can become a strong market for the Dutch private brands as well as the premium brands available from the wholesaler. “We can be successful in Russia,” Versteeg asserts. “It’s not difficult but it takes time to get a foothold.” But before a professional wholesaler such as Van Den Ban firmly sets foot in a new market it has to be thoroughly explored. For example it isn’t yet clear exactly which products will be required in order to establish good and lasting business relations in the Russian market.

Should these be premium tyres or the exclusive and private brands that Van den Ban offers? Or Both? Apart from the supply of high-quality private branded products such as Flamingo or Novex, and the Clear exclusive brand, the Dutch wholesaler also helps with merchandising and sales promotion, Cyril Versteeg points out.

Potential customers in Russia could be dealers with their “own reasonable distribution as a prerequisite.” Such dealers can mainly be found in Russia’s larger cities where the standard of business operations is now approaching Western levels. First impressions of the Russian market were quite promising for the Dutch tyre wholesaler, says Versteeg, speaking after the Tires & Rubber show in Moscow. Promising in terms of possible new customers.

Like other wholesalers from Holland, Belgium or Germany, Russian wholesalers too were doing business at the Moscow show, without having actually booked a stand. One example is Xarello Trading Ltd. This new wholesaling company was founded about a year ago by the two brothers Igor and Yuri Degtyarev. Igor Degtyarev has many years’ experience in the tyre business; he is an automation engineer and used to work as a supply manager at Amtel, one of the biggest Russian manufacturers. Right now the company is still establishing itself, however there is already a central warehouse in Gdansk in Poland, from which Eastern European markets are supplied. Xarello Trading is registered in Cyprus and currently only sells tyres produced by Sibur-Russian Tires. In Poland Xarello is the general distributor for these tyres, Igor Degtyarev explains.

However, according to the terms of the contract, Xarello cannot sell Sibur tyres in Russia but only on export markets. The tyres are not supplied by the manufacturer itself for internal reasons but by another Gazprom subsidiary, “Gazexport”. This company manages all exports for the Russian gas monopoly to which the majority of the Sibur group belongs. This will change in the near future, Mr Degtyarev explains, because the newly-formed tyre holding Sibur-Russian Tires will take on new operative responsibilities such as the coordination of exports as part of the spin-off deal. So in future Xarello will trade directly with the manufacturer Sibur-Russian Tires and not with Gazexport.

“Now we want to improve our sales in Western Europe,” Igor Detyarev asserts. At the moment there are only a few sporadic customers in Western Europe. Although currently commercial, agricultural and forestry tyres make up the lion’s share of Xarello’s sales into Eastern Europe, Latin America and Africa, during this summer the new Sibur passenger car tyre brand Cordiant will be available to the wholesaler. The Sibur corporation launched this new passenger car tyre brand last summer (as reported in Tyres & Accessories September 2005). At Xarello it is hoped that the Cordiant brand will match the high Western European quality standards and expectations. Furthermore, the new Sibur truck tyre brand “Tyrex” will also be available soon for Xarello’s customers. Mr Detyarev firmly believes that he has the right products for the demanding Western European markets.

Currently tyres made by Sibur – the company is traditionally strong in truck tyres and is Russian market leader in this and other segments – are barely known to customers outside of Russia and the CIS states. For example, last year only 10 per cent of the 13.4 million tyres that were produced at Sibur-Russian Tires’ four factories in Russia were sold on export markets and most of these were sold in the states of the former Sovjet Union. In order to change this for his own good, Igor Degtyarev plans common marketing activities in Western Europe together with Sibur-Russian Tires. Xarello is confident that there will be demand from European dealers and wholesalers.
The fact that the Russian tyre market now operates more and more according to Western standards is illustrated by the increasing number of exclusive and general importers of Western and Far-Eastern branded tyres. For example, since 2004, the Moscow-based trading company Ronex has acted as exclusive importer and distributor for the Korean Nexen Tire Corp.

Together with Nexen’s first brand, Ronex also sells the secondary brand Roadstone on the Russian and the Ukrainian markets, explains Yriy Ganagov. In total more than 500 different passenger and light truck tyre sizes and models can be offered. Last summer, when business with Nexen and Roadstone tyres started to unfold, Ronex was able to sign up with two more tyre suppliers. Now the Russian trade company also sells truck tyres produced by Kyoto Japan (Chinese production) and by Shandong Chengshan (also China). According to Ganagov, Ronex sells 300,000 tyres per year, of which the Nexen brand has the biggest share.
At the show in Moscow, Ronex booked a huge floor space for a trading company and clearly invested heavily in the stand design. It was important to make the Nexen brand known to the Russian tyre dealers and the market; that was Ronex’s target for the exhibition.

First impressions seemed favourable, according to Yriy Ganagov. To emphasise the Nexen presence, Ronex’s stand was painted in Nexen’s house colour purple and Nexen’s latest products were displayed everywhere. Ronex also hired some scantily-clad exhibition hostesses – all this attracted attention at the Tires & Rubber show and Yriy Ganagov was quite pleased with the outcome of the exhibition. As well as importing the tyres, Ronex is responsible for the marketing activities in Russia for the Korean manufacturer. Among the imminent plans is the introduction of agricultural tyres to the Russian market which would complete Ronex’s product portfolio.

Among the trading companies that are already well established on the Russian market is the Rimeks Group. The company, with its various activities in the tyre and wheel market, belongs to the biggest players in the Ural region of Russia. Firstly there is the wholesale business “Rimeks Trade” which belongs to the group based in Yekaterinburg. Apart from passenger and truck tyres and Russian-made wheels, Western brands such as Michelin, Bridgestone, Goodyear, Continental, Pirelli, etc. are distributed regionally. The (for Western Europeans at least) best-known wheel brand in Rimeks’ wheel portfolio is Alessio. The wholesale business is mainly a regional business, which operates out of a central warehouse of 18,000 square metres. Apart from its headquarters in Yekaterinburg, Rimeks owns two outposts in the cities of Perm and Tyumen. At these three locations the company also runs several local tyre retail shops.

Another main pillar of the Rimeks Group is its own “Partner Programm”. Currently there are 42 tyre dealerships in the Ural region that are participating in the wholesaler’s partner programme. This partnership between entrepreneur-owned dealerships and Rimeks is based on the following motto: “To carry on business independently but not on your own.” Apart from the Rimeks logo that has a good reputation with the customers, the wholesaler also assists in the area of finance (debt guarantees), logistics, marketing, and staff training. Together with the tyre trading business the Rimeks group also operates ten car repair shops, a small transportation company and is a Subaru car dealer.