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The Rise of German Wines in Russia

Dubai, 14th of November 2011

Team 8: - Andie Piddington - Ashish Kumar Rastogi - Zaruhi Tonapetyan - Cheriyan Joseph N - Ankit Lunia - Luis Pinho de Aguiar 1

Index Why German Wine in the Baden Region? Our products and their adaptation Market Tendencies in Russia Why us? Entry Strategy in the Russian Market Interviews and Real World Issues Impacts of our Cross Cultural Point of View Ethics in our business Overall impact of culture in our Business 2 .

third largest wine region[ 3 . which is protected by the Black Forest and the Vosges mountains to the west of Rhine. Baden is divided into nine districts (Bereiche). and is therefore one of Germany's warmest location.Why German Wine in the Baden Region? ‡With 15.300 acres) under vine in 2008.300 acres) ‡A large number of grape varieties present in Baden is Germany's under vine in 2008. which is more than any other German wine region. With 15. and are responsible for 85% of the region's production. ‡Much of Baden is situated in the Rhine rift. its wines are usually more full-bodied and higher in alcohol than wines from many other German regions. Therefore. Riesling. MullerThurgau«ect).906 hectares (39. number around 100. ‡Due to its very large north-south length.906 hectares (39. the region(eg Spätburgunder. ‡Winemaking cooperatives are very common in Baden. Baden is Germany's third largest wine region.

Several important segments to focus on are identified 4 . with a market share of 4% in 2009. The population is huge and its tastes cannot be easily generalized.Market Tendencies in Germany and Russia While the German wine industry does not enjoy the same international reputation as that of France or Italy. Our team believes the time is right to build on this success and introduce a unique German wine experience internationally. The recent trends in Russia. German wines have already established a foothold in the Russian market. and despite the recent financial crisis. is still going strong. (reported by Business Monitor International) are toward premium products. Russian consumer goods market has been steadily growing since 1998. including high-end wines. it has a rich history and has produced award-winning brands.

skills. etc. vanilla Marketing:  Sold in larger bottle  Colorful label with serving instructions  Sold in low-market grocery stores Low-alcohol white wine (4-6% alcohol)  Target: Upper middle class Russian women  Season: Spring & summer (March ± September)  Sweeter & fruity. with different levels of customization in order to provide the diversified experiences that Russian consumers want: How did the business grow nationally? What organization structure was adopted? How has the organization changed over time? What about staffing (team. to be served as an aperitif Marketing:  Sold in slim.)? Spiced red wine blend. to be served hot  Target: lower middle class Russians  Season: winter months (October ± March)  3 varieties: Cinnamon.Our products and their adaptation We will offer four different wine products. nutmeg. grocery stores and midlevel restaurants 5 . curvy wine bottle  Label will display lower alcohol and fruity flavor  Sold in wine boutiques and grocery stores Premium Spatburgunder with gold flakes  Target: upper class / nouveau riche Russians  Season: year-round Marketing:  Sold in black bottle with gold and black label  Sold in expensive wine boutiques & elite restaurants Mid-priced Pinot Noir  Target: middle class Russians  Season: year-round Marketing:  Sold in standard bottle with silver and black label  Sold in wine boutiques. leadership.

excise tax predicted increase of 10 ± 37%) are calculated based on customs cost of the Wine. 6 .Why us? Competitive Advantages 1. Customs duties. giving us the opportunity to make a market entry. i. German wine market in Russia is quite untapped and only is represented in the elite wine segment. which in turn requires additional manpower. Legal obstacles 1.e. with the increase in average personal monthly incomes (as per Scottish development international) and our variety of wine offerings. 2. and now Russian wine market is counting on imported wines growing at around 31% in volume from 2008. 2. which is required for importers not only to run a warehouse and wholesale operations in Russia but also to acquire excise stamps. fees and taxes (2011. The Russian alcohol sector is regulated and controlled by at least four Government agencies. 3. most important of these is FSRAM (Federal Service for the Regulation of the Alcohol Market). The Classifications of wines we offer cater to round the year sales. (As it is described in the previous slide). The Russian local wine market have been downsizing for the last 10 to 15 years. FSRAM has taken a hard stance on licensing. FSRAM reportedly has a long list of documents and requirements necessary for obtaining a five-year wholesale license.: cost of the Wine plus transportation expenses forcing a cost impact on the wines. all segments of the Russian market will open to the German wines.

Organizational Structure. To Be Modified Executive Director Internal Sales Assistant Winemaker Sales Office Butler Membership Administration 7 .

IT. where restaurants. we are developing the local market and we are creating jobs for locals.). We will outsource to local companies some of the support services needed (accounting. Now that we have taken the decision to expand to this new market. Petersburg. etc. like cocktails for the owners/managers of the most important restaurants/hotels. but sell the experience of drinking a unique wine that¶s has been developed specifically for the client. Initially we will create a small number of jobs but the idea is to grow when we expand to St. Our company also will develop a B2B site. tax. winery shops and supermarkets can order or ask for more details. Petersburg another important market for the success of our Company. . People will be able to taste our products and be informed of mission and values. It will be divided into two different areas. ‡ On the other hand local inhabitants will also welcome us due to our high quality product and unique features that satisfy their real needs. we will start creating a network with the owners of the most important restaurants. ‡ One of the main responsibilities for our representative in Russia is to create a good relationship with the local government so that there are no legal barriers. hotels. We will also be present in the main fairs of 8 the region with stands. The first will the office where our team (one German expat and his team of Russian sales representatives will be based) and an area with a show room which will allow the costumer to have an unique experience of our region of Baden.Entry Strategy in the Russian Market ‡ Our companies strategy is to enter the Russian market and sell wines that have been developed and adapted to meet with the customers needs. We will supply free samples of our product to them in order to start a relationship. hotels and winery shops in Moscow. etc. After acquiring enough experience of the market we will expand to St. We are going to open a representation initially in Moscow.). ‡ We will focus initially in Moscow due to the access to a large number of potential consumers. ‡ There will be a initial period of setting up our representative in Moscow (we need to choose our location). Thanks to our partnership with a local importer/distributor (legally required) we will have access to his distributing channels. Our commercial efforts will be in these two big cities but we will not be limited to them. The government will welcome our company because we are bringing foreign investment into the country. This show room will also be used to organize commercial events. Our goal is not to sell just wine. while keeping in house some other critical areas (ex.

graphic slide for business strategy Russian Government Russian Market B2B website Service outsource to locals Representation in Moscow Local wine fairs Jobs Creation Admin Office Show room Restaurants Shops Local Importer FDI Directly to customer 9 .

F&B consultant in Russia (emailed) ‡ Steffen Christmann. spent 10 yrs in Germany. wine consultant in Munich ‡ Andrey Tkemaladze. Chairman of German Wine Producers Union ‡ Stephen Jurende. organic wine consultant.Interviews and Real World Issues Interview Targets & Protocols ‡ Svetlana Simonova. (emailed) 10 . Russian wine boutique/supermarket owner ‡ Roy Cook.

Prefers long term goal. Russian Organization culture Positions are defined in terms of social status and authority in an organization. compromising is bad business. Goal achievement is secondary over acquisition of power in an organization. Due to hierarchy in nature. However. hence try to be more caring. They are more result-oriented in nature. as this may be a test of your patience. ‡ It should be realized that "Final Offers" are often not actually the end of the negotiations. Do not expect an apology from a late Russian. ‡ Russians are known as great "sitters" during negotiations. this demonstrates their tremendous patience. . superior-subordinate relationships are defined as impersonal and implying equality within a group or organization. Social status is more important. Goal achievement is primary over acquisition of power in an organization. ‡ Some 'hard-line' Russians still view compromise as a sign of weakness.Hefstede) German Organization culture Positions are defined in terms of tasks in an organization. To these individuals. Authority is impersonal and comes from roles and function. hence try to be more competitive. Due to less hierarchy in nature. Prefer short term goal. and do not demonstrate any kind of attitude if your business appointments begin one or two hours late.Cultural difference: Germany Vs Russia (Cultural map as of G. This may also be a test of your patience. and often refuse to back down. you are expected to be on time to all business appointments. Overall impact of culture in our Business ‡It is extremely difficult to do business in Russia without help from a local. gifts. ‡As a foreigner. money or other items could be a helpful. and that often times the outcome will be more beneficial and attractive if one can hold out. Authority directly comes from status. punctuality is not. To help with this. ‡ Patience is an extremely important virtue among Russians. superior-subordinate relationships are defined as personal and implying superior over another. your Russian counterpart may be late.

‡ Our company/representation in Russia must follow the German high standards and work with integrity. avoiding actions that might put in risk our future business in the market. Alcoholism). Our company works everyday with all stakeholders to guarantee sustainable production of quality wines in Germany respecting the environment and the law. transparency. ‡ Our company is also very interested in the use of recycled glass for the bottles in order to maintain our ecological foot print smaller in the world. For this reason our company works with the authorities and supports campaigns of the incentive moderate drinking. avoid paying bribes even if it slows down our penetration in the market. Social awareness of Alcohol ‡ Our company is well aware of its responsibilities when it comes to selling alcohol. honesty. while not illegal it can lead to serious social problems (ex. Respect for Environment ‡ Our company employs production techniques that avoid using the chemicals and fertilizers that might pollute the environment.Ethics in our business Potential Ethical Issues in our Business Bribary to ease entry in new market Corruption and Briberies ‡ In 2010 Russia was on the 154th place on the Corruption No respect for Enviornment Alchool Selling Perceptions Index of a total of 178 countries. with a unique objective of transforming the experience of drinking our wines an enjoyable but responsible one. 12 .This means that there is a big perception that Russia is a corrupted country. concise. ‡ Our partnership with the importer/distributor must be a clear. Over the last few years Russia has been decreasing in the rankings (in 2006 the country was in 121st place). purposeful and truthful one. reliability.

jpg ‡http://trade.References ‡http://en.com/culture-map/ ‡http://0.tqn.transparency.Statistisches Bundesamt.de (German Agricultural Society): Baden ‡Landwirtschaftliche Bodennutzung .gov/goodgovernance/adobe/IDARIDBusEthicsGuidelinesEng.pdf ‡University of Illinois at Urbana-Champaign ‡www.com/d/wine/1/0/H/6/germanwinelabel. References: GAIN Report 2010/2007 13 .Areas under vine].org/wiki/German_wine ‡http://christopherliechty.Rebflächen .wikipedia.org ‡German Wine Institute: German wine statistics 2009/2010 ‡Wein.Fachserie 3 Reihe 3.2008 [Agricultural land use .5 .1. 20 ‡08.

Appendix: Approved research proposition 14 .

The scope of our Business Model 15 .

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