Wimm-Bill-Dann Foods OJSC was founded in 1992 and is the largest manufacturer of dairy products and a leading producer of juices and beverages in Russia and the CIS. It has 38 manufacturing facilities in Russia, Ukraine, Kyrgyzstan, Uzbekistan and Georgia, with more than 16,000 employees.
In 2005, the company became the first Russian dairy producer to receive approval from the European Commission to export its products into the European Union.
In 1992, the Wimm-Bill-Dann brand name was selected to attract consumers who preferred products with foreign-sounding names due to their perceived higher quality and novelty, and since its introduction, the ‘Wimm-Bill-Dann’ name has become recognised in the majority of Russian households.
What is the current state of Wimm-Bill-Dann’s beverage category?
Gary Sobel: Despite the economic crisis, we haven’t suffered a decline in our brands. In fact, we have four big stories to tell.
The first is for LubimiSat (meaning ‘Favourite Garden’). This is an established brand, but we decided to make a significant reduction in the assortment of flavours, bringing it down from around 60-65 SKUs to the mid 40s. We eliminated seasonal flavours and those such as raspberry, concentrating on just the most popular.
Our TV advertising is very strong here, with animation of Mr Carrot and Mrs Apple and the Lublimi family tree, with humour that can be taken two ways: on an adult level, and for a child it’s just funny. We carried out relatively inexpensive promotions, with a lottery for the car in the parking lot and some ‘buy 2 get 1 free’ offers. Our market share here has risen from 15% at the start of the crisis in December 2008, to now 20%.
The second product success story is our Rodniki Rossii mineral water, which means ‘Russian Springs’. I have made about 100 commercials in my life and this has to be among the top five.
A man in a canoe paddles to a beautiful, natural spot – the original source of the water. Today, many competing brands are processed waters with minerals added back in. Ours isn’t from just one source, but it’s natural source water from ecologically pure areas. Water from the major multinationals is quite expensive and has strong support, but we continue to invest in the brand and have one third Share of Voice on national television in the category this year.
How are things now for the Russian consumer?
Sobel: It’s coming to the end of the two-year crisis, but it has been tough for many, with unemployment at around 8-9% for about two years now. For the past few years, many workers were not paid regularly, or they suffered salary cuts, sometimes by as much as a third of their income.
The juice market saw double-digit decline in 2009 as well as many other categories. For most consumers, the better times have begun only in the last few months and we’re now seeing volume growth start again in the categories.
What about drinks for children?
Sobel: This is our next big story. The children’s brand Zdraivery is made up of two words, ‘health’ and ‘drive’. This is doing so well that it’s now a major brand across many categories, including cheese, yogurts, drinking yogurts, juice and juice drinks.
The brand ambassadors for Zdraivery are a team of five animals: a zebra, platypus, rhino and others who use teamwork to solve life’s challenges. These are all natural products, with no GMO ingredients, no artificial additives, sweeteners, flavours or colours – just fruit, dairy and grains.
Its main competitor is Danone’s Raftishka (meaning ‘Helps you grow’) – the equivalent of Danone4kids. We decided to aim for a target market of slightly older children but with strong, wholesome values and an ethos of playing together.
Our aim was to break even by the end of the second year, but surprisingly we achieved this by the end of the first year and we believe that already in 2011 it will be close to $100m brand.
It’s quite premium, containing the best quality of juice concentrates and other ingredients, and we knew we didn’t wish to go for the aggressive fighting style advertising of some value brands, but wanted to emphasise the natural benefits and the teamwork aspect.
And what about your value brands?
Sobel: When it became evident that the economic crisis was going to hit, we knew we had to cater for the hard-pressed consumer with a value brand. Our Gold Classic range of nectars and juice drinks does just that. We offered five flavours originally and now we have eight.
For instance, we added tomato juice for the Horeca sector, and grape. It is notable that we have better artwork than most brands in the bottom tier, using four colours for instance. However, while many basic brands in cartons need to be snipped open, we kept the Tetra screw cap. This adds about 3% to the price but we feel from a sales viewpoint that it has been worthwhile. The margins are not the same here as in the rest of the portfolio, of course, but we have done some careful cost optimising and we knew it could work.
What sort of formats do you pack in?
Sobel: We have more than 40 formats, with many beverages in Tetra Pak cartons and some in PET. We also have pouch packaging and are looking to extend this format with a stand-up pouch.
Do you have a large R&D department?
Sobel: Yes, we have around 40-45 people across the whole company, so about 5-10 people work continually on beverages.
Have you cannibalised any of your other brands, J7 for instance?
Sobel: J7 and Zdraivery have two different target audiences, so the impact was insignificant, and J7 continued to gain share in its segment. Both brands are premium, but showed good share performance in challenging times.
What systems have you introduced in plant?
Sobel: We have mostly Tetra Pak lines, some Combi and a Procomac PET line. We use SLE (System Line Effectiveness) to assess efficiency, and as a result have made tremendous efforts to eliminate costly short runs and reduce losses on concentrate.
This has required better production planning, in some cases more warehousing but we’re now trying not to produce less than 100 tonnes in one run. We’re also now better able to manage our stock and are aiming to have no expired goods.
We also want to eliminate discounting when stock is approaching expiry dates. This used to cost us $500,000 and we have reduced that to $250,000. It has taken a lot of effort but we will see even better results in the long-term.
We know that some of the largest players have been integrating their juice production into the mothership, but this isn’t a cheap thing to do and we know that they must be suffering the costs of this right now.
What about the heat this last summer? I understand you had temperatures as high as 40 degrees.
Sobel: Yes, we had record temperatures and fires, even in central Russia. The heat wasn’t particularly good for our juice business but it was a good way to persuade people to try our water. We can see our Rodniki Rossii brand being twice as big next year, whatever the weather.
Where do you plan to expand next geographically?
Sobel: We’re now 18 years old and have about 90% of our sales in Russia. However, we’re expanding in the Ukraine and moving into the Baltics and other white space. We intend to build our international business from the ground up. We have had double-digit growth in volume even during these difficult years, and that’s unheard of in the west and rare even in other emerging markets.
What other strategies have you employed to ensure retail success?
Sobel: We have introduced MML (a ‘Minimum Must List’) – a tool that helps salespeople put the right, fastest selling SKUs on the shelf. We’re also strong in distribution and logistics and have built another strong brand with Granfor – a new cheese brand – which is doing well across all types of cheese.
Where does Wimm-Bill-Dann stand in the market right now?
Sobel: We believe we’re now at No 2 in juice, and No 1 in the key Moscow market. In beverages, we were 4th in 2006, rising to 3rd by 2008. No 1 in juice is Lebedyansky, owned by Pepsi.
What is your background, and how has this benefited the company?
Sobel: I started my career with 13 years at Procter & Gamble in marketing, where I learned to focus on the needs of the consumer and had the good fortune to work in several countries, including Russia.
Coming to Wimm-Bill-Dann was a natural move, allowing me to leverage my corporate strengths in a company that’s still relatively small and nimble.
Gary Sobel is head of beverages at Wimm-Bill-Dann.
Claire Phoenix is managing editor of Beverage Innovation magazine. Subscribe here.
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