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Can Local Brands Conquer Global Markets? — the experience of UIA, Nemiroff and Ajax Systems

Every year, Ukrainian successful market players receive awards for their achievements and share unique experiences at the Ukrainian Creative Stories event. This year is no exception: the UCS took place at the end of May in the PMHUB event space, where companies discussed a hot topic: Can local brands expand in international markets?

Ukrainian Creative Stories is a platform that unites events of the Ukrainian creative sphere under one roof. UCS 2021 consists of the competition part of the Ukrainian Creative Awards and Stories - entertainment and educational part.

At the event, attendees were treated to a fascinating three-way panel discussion hosted by Parimatch Tech and featuring Ukrainian International Airlines board member Iurii Miroshnikov, Ajax Systems CMO Valentin Gritsenko, and the CEO of Nemiroff, Iurii Sorochinskii.

The three successful Ukrainian businessmen had come together—moderated by Kseniia Morozova, Head of Sponsorship Parimatch Tech, and Ekaterina Amirkhanova, Creative Director of Parimatch Tech — to share their experiences of promoting products to foreign markets. But it wasn’t all tales of instant success; they also mentioned the failures and the modifications they’d had to make to win the hearts of new consumers.

One of the main goals of Parimatch Tech is scaling up and entering new countries, hence the theme of the discussion: Going Global. Events like this allow the company to spread the word about the opportunities for Ukrainian businesses in the global market, answer the questions of local players contemplating taking the plunge, and inspiring them to make the big decision!

Preparing a product to enter the international market

Valentin Gritsenko: When we founded Ajax Systems, we had no plans to enter the global market. We understood there was a local market for the product.

We created the first generation of our security system, and it became pretty successful in Ukraine. But actually, we just created a local model that replaced the European ones.

When we decided to move onto the international market, we realized our product wasn’t really ready. We had to go back to the drawing board and create a competitive world-class product from scratch. Professional safety systems have three major global exhibitions—one takes place in the States, and the other two in Europe. To enter these markets, you have to participate in the exhibitions. That’s how we realized Ajax was more suitable for the European market.

We decided to start with Italy, widely considered to be the oldest security system market. There are lots of small family-owned companies with specializations that cater to narrow niches. At the same time, the top players, Israeli and Canadian companies, could no longer keep up with technological developments like the Internet of Things and cloud solutions.

We had the right product at the right time and managed to enter the Italian market at just the right moment.

A few years later, we chose Andrei Shevchenko as our ambassador for the Italian market. Why? Every time we went to Italy with our product and said we were from Ukraine, people immediately asked about Shevchenko. Italy is divided into provinces, and the inhabitants of each province are fiercely loyal to their region, but Andrei was appreciated everywhere by fans of Inter and Roma alike. That’s how we came up with the idea of making him our ambassador. It’s been nearly a year since then, and we’re seeing tangible results in terms of sales growth and brand awareness. Over the year, Ajax Systems climbed to third place in Italy.

Iurii Sorochinskii: I started working at Nemiroff in 1997. Back then, our slogan was: “For Nemiroff all over the world,” which was also what we were aiming for. We immediately set our sights on the largest market—American. In 1998, two “Texas Rangers” came to us and decided to buy Ukrainian vodka. They had money, but they didn’t know anything about alcohol, and we didn’t know anything about the American market. So, we didn’t come to any agreement. From 1999, when we were able to meet the needs of the Ukrainian market and create a big enough production base, we began to enter neighboring markets.

The Soviet Union had collapsed just 8 years earlier, and mentally part of our target audience still lived there. Therefore, Armenia, Georgia, Azerbaijan, Belarus, and Moldova were the first countries on our list.

In 2014, we began a new stage of entering international markets. We already occupied the first or second position in our main nearby markets in the strong spirits niche. And at that moment, when the large Russian market was closed for us by law, we packed several bottles of vodka into a suitcase and flew to America expecting to make a breakthrough.

The question we were asked there was like a cold shower: “Why do we need another vodka?” When we showed them our product, they told us it was old-school and boring.

So, our challenge was to answer the question, why do the States need yet another vodka? And secondly, to develop a new product. It took us about a year. We changed the concept we’d been living with for 15–20 years, created a completely new design (we used to have a vertical logo, and now it’s horizontal), completely redesigned the bottle, and launched a new premium product.

When we showed it to the Americans a year later, we received a completely different reaction. That moment was when we began our entrance into the American market, and then we brought the new product back home to our local neighbors.

Our presence in different countries around the world and the understanding that we have to communicate with the end consumer in these countries took us to the next level of marketing support for the brand. And since 2018, we have been the exclusive vodka partner of the UFC. And at the end of 2019, we completed negotiations and signed a contract with Coca-Cola HBC. Coca-Cola now distributes our product throughout Europe, in Poland, Austria, Italy, the Baltic countries, and Moldova.

Today we have 60 markets with monthly or quarterly orders and another 20 with orders every six or twelve months.

Iurii Miroshnikov: UIA has been focused on international markets from the very beginning. It usually takes us about a year to prepare a new route cycle: analyzing the market, the economy, the cultural, economic, and political ties of the new country with Ukraine, and, of course, the competitive environment (aviation is an incredibly competitive business).

Every market has its own particular risks. They always exist, but sometimes they’re acceptable, and sometimes they’re not. Risk assessment is an integral part of the preparatory work. For example, UIA has always really wanted to fly to Iraq, but it’s never happened because of what we consider to be unacceptable risks.

Before the COVID-19 pandemic, we flew to over 40 countries. We have a representative office in each one—either with our own staff or a contracted workforce. Choosing a partner and concluding agreements is one of the elements of preparing a new route. Until recently, it wasn't easy to fly without a representative office in the country. But now, more and more issues can be resolved online, and more and more businesses are moving to e-commerce.

Dealing with barriers and competitors

Iurii Sorochinskii: When we entered the American market, we imagined it to be one single large US market. But in fact, it isn’t a single market, there are 50 of them. In addition, after Prohibition in the United States, they introduced specific laws to cover the promotion and sale of alcohol. There is a so-called three-tier system of alcohol distribution, according to which manufacturers are not allowed to deliver the product directly to any point of sale. At the same time, in 17 states, which are called control states, alcohol is sold exclusively by the federal government of the state. And there are states in which liquor stores are located 30-50 miles away from the city. So, these are 50 completely different markets, and so far we have not mastered everything. We move from state to state, gradually building brand awareness and sales. And in every state we get the same question: “We already have 200 vodka brands, why do we need another one?”

Valentin Gritsenko: To enter new markets, the first thing you have to do is adapt the product to comply with professional security certification.

For example, in the UK, every standard has an additional standard. It took us several years just to understand what they needed. At the same time, some requirements are relevant only for 20 percent of our potential B2B partners. But as soon as you start producing a product according to these standards, the market opens up to you, and everything becomes much more interesting.

Once you’ve done the homework, you can analyze how developed your niche is in a particular market. For example, historically, over decades, hundreds of millions of euros have been invested in security systems in the markets of Italy, Spain, and France. When we enter those markets, we are, in fact, taking away the existing demand created by the “dinosaurs” in this niche. And when we understand that we are hitting the ceiling in terms of market volumes, the next phase begins—with other companies in the market, we invest in creating a new demand for security systems.

In our field, the development of the market is highly dependent on how strong the insurance companies are within it. If insurance companies dictate the security systems as a condition for getting insurance, people buy them. For example, a person buys a home on a mortgage, it needs to be insured, and if a security system is installed, regular payments will be lower. Accordingly, after a couple of years, the buyer gets the cost of the security system back. This increases the demand for security systems. In Ukraine, things work the opposite way—few people insure their homes; people are afraid to take out mortgages, but they install security systems because of the high crime rate. If of in Europe advertising security systems is more like advertising for life insurance, whereas, in Ukraine, the emphasis is on safety and protection from crime.

Iurii Miroshnikov: The aviation business is extremely competitive. We compete with other Ukrainian airlines within the same destination country, and with foreign flagship companies as well—with a French company in France or a German company in Germany, for example. We also compete with transit carriers, not to mention land transport.

One of the main methods of dealing with competitors in aviation is cooperation. Code-sharing is when, without violating competition law, competitors agree to share access to their flights with a competitor and they become partners. Another aspect of the competition is product and service level, but not many companies use it these days; most airlines use price competition. That’s the ability to reduce your expenses and gain sufficient flexibility to offer increasingly cheaper rates. For example, within 3 or 6 months before the flight, you can offer a low price, but if a customer wants to buy a ticket today for a flight tomorrow, the price will be ten times higher. In this situation, even if the consumer flying tomorrow has a choice of paying $100, $120, or $90 for the flight, it’s still price competition.

On the other hand, service and a convenient schedule can also be crucial for your choice. That’s why, on some routes, UIA will put on two or even three or four flights a day. Code-sharing helps with this: you fly once, your partner flies one more time, but together you fly twice a day. Thus, the market is saturated with your offer, it becomes easier for you to find your audience, and you can even set a premium price if your company has flights every two hours on a certain route. And if another company has flights twice a week, it has no option but to drop its price.

Business advise for entering global markets

Iurii Sorochinskii: First of all, don’t be afraid. And make sure you do your homework very attentively and in detail to find out everything you need to know about the market you are going to enter. Understand your competitors, the level of involvement, why the consumer would want to buy your product or service, be able to switch from familiar “home” products to “someone else’s” products. Sometimes approaches that work in the home market can be a fiasco in the global arena.

There is the 4P theory in marketing—product, price, place, and promotion. Until you have collected all four Ps and understood what, where, to whom, how and at what price you want to sell—nothing will work.

Valentin Gritsenko: I completely support it. It’s also important to be hungry. From our communication with Western Europe and the Middle East, we understand that people in Ukraine are hungrier and more determined to succeed. While Europeans calmly plan their lives for years ahead, we’re used to living with constant change. But this is a huge plus for development.

One more piece of advice is to learn English. It is strange to hear from Ukrainian companies that want to enter the global market that they don’t have that knowledge.

And of course, it’s important to do your homework. You have to be able to ask the right people the right questions. For example, in our field, you talk to one distributor and hear only what’s beneficial to him, but you need to listen to everyone, right up to the end-user. It takes longer, but you get to know a whole lot more about how the market works.

Iurii Miroshnikov: I would like to add two more points to everything that’s been said. Firstly, reliance on local resources is important. We have brilliant people in our country, but we can hardly find a person who knows the American market better than an American or the German market better than a German. Especially when it comes to marketing, sales, and promotion, you need to rely on the expertise of local people. At the same time, it’s important to get various opinions—some people will pursue their own interests exclusively, without taking yours into account. So, it’s important to study alternative opinions but draw your own conclusions.

Market research and preparation for entering the market is a long process, and there’s no guarantee that you’ll get a positive result. It would therefore be good to have at least two or three options that you can work with at the same time so that at the end of the day, you can choose the best road to take.

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