Partnership

TO OVERCOME THE CRISIS, TO BECOME STRONGER THROUGH COLLABORATION

Sergey Pryamikov,
Head, Department of International Scientific Cooperation,
Arctic and Antarctic Research Institute

        International cooperation in Arctic research is implemented in various forms. This is especially connected with the fact that in the Arctic (in contrast with the Antarctic) this research has just begun to develop after the long period of the Cold War. Currently cooperation in various fields of Arctic research is coordinated by a large number of international committees and commissions, and cooperation with Russia is also implemented by various charitable projects and foundations such as the International Scientific Foundation, the European Scientific Foundation, and the European Commission's East European Programs. Many countries that carry out Arctic research, especially Germany, Norway, Japan, and the US, have their own bilateral programs of cooperation with Russia. The diversity of cooperation and the large number of official institutions involved in cooperation with Russia in the Arctic, on the one hand, create certain difficulties in terms of choosing optimal strategy. But on the other hand, they provide an opportunity to choose partners and develop cooperation aimed at solving practically all actual problems confronted by the Russian side in such research. This matter is of considerable concern for our institute.
        The main goal of cooperation had always been hydrometeorological support for the activities in the Northern Sea route area. This support consists not only of information about the actual development of environment processes, but also of long-term (six-month) forecasts of the conditions for navigation in ice. (The latter is necessary in order to specify navigation strategy.) Short-term forecast of weather and ice conditions and sea level changes, is necessary in order to choose navigation routes for vessels along the Northern Sea route. It also includes the delivery of instructions for navigators concerning the optimal strategy of navigation, which defines the safest maximum speed and recommends a route for the concrete vessel to its place of destination.
        The implementation of such international projects in recent years as the International Northern Sea Route Program, or INSROP (Russia, Norway and Japan) and the Arctic Demonstrational Exploratory Voyage ARCDEV (Russia and European Union) brought everyone closer to implementing these plans. Suffice it to say, for instance, that in the final document of the shipboard expedition to the ARCDEV project particular attention was given to the efficiency of the investigations performed by our institute, something that made for a successful expedition.
        In our cooperation with US research centers we are creating digital Arctic climate atlases within the framework of the activity of the Joint Russian-American Commission for economic and technological cooperation. Two CDs are already available. They contain the digital climatic atlas of the Arctic Ocean for winter and summer conditions and have been accepted by scientists all over the world.         The World Ice Date Center is successfully working at our institute. It collects information from countries that conduct ice observations. These databases including the digital atlases, among others, make it possible for researchers to use modern storage systems, generalized data and state-of-the-art computer software. The Arctic environment models and their long-term climatic variability can be significantly improved upon by using the climatic fields of the hydrometeorological elements in regular grid cells, which are developed within the framework of preparing the atlases. Use of these climatic fields also makes it possible to view and develop various scenarios connected with the influence of the climatic changes on economic and transport activity in the polar regions. More than 10 automatic meteorological buoys of our own design were developed at AARI and mounted in the Arctic. This work has been done within the framework of cooperation on the International Arctic Buoy Project (IABP), which is implemented by eight countries and a number of international institutions. The new generation ARGOS automatic polar meteorological drifting buoy, which drew the interest of specialists and users, was also developed and mounted. This is a valuable Russian contribution to IABP. The American partners of this program put at the long-term disposal of our institute a modern receiving terminal, by which AARI researchers can receive information directly from the drifting Arctic meteorological buoys.
        An agreement was recently signed on the joint project "Otto Schmidt Russian-German Laboratory for Polar and Marine Research". Named after the famous Russian polar explorer, it will be implemented using our institute as a base. It is aimed at performing detailed analysis of the experimental data collected within the framework of the Laptev Sea System Project.
        As is planned, the laboratory will be equipped by the most modern analytical and computer systems including electronic microscopes. International seminars, courses, and language classes will be held at the laboratory.
        International cooperation may become the means by which Russian science will overcome its current crisis situation and gain energy for future advances.

Partnership

Orymy Trade's "Princesses"
From India, Sri Lanka and Indonesia

Sergei Kasyanenko,
Chairman of Orymy Trade's board

        The four profiles on the scarlet background of the oval medallion are the four "princesses", whose names - Kandy, Gita, Noori, and Yava - seem mysterious at first. It is a trademark of Orymy Trade, a St. Petersburg company. Despite the oriental beauties' mystery, many people have already become acquainted with Orymy Trade's "princesses". We can see them on tea boxes, billboards, booklets, in TV commercials, and even on city transport.
        We spoke to Sergei Kasyanenko, Chairman of Orymy Trade's board
        - How did Orymy Trade manage to make its production popular in Russia and abroad?
        - It was not at once that Orymy Trade reached its current market coverage, variety, high quality of goods, and import and export turnover. The company first appeared in the market in October 1994, when it delivered a small consignment of Ceylon tea to Russia. Later this tea became popular under the name of Princess Kandy. We began our supplies from three containers a month. Our company bought high-grade tea at reasonable prices from tea-growing countries and also at specialized fairs where tea was being sold following processing. We studied the growing and processing of high-quality tea from the most experienced specialists in oriental countries. We chose large and influential companies as our partners. We learned everything in the course of practical work.
        - Did you have any experience in the tea industry?
        - No, I graduated from the Leningrad University as a physicist, a specialist in optics. I have a Ph.D. in physics and mathematics. I worked on the teaching staff of the Leningrad Aircraft Instrument-Manufacturing Institute and later as a chief research assistant at the Joffe State Physical and Engineering Research Institute, which was part of the USSR's Academy of Sciences. I knew nothing about the tea industry. But life provides us with a lot of new lessons, and since last year I have worked as the chairman of Orymy Trade's board. Our company is growing and gaining recognition in Russia and among its foreign partners. Early this autumn I took part in two international conferences of tea manufacturers, one of which was held in southern India, and the other in Colombo, the capital of Sri Lanka. I was invited there to give a general review of our company's future perspectives given the current situation in the Russian tea market and Orymy Trade's role in the world tea industry.
        - Can you briefly describe the history and specific features of the Russian tea market?
        - As far as it is known, tea was first brought to Russia from China in 1638, so it appeared in Moscow 20 years earlier than in London. By the middle of the 19th century tea made up 95 percent of Chinese exports to our country. By the beginning of the 20th century our tea imports came to 60-70 thousand tons a year. We occupy third place after China and India in the consumption of tea, which was 160-170 thousand tons a year at the end of the 20th century. Russia is the largest tea importer in the world market.
        - Did the August crisis influence the tea industry in Russia?
        - The recession in demand first affected expensive high-grade teas from Ceylon, North-East India, and Indonesian mountain plantations, but this did not last long. The situation has now stabilized and even improved. During the first half of 1999 the overall consumption of tea was 5 percent higher than last year.
        - Did Russia take any antirecessionary measures?
        - Stabilization and extension of the tea market took place largely due to the creation of the Russian Industrial Tea Association in 1998. Its task is to control the quality of imported tea, help the development of Russian tea processing, weighing, and packaging industries, and organize product advertising for Russian import and export operators.
        In Soviet times the state possessed a monopoly for tea growing, processing, and internal and foreign trade. Today there exist about two hundred tea companies of different size, including private companies, joint stock companies, and joint ventures. At the same time 55 percent of the tea market is controlled by the four largest companies: Grand, Maiskii Chai, Unilever, and Orymy Trade. Our company is one of the leaders.
        - What is your opinion of Orymy Trade's perspectives in the XXI century?
        - The development of Russia's tea market in the XXI century will undoubtedly depend on our country's and the world's macroeconomic situation. We hope for the best. We are continuing our search for new providers of high-grade tea and strive to develop new tea brands. About 75 percent of all tea comes to Russia from India, and the rest - from Sri Lanka, Indonesia, and China. Russia traditionally buys tea in the countries of East Asia, but in Europe people mostly drink African tea from Kenya, which is almost unknown in our country. Perhaps our company will acquaint Russian customers with this sort of tea. We are anticipating a growth of demand for green tea, which possesses many healing qualities, and for herbal and medicinal teas. There are also many expensive sorts of tea in the world market which are sold not in tons but in kilograms. We can certainly find tea lovers of elite tea in our country.
        A so-called Ready-to-drink Tea recently became popular in some countries and occupied almost 80 percent of the US tea market. It successfully rivals synthetic soft drinks and may become popular in Russia as well.
        - Do you plan the development of our country's tea industry?
        - We cannot import raw tea leaves because they easily wither and rot. This is the reason why the primary processing of tea is realized by its manufacturers right after the tea is picked in the plantation. But the final processing of dry tea leaves is usually realized right here, because it is both technologically reasonable and more profitable.
        Orymy Trade is extending its production base thus improving the quality of tea and creating new jobs. In Leningrad region's Vsevolozhsk district our company is finishing the construction of a plant for the secondary processing of tea. This plant's output will be 1440 tons of tea a year. And the Nevskie Porogi plant is slated to open in Krasnaya Zarya in June 2000.

Interview by Vadim Kruchina

Partnership

Most Reliable Partner

Dr. Elena Kalinina,
President
Woman and Management International College

        Business contacts are established in different ways, and this time, we hope, this will be done with the help of our edition.
        New East is very popular at the Women's College of Catalonia in Barcelona, Spain. Spanish women are writing that they have, , learned a lot about St. Petersburg from our magazine and would like to establish contacts with businesswomen of our city. That is our correspondent, Natalya Odintsova, visited 147 Nevsky prospect where the Woman and Management College is located. It opened in 1992, and today it is one of the twenty best business schools in Russia.
        - What role do international contacts play in the College's success?
        - When our College was founded, Russia was making its first steps in the free market, and so such words as integration, world market, and international division of labor were in vogue. Everybody saw that we need specialists able to make these words a reality. We needed professionals to become reliable partners for western businesspeople and promote mutual understanding. We never prepared such high-class managers in Russia. Russia had recently rejected its traditional forms of government and had not yet found new ones. We understood that top Russian managers must receive a first-rate education that dovetails with the best national achievements and with foreign experience as well. Our task was to create such a system of education at our College, so we began to cooperate with the world's leading educational centers.
        Of course, this was not an easy task and not all our partners stayed with us. We greatly value stable business contacts. One of our partners is Naestved Business College (Denmark), which was the first to work with us. This College gave us necessary information in method studies, which were translated into Russian and adapted to our reality.
        This is the fourth year now that our college has realized its International Management Program. This program is implemented together with Stockholm University, which helped to develop it, as well as with SIDA (Swedish International Development Agency). It is intended for women who encounter difficulties while trying to compete in the market.
        When some time ago the Finnish Ministry of Labor was looking for Russian partners in the field of training specialists for joint ventures, it decided to cooperate with our College. Today we offer such educational programs as Manager of Small Business and Manager of a Joint Venture, both of which were requested by this ministry. Both Russian teachers and teachers from the Helsinki Economic Institute's Center for Support of Small Business are participating.
        We hope that our colleagues at Women's College of Catalonia will also regard us as reliable partners. We will definitely establish contacts with them.

Partnership

Furs Means a Lot

Women and furs are inseparable. Perhaps this is the reason why Rot Front, the largest European fur manufacture, is headed by women. We spoke to Natalya Karzhavina, its director general , and Galina Gavrentsova, its business director .

        N.K.: Russia has long been known as the country of furs, something which brought it both fame and profit. Our enterprise corroborates these facts, so its history is closely connected with the history of Russian furs.
        G.G.: Yes, the business began in 1885 when Martens, a German furrier, opened his workshop in St. Petersburg, at 21 Nevsky prospect. Soon after that this workshop merged with the Schults dye-works, the first one in the country, and hence Russia learned to make fur goods and prepare raw materials for this production.
        - Many years have passed since thenÅ
        N.K.: The manufacture experienced different periods, it gained recognition and won prestige at international competitions and shows. But recently things have not been easy. The fur industry declined and traditional economic links fell apart, so we had to reduce our staff in order to survive. Nevertheless in 1993 we managed to re-equip technically, buy the latest machinery and technologies for the dressing of skins, and better our clearing system.
        G.G.: Today some of the fur farms which were our country's pride not so long ago, are closed, and other ones have sunk into such poverty that they do not even have enough money to feed their animals. So the quality and amount of furs is reduced, and a greater number of skins are brought to Russia from abroad, for example, beaver skins.
        N.K.: This situation forces Rot Front to buy skins from foreign providers. Today we have about fifty Russian and foreign partners but we want this number to increase and we are ready to establish new links. But we are sure that this problem must be solved by federal authorities and our state must be interested in the support for fur farms. Russian furs have always been the best, and warm hats and fur coats are quite necessary for people in our country.
        - As far as we have touched on such a vital issue, especially for women, as furs, please say some words about the main tendencies of present-day fashion.
        N.K.: Today the furs of waterfowl animals are in great fashion all over the world. This has been corroborated by the last public sale in Copenhagen and the Furs of Russia show in Moscow. Our manufacture has received a lot of orders for the dressing of beavers, coon-skins, and sealskins, and this is quite understandable, for Rot Front is the only enterprise in Russia able to dress the skins of the marine animals.
        Our manufacture uses more than fifteen types of fur for making fur coats, mantles, hats, jackets, and even fine evening gowns of astrakhan. The enterprise has great experience in the redying of furs, so almost any color can be attained. Our company creates more than a hundred new models a year. Rot Front products are widely known abroad. We also make exclusive and individual models. For example, we made fur coats for Galina Vishnevskaya and Edita Pieha. But we are mostly oriented towards the usual customer - a Russian woman who can not afford the renewing of her wardrobe every year and needs a warm, fashionable, and comfortable fur coat. That is why our motto is European Quality for Russian Furs.

Interview by Marina Alexeeva

Partnership

KPMG

Mr. Lindsay G. Ellwood,
Managing Partner
of KPMG in St. Petersburg.

        - What does KPMG stand for and how long has the company been in St. Petersburg?
        - It stands for the initials of the founding members of four accounting and audit firms established as early as the 19th century in various countries of the world: the Netherlands, Great Britain, the US and Germany. The founders include P. Klynveld, who headed a Dutch firm, W. B. Peat, who led an English firm, J. Marwick, the head of an American firm, and R. Goerdeler, who was chairman of a German firm. These firms gradually united and, in 1987, the merger was complete with the creation of KPMG.
        At present, KPMG International's member firms have more than 100,000 professionals working in 160 countries throughout the world. We began in St. Petersburg in 1993 with a small office of 10 people. Our office started to expand in 1995, offering a wider range of services, and today we have a staff of 75.
        We are a private company structured as a branch of KPMG Russia, which is a Russian limited joint-stock company. We work relatively independently in St. Petersburg but cooperate fully with our Moscow office and global network to ensure that our clients are offered the full range of KPMG services.
        KPMG's objective in St. Petersburg and in Russia in general is to become recognized as the firm of natural choice of businesses. By this we mean that we would like businesses to turn to KPMG for prime quality business advice on a regular basis. Obviously, this is not something that can be demanded, but rather must be earned through high-quality work. Our ultimate aim in Russia is to build a strong Russian national firm, one with all of the international links and contacts with other KPMG firms around the world. KPMG has a strong national representation in every country, and that is what our aim is here as well.
        - What does the branch office specialize in and what is the range of services offered?
        - If we go back to our structure, KPMG is not just an auditing firm. KPMG offers tax and legal consulting and we have a very large management consulting and financial advisory practice. To a degree, we may provide some labor consulting services as well, although this tends to be an odd-on rather than a primary service. We do not offer recruitment services. We put emphasis on our core services. Our client base tends to be heavily oriented towards some form of foreign investment. This is likely the result of the specialized nature of services that KPMG offers globally. We serve Russian clients but they are predominantly those that have some form of foreign investment or financing. We also work with international companies operating in Russia that are part of our global base.
        - What particularities can you identify about operating in Russia and especially in St. Petersburg?
        - If we speak about the Russian economy, it is subject to ups and downs. This is part of the move from a centralized economy to a market economy. There is a very large learning curve for businessmen, for politicians and for everyone to understand a different type of economy. I think that Russia is such a large country and is so rich in natural resources that it will continue to grow and develop. One of my pet peeves is the attitude of certain Western commentaries, which regard the Russian economy as risky. All business has risks, whether it is business in Russia or in countries in other parts of the world. I believe that if sensible business decisions are made in Russia, it is no more risky to do business in Russia than in any other country. However, I think possibly because the economy in Russia is undergoing change, business planning needs to be more in-depth than perhaps it does in an established market economy.
        Probably the main difficulty in terms of operating in Russia is the current state of the legal base. I personally believe that there are two issues to be addressed. The first is law and order. The second issue involves the notion of a stable, responsible government. If you look behind all of the difficulties, they point to both of these issues, that is, respect for law and respect for government needs to be higher.
        Respect for the law will come from having laws that are clear and consistently applied. Russia has to develop its own laws. Although experience can be drawn from the way laws have been developed in other countries, every country is unique in terms of its legal perspective. Laws should be consistent and free of contradiction. The way in which the law is invoked and applied is also important. This relates especially to tax legislation. There can be situations in Russia where a particular person can give a ruling as to how the law applies in one case, and another person can give a completely different interpretation of that same law.
        Again, respect for the government cannot be demanded - it can only be earned. This means the government has to be seen to be acting in the interests of all of the people. I may regret making these comments, but that is how I feel.
        - Now let us move from general economic and philosophical issues to more personal matters. What do you think of St. Petersburg? What do you like about it and what struck you most of all?
        - Coming from Australia, which has very little history, it is the history of the past that strikes me most. The other thing that impresses me all the time is the cleanliness of the city. Certainly, the infrastructure needs some work and maybe some buildings need some work, but the place is basically clean. I enjoy living here. I feel very comfortable in the city; I have never felt at all threatened. St. Petersburg is a beautiful city and I enjoy showing the city to visitors that we have coming here regularly.
        - What question is missing from our interview?
        - We have not discussed relationships with people. One of the aspects that keeps me here and keeps me interested in working in Russia is our Russian professionals. I am constantly impressed with their willingness to work extremely hard, and together we are able to develop the skills base from what is required in a strictly Russian environment to what is required in a Russian market economy environment.

Interview by Vadim Bogdanov

Partnership

St. PETERSBURG's JAPANESE HOUSE

Igor Aleksandrov,
advisor to the governor

        Yamato is the former name of Japan. This name was given to the Russian-Japanese Cultural and Educational Interregional Public Foundation that was created in our city five years ago. For nearly two years this Foundation has officially represented the St. Petersburg administration in the context of its relations with the Country of Sunrise. Yamato is supported by the city administration and helps Japanese companies, organizations, universities, and private individuals to realize their projects. This Foundation also helps Russian citizens striving for the realization of their projects in Japan.
        Yamato is striving for the opening of a St. Petersburg administration's representative office in Japan. It is also realizing a program for the development of a many-sided relationship between St. Petersburg and Japan, that has been ratified by the governor. One of this program's points is the creation of the Japanese House multipurpose international centre in the old part of St.Petersburg.
        Look at the map of St. Petersburg: it is planned to build the Japanese House near the Japanese Consulate General, that is, only 50 metres from the Hermitage. As for the space between Bolshaya Konushennaya street and Moika embankment, it will be occupied by a Japanese Street.
        What will be the role of the Japanese House?
        Our readers may have seen several parts of this project already. According to the plan prepared by the St. Petersburg architects, this Centre will house a hotel, Japanese restaurants and cafes, a business centre, a Japanese winter garden, trading and tourist information support centres, an exhibition hall, and a sports centre.
        Governor Vladimir Yakovlev has informed the leaders of the Japanese administrative structure about our city's project for a Japanese House.
        This idea was enthusiastically supported in Japan. Mr. Takuji Kato, member of the House of Representatives, the Parliament of Japan, wrote to Petersburg that he wished to work on the project along with other participants. He offered to give information about the location of the companies that have taken an interest in the project. He has also offered his help in some of the other activities.
        The project was warmly received by Mr. Yoshihiko Tsuchiya, President of the National Governors' Association.
        Yamato Foundation is in search of companies ready to make investments and participate in this Petersburg project.

Partnership

A Way Towards Integration

Vladimir Churov,
Vice-Chairman of the Committee for Foreign Relations

        - Mr. Churov, everyone regards as urgent the problem of the broadening of economic relations with the former republics of the USSR. In what way is this problem being solved here in St. Petersburg?
        - Trade and economic relations with the countries of the CIS are very important for our region and for St. Petersburg in particular. Above all, our industrial cooperation with the former Soviet republics has long been traditional. Our city has been importing a wide variety of food products as well as raw materials and half-finished products that are produced in their final form here. Now we have major opportunities for further joint work and there are wide opportunities for the introduction of mutual offsets and mutual supplies of raw materials, among other forms of collaboration. We are aware of the fact that our region plays an important role as a transit territory. This increases commodity transfer and through traffic, and promotes our penetration into the CIS market with the goods produced in our region.
        - How was the commodity exchange influenced by the August 1998 crisis?
        - There was a recession. Trade with Ukraine and Kazakhstan has slowed down. Our supplies to Ukraine decreased due to the foreign trade doctrine adopted in that country according to which Ukraine must strive to become increasingly independent from Russian sources of energy. But at the same time we are observing a steady growth of trade with Armenia, Uzbekistan, and Kirghizia.
        -Apart from the crisis, are there any other reasons that hamper the development of mutual trade?
        - Analysis shows that the basic reasons are industrial depression in the CIS countries, complicated and often-changing legislation, the absence of credit resources, and unbalanced mutual trade which lead to trade deficit.
        The export of resources by former Soviet republics is now oriented towards the foreign market outside the CIS with the aim of obtaining hard currency. Commodity exchange is further complicated by unstable and sometime non-convertible national currencies, as well as by certain limitations within the inner-republican currency exchange markets.
        We must also take into account the relatively low quality of products manufactured in the countries, something that is due to their technological backwardness. Commodity exchange is also restricted by high currency rate quotations and additional cargo dues. Transportation costs so much that sometimes commodity exchange becomes pointless.
        - How are these difficulties overcome?
        - For the time being Petersburg's relations with CIS countries are based on mutual agreements with their governments. In the last two years trade and economy agreements have been signed with Azerbaijan, Armenia, Belorus, Georgia, Kazakhstan, and Moldova. However control upon the realization of these agreements has been rather weak. This was the reason why we offered to prepare the supplements to basic mutual agreements in which the enterprises responsible for bilateral cooperation would be listed.
        The visit to Georgia of the Petersburg delegation headed by Governor Vladimir Yakovlev reached the same conclusions regarding the problems involved. The aim of our region's businesspeople is to broaden economic relations with Georgia, so mutual work resulted in the development of several programs. Both sides decided to create a Tbilisi universal wholesale store in Petersburg with the aim of getting Georgian goods here where they will be resold. Through this store we intend to supply to Georgia ferrous rolled stock and steel wire from Cherepovets, electric welded tubes and nonferrous rolled stock from Petersburg, as well as paper, plywood, and timber from Arkhangelsk and Kotlas.
        This spring a group from Dushanbe came to St. Petersburg. They acquainted themselves with the city's computerized delivery service. In autumn 1999 the sides discussed the problem of how to adapt such a system to Tajikistan and it was also decided to acquire the necessary information technologies. In Petersburg a plan is being prepared to create a wholesale warehouse for goods produced in Tajikistan. Both sides also stressed the necessity to coordinate their strategic plans concerning transit transportation.
        Generally speaking, there are many joint projects aimed at cooperation within the CIS. They are all being gradually realized. These projects deal not only with the supply of goods. A number of projects foresee the creation of joint ventures and the production of various goods that are of high demand within the CIS. There is a project to involve Ukraine in organizing a joint venture to produce electrical and diesel railway engines and passenger and freight cars. There is also close cooperation between the Belorus consumer goods industry and the Petersburg Clothing Association. Our region is to be supplied with synthetic fibers to produce the final product here.
        Various banks have contributed to the boosting of international economic ties. It is worth mentioning the Baltic Bank that has purchased the major Latvian RER enterprise where electrical equipment is produced for the rolling stock. This equipment is planned to be delivered not only to our region but to the other countries of the CIS as well.
        - What favorable terms are being created for the business activities of CIS partners?
        - Petersburg is greatly contributing to the creation of advantageous conditions for international business. We are now developing a buy-back strategy to supply the products of our region's machine-building industry to CIS countries and obtain various necessary goods from them. A leasing operations database is now being organized. It will include information about all enterprises interested in cooperation, that is, information about raw material and equipment suppliers, potential investors, and so on. Our city legislation envisages a partial exemption from duties as well as other franchises for those partners who cooperate in joint ventures and programs. There is a plan to organize a center in Petersburg that will simplify mutual settlements between businesspeople from the CIS by using a unitary form of mutual payments.
        Our region plays a unique role in the North-West because the economic interests of the CIS and European Union intersect here. This is our region's great advantage, and we must use and develop to its fullest potential.

Interview by Aleksei Maksimov

Partnership

SOBER SPECULATIONS ON MUTUAL BENEFITS

Gilbert Doctorow,
UDV's representative in Moscow
Vladimir Sharshov,
Director General of the LIVIZ company

        It has already been two years since St. Petersburg's oldest and Russia's most famous liqueur and vodka-making LIVIZ plant enriched the list of its products with a brand name, which, though foreign, sounds familiar to all Russians. It has started the production of Smirnoff vodka. This is the result of a business partnership between the United Distillers and Vintners company (UDV), which is a part of the powerful Diageo corporation, and the LIVIZ plant. Thanks to this, equipment and technologies for the new beverage appeared at the St. Petersburg plant.
        Mr. Gilbert Doctorow, UDV's representative in Moscow, told us how Smirnoff returned to Russia: "As early as before the Russian revolution Pyotr Arsenyevich Smirnov was delivering "export quality" vodka abroad. As it was common at the Russian court, he was called Pierre Smirnoff in French, and all deliveries abroad were labeled with this brand name.
        After the Russian revolution Pyotr Smirnov's son, Vladimir Petrovich, emigrated, taking with him the know-how and recipes for producing Smirnoff vodka. This is when the history of the trademark began.
        Smirnoff vodka persistently kept making its way to the rather sophisticated American and European markets, cultivating in consumers a taste for a new alcoholic drink. It was advertised as an indispensable ingredient for different cocktails, the favorite drinks of the celebrities, people of independent and riotous spirit. The slogans, advertising the product throughout the world, sounded new and full of humor. The phrase "It knocks you off your feet and takes your breath away," pronounced by one of the guests at a party after he had tasted a Bloody Mary, became Smirnoff's advertising slogan in the 1960-ies. Later on, it was accentuated that the consumer of the spirit "was breaking up the thoroughly rotten principles of life and was disdaining routine." Recently, a new image has been born, based on the sensations of purity and translucency.
        In short, Smirnoff vodka found its place in a world in which whisky, gin and rum had been drunk for ages. It became one of the most popular spirits, surpassing whisky and gin in the 1970s. Today, the Pierre Smirnoff company annually sells over 15 million 9-litre boxes of vodka in 150 countries. People buy over 700,000 bottles of Smirnoff vodka every day.
        Speaking about Russia, one of the largest vodka consuming markets in the world, it is absolutely obvious that the world's best known and best sold vodka has to be produced and sold in Russia. In 1997, upon careful analysis of the vodka market and of the production capacities, we launched the production of the full range of Smirnoff vodka here in St. Petersburg.

        "Each partner has gained," says Vladimir Sharshov, Director General of the LIVIZ company.
        "Before making us a proposal to begin the production of Smirnoff vodka, the UDV company had examined the best liqueur and vodka making plants in Russia, which are able to produce spirits of export quality. The approach was very tough: technicians, mechanics, financiers and administrators came here more than once. They made their choice in favor of our plant, which pleased but not surprised us, because we were well aware of our capacity and of our plant's high production level. A series of talks followed, which resulted in eliciting mutual interests connected with Smirnoff vodka production in Russia.
        Our LIVIZ plant is able to produce any alcoholic drinks that exist in the world. Therefore, the principal conditions, which we set forth to our Western partners, were simple: equal investments for the complete realization of this project, which embraced production organization, technical re-equipment, equipment of laboratories, elaboration of technical documentation, and more.
        Our partners were serious. All equipment was delivered and financed on time and, on the whole, whatever had been planned, was accomplished. We are now producing Smirnoff vodka in accordance with the mutual plans and schedules. No serious problems have arisen so far, because, in my opinion, honest and open business relations were formed between LIVIZ and UDV, and I do hope they will be maintained in the future.
        Is such partnership to the benefit of our plant? Yes, it is. We are producing Smirnoff vodka not only for the internal market, but for the external market as well, which is twice as profitable. The label on each bottle informs that the product was made in Russia, in St. Petersburg, at our plant. We get a guaranteed amount of purchases and sales, we get paid on a regular basis and we are spared all problems concerning trade organization and advertising. For our part, we guarantee that the product is produced on time and that its quality is as high as the quality of any LIVIZ product.
        Speaking about our products' quality, there is one subtlety: in no way can one define it as "better" or "worse". We produce vodka of international quality and, in many ways, it may rival the world's best vodkas. Smirnoff is, first and foremost, a special patent technology of purification which was introduced on our plant in cooperation with our Western partners.
        Therefore, I consider our partnership with the UDV company highly successful and fruitful. It may serve as an example of mutually beneficial operations where both parties manage to satisfy their interests and to work together for the sake of common business.