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					Russian Roulette: The change of the OP sector
OPI Europe 10th Anniversary Event Rome, Italy

Introduction
Leonid Spiridonoff EX Top Pen founder and C.E.O. NOW Bureaucrat Member of Board

Important disclaimer

Steve Hilleard will get vodka and caviar NO MORE

Important disclaimer

Important disclaimer

Important disclaimer

Steve Hilleard will get vodka and caviar NO MORE!!!

Table of contents
Market overview Changing product portfolios Developing the wholesale market Case Study – what works in Russia? Future Opportunities

Market overview. General stats
The fundamental indicators of development of economy of Russia,
year to year growth,%

Indicator

2006 1Q 2Q 7.8 5.7 6.7 4.3 23.8 8.7 16.6 14.8 7 9.8 35

2007 3Q 7.6 7.5 4.9 3 19.6 11.4 13.9 15.8 6.1 12.1 35.5 11.9 5.6 3.1 20.9 10.8 16.1 15.8 6.9 35.2 37.9 4Q Year 8.1 11.9 9.3 3.3 21.1 10.4 16.2 15.2 7.1 16.5 36.8

Gross domestic product Consumer price index on the end of period, by December of the last year Index of industrial production Index of production of an agriculture Fixed asset investments Real income of population Real wages of population Turnover of retail trade Volume of paid services to the population Export of goods Import of goods

7.4 9 6.3 3.6 13.7 13.3 13.3 13.9 7.9 24.7 31.3

7.9 3.4 8.4 3.4 20.1 9.6 18.2 13.8 8.7 6.9 39

Source: Ministry for economic development of Russian Federation

Market overview. Population
Russian Population in Million: 2002-2007
Year Number % Change

2002

145.6

-0.48%

2003

145

-0.41%

2004

144.2

-0.55%

2005

143.5

-0.49%

2006

142.8

-0.49%

2007

142.1

-0.49%

Source: GKS

Market overview. Inflation rate

)

Source: Ministry for economic development of Russian Federation, Guild of marketers, appraisal of RBC

Market overview. Salaries

Source: Ministry for economic development of Russian Federation

Market overview. Retail Development
Global Retail Development Index 2006

Place

Country

Region Coefficient

Risk 25% 67 62 75 57 41 80 77 70 83

Appeal of market 25% 42 52 46 34 43 51 32 44 58

Saturation of market 30% 80 53 46 76 44 42 21 46 33

Time factor 20% 74 90 84 59 88 43 86 54 33

General Point 100% 92 89 86 74 69 69 68 68 64

1 2 3 4 5 6 7 8 9

India Russia China Vietnam Ukraine Chile Latvia Malaysia Mexico

Asia East Europe East Asia Southeast Asia East Europe Latin America East Europe Southeast Asia North America

Source: Consulting company “A.T. Kearney”

Market overview. OP sector facts
Exact size of the market still unknown. Heavily dominated by imported goods (except of paper product segment). Traditional product portfolio and distribution …but things are changing

Market overview. Market size

Market overview. Market size
Dynamics of growth of volume of the market of stationery goods, billion dollars
2.75 2.22 1.89 1.47 1.19

2003

2004

2005

2006

2007
(Forecast)

Source: Consulting company “AMIKO”

OP Market structure 2007 as Buraucrat sees it (in wholesale prices)
(only those markets where Bureaucrat is present)

Макрогруппа Printing consumables original Printing consumables compatible Photo paper and etc. Memory cards and USB storage devices DVD and other storage devices Computer mouse PC speakers Keyboards PC cameras Joystics and etc. Head phones and microphones Laptop bags PC accessories Office business machines Writing instruments Cut Office Paper Filing products Office accessories Paper products Office chairs Computer tables

USD x 1,000 715 800 94 550 58 780 481 517 140 100 87 487 69 530 87 348 6 728 29 408 33 583 25 588 44 547 45 783 130 000 520 000 130 000 108 000 90 000 353 297 45 370

pcs x 1,000 20 032 34 269 6 657 25 343 28 020 14 343 5 737 9 159 284 933 4 926 816 41 638 969 210 835 128 319 228 276 156 278 233 191 5 932 469

Total

3 297 418

Market overview. Imports structure
Import of OP to Russia by regions

East Europe
10.0% 5.0%

Other

Western Europe and USA

20.0% 65.0%

Asia

Source: Consulting company “AMIKO”

Market overview. Distribution channels
Structure of Purchases of OP by offices and consumers in Russia

Direct sales
11% 2%

Other

48%

Shops

Catalogues and price-lists

39%

Source: Consulting company “AMIKO”

Market overview. Corporate segment

Structure of Purchases of OP by offices in Russia

Retail outlets
21.0% 2.0%

Internet shops

Catalogues

77.0%

Source: Consulting company “AMIKO”

Future trends
Change of product portfolio Change of logistics Mergers and acquisitions

Total €37.4bn at MSP
Source: Consulting company “AMIKO”

Income by product category, Russia
4% 19% 47%

14% 5% 11%
Writing goods Office furniture Other

Printing supply/data carriers Household goods Paper

Source: Consulting company “AMIKO”

Product portfolio of B2B catalogues, number of SKU
BUREAUCRAT Paper & paper products Traditional stationery Planning & presentation TOTAL STATIONERY STATIONERY SHARE, % EOS (Computers, shredders and etc.) Printers, scanners and etc. PC consumables Household electronic devices TOTAL EOS EOS SHARE, % Office furniture TOTAL FURNITURE FURNITURE SHARE, % Traditional household goods TOTAL HOUSEHOLD GOODS HOUSEHOLD GOODS SHARE, % 144 609 91 844 61,47% 100 154 70 44 368 26,80% 76 76 5,54% 85 85 6,19% 458 25,56% 83 83 4,63% 117 117 6,53% PARMATIC EXPRESS 188 811 135 1 134 63,28% 100 168 190 KOMUS 234 642 101 977 52,33% 266 131 105 43 545 29,19% 185 185 9,91% 160 160 8,57%

TOTAL SCUs

1 373

1 792

1 867

Who is a wholesaler of The New Era?
Contemporary product portfolio Decentralized logistics Multiple growth strategies

Bureaucrat’s history
2000
600 employees 3 000 SKU 800 customers 5 000 m2 for storing
3 warehouses 20 direct Contracts 1 Own brand Own manufacture

2007
1960 employees 13 000 SKU 3 000 customers 55 000 m2 for storing
14 warehouses for trading and distributing > 110 direct contracts 18 exclusive contracts 3 own brands Own manufacture

1994
10 employees 500 SKU

50 customers
250 m2 for storing
Not direct Purchases

Bureaucrat’s history (continued)
54%

Year to year growth

54%
Expanding in segment of A class stationery and in segment of computer peripherals

48% 50% 50% 45% 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Expanding to the new market segment of stationery products.

Expanding to the new market segments of printing supplies and data storage products

Starting manufacturing activity in Russia: Office Chairs and Plastic folders

Expanding to the new market segments of digital devices

Expanding to the new market segments of flash memory

Expanding to the new market segments of business gifts

Warehouses by locations

St. Petersburg
(Moscow) Moscow
N Novgood Samara Ekaterinburg Irkutsk Rostov-on-Don Chabarovsk

Novosibirsk

Success story Sucks – Sex story
Smaller wholesalers will suffer Large wholesalers will suffer Sweet surrender of smaller to bigger ones will bring both to the future

Case study. Why me?
Top Pen has 18 exclusive distribution agreements all in premium segment Advanced sales and promotion technologies Established contacts with cream-of-thecream of Russian OP clientele Strong reputation

Case study. Why not?
Similar business model Immediate change to product portfolio Great team, trained personnel Access to new client data base Huge potential for premium brands accessing larger clientele Minimum risk and easy merge

Case study. How?
Clear phasing - merged logistics and procurement - parallel sales teams, cross training - merge of sales teams Talk to your people Ensure win-win situation not only for corporations

Bottom line
Dashenka is the best! Wholesale channel in Russia is ready for big change Wholesaler of The New Era is a full portfolio, financially and logistically powerful service provider Other distribution channels will change dramatically once wholesale channel complete its transformation

You can trust the guy who sold to President

Thank you and good bye!


				
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