Assignment 3

Davoud Shalforoushan
14/10/2022
Q 2: What are the potential sources of competitive advantage in the Russian ice cream
market?
• its abilities to reorient itself toward a more focused customer group in which it could leverage its role as the
only traditional Russian all-natural milk-based ice cream product.
• Using milk and natural products instead of preservatives.

• Use of higher quality materials.

• Using an advertising company that involved the emotions of the audience.

• In 1998, this company began producing products with special flavors that had no competitors because no one
had produced anything like them before.
• Before the collapse of the Soviet Union, government support was behind the industry and helped it a lot.
Because it benefits from a non-competitive economy.
• Traditional Russian ice cream contained about 15% milk fat, compared with the 10% found in premium western
brands. This contributed to the unique flavor of Russian ice cream,6 which was less sweet and more aerated
than the typical ice cream product of the U.S. and Europe (reminiscent of whipped cream). Also, traditional
Russian ice cream was made with all natural ingredients and did not contain preservatives. It was believed that
Russian consumers were generally more concerned about preservatives in food than fat levels. According to
an industry trade association representative, “Millions of foreigners, after arriving in Moscow and tasting our ice
cream, have proclaimed Russian ice cream to be the best in the world.
• Very high variety of products. (About 170 items of ice cream)
• After the alliance with the rest of the ice cream giants in Russia, they gained a competitive advantage over
foreign companies.
• This company, if it wanted to leave, had nowhere to go, unlike foreign companies that could return to their
country. And this will change the mentality of its people that "whatever is, is here". Like what happened in the
US-Vietnam war.
• From the beginning, this company had the experience of specialized work on ice cream and was not like
some foreign companies that were engaged in other work (such as producing perfumes or home appliances)
and now that they have seen the profit of the ice cream industry, they entered it. So, it has a better and more
experience.
Q3: 3) Who are Ice Filly's competitors? How well positioned is Ice Filly relative to its
competitors?

• Foreign ice cream companies that entered Russia after the dissolution of the communist regime. Like Nestle.

• Domestic ice cream companies that were formed over time.

• The rest of the food companies that were used as snacks or for entertainment, such as beer, chocolate, etc.,
were placed in the household shopping basket.
• Some experts felt that the greatest threat in the Russian ice cream market emanated from regional producers.
Many of these regional players were newly established, did not have the heritage of an old management
system dating back to Soviet times, and had new manufacturing facilities resulting in a significant cost
advantage. Product quality was varied, as was packaging; indeed, some producers distributed their products
solely in waffle cones. The regional companies also took advantage of lower rents and labor costs, which
further contributed to their cost advantages.

• The dramatic increase in the number of regional producers was explained by the shrinking frozen-food
imports market, which had been impacted by the 1998 crisis. Many former frozen-meat and -fish wholesalers
found it relatively easy to set up for ice cream production since they already had cold-storage and production
Capabilities.

• According to an executive of the Association of Russian Ice Cream Producers: “There’s no longer a need to
transport ice cream from, say, Kamchatka [in the Far East] to central Russia because there are local producers
everywhere.” While Moscow-based producers found themselves losing their market share in the capital.

• regional producers, hungry to increase their market share, were regarded as being more flexible.
• The expansion of local ice cream factories as "companies" that took over the market of Moscow and other big
cities and increased and appropriated ice cream kiosks from 150 to 300.
• Ben & Jerry’s In 1992, Ben & Jerry’s joint venture, Iceverks, to manufacture ice cream for the Russian market.
A production plant was built in the region of Karelia, north of St. Petersburg because of its similarity to Vermont,
the birthplace of Ben & Jerry’s. The first ice cream “scoop” shop opened in the town of Petrozavodsk in 1992.
• Ben & Jerry’s Adapting the recipe for making ice cream with Russian taste.

• Unilever In 1994, who sought to gradually decrease imports while purchasing more supplies domestically in
order to reduce production costs. Unilever was a leading ice cream producer in many other markets and
typically strove to build the leading share wherever it operated. Unilever outsourced its ice cream manufacturing
in Russia to two ice cream factories in Moscow, in addition to importing ice cream that it produced in its own
factories in Turkey and Hungary. It was estimated that Russians consumed 1,000–1,500 tons of Algida per
year. To distribute Algida, Unilever bought 3,000 kiosk stalls, one-third of which were in Moscow. Unilever sold
17 brands of ice cream in Russia.
• Baskin-Robbins was a pioneer on June 8, 1990, when it entered the Russian market by opening the first ice
cream store with a sidewalk café (on historically well-known Arbat Street in Moscow) as a joint venture with
 Mosrestoranservis, a Moscow government entity that provided goods and services to Moscow restaurants.
This deal was part of Baskin-Robbins’ aggressive global expansion initiative, which included 3,500 stores in
more than 44 countries.
• Baskin-Robbins was the first American franchise operation in the Soviet Union to sell its products in Russian
currency.
• Similar to its operations in other countries, Baskin-Robbins flooded the Russian market through a franchising
system whereby independent companies and entrepreneurs operated cafés and shops under the Baskin-
Robbins brand name. By focusing on the restaurant/café segment of the Russian ice cream market, Baskin-
Robbins enjoyed few (if any) competitors.
• Nestlé Henry Nestlé negotiated his first deal with Alexander Vencel, a St. Petersburg businessman, by
the end of the nineteenth century, securing Nestlé as a dairy product supplier to the Russian Empire. This
established Nestlé as the foreign ice cream producer having had the longest and most established relationship
with Russia.
• By having invested early in a domestic infrastructure, Nestlé developed its own independent storage facilities
and distribution and marketing networks, which included kiosks and branded refrigerator displays.
• Nestlé made significant investments in training and development of its local staff.
• Nestlé invested $20 million in ice cream production between 1996 and 1999. (High Budget)
• In June 1996, Nestlé acquired a controlling share in an ice cream factory in the Moscow region.
• Nestlé made significant capital investments in order to modernize and expand both plants and to develop their
infrastructure and facilities to ensure that they met Nestlé’s international manufacturing standards. In 2000,
Nestlé had the second-largest ice cream market share after Ice-Fili and produced about 16,000–17,000 tons.
• Nestlé produced nontraditional Russian ice cream (using both milk and vegetable fats) under new brand names
such as “Eskimo Kimo” and “Rozochka”.
• Nestlé actively advertised other ice cream brands such as “Extreme” and “Mega” through extensive TV
campaigns.
• Many domestic ice cream producers feared the kind of domination that Nestlé showed in Egypt, where in only
a matter of a few years, it had managed to oust 23 domestic ice cream producers to become the only ice cream
producer left in the country.