Andrei Karunos

I

n those years, when the Kamensk-Uralsky Metallurgical Plant (KUMZ) was just developing the production of cookware with the nonsticking coating, this was not considered a major direction of its business diversification. The cookware accounted for too small a share of the KUMZ aluminum products that went mainly to the military sector. But precisely this cookware helped the plant survive during Russia’s economic reforms. The curtailment of Russian military programs and crisis of entire industries caused a slump in demand for aluminum rolled products. However, the use of aluminum cookware in Russia remained unchanged, Inessa Smirnova says. As a result, the production of cookware was about the only profitable business of KUMZ during those crisis years. Smirnova maintains that “there were moments, when, in fact, this shop was feeding the entire enterprise”.
In the late 1990s the change of owners took place and KUMZ began gradually getting over the crisis.
In Smirnova’s words, the company’s management focused its efforts on manufacturing principal products, whereas the cookware shop was financed on the residual principle. There were even proposals to close the shop down for good because of its unprofitableness. But Inessa Smirnova, who was just invited at that time to become manager for consumer goods production development, put forward an alternative plan: "We proposed to make the cookware production an independent business unit. By our estimates, it could still bring in a profit, however small it might be. The idea was supported by the company’s leadership and on October 2, 2000, the subsidiary enterprise Demidovsky Consumer Goods was set up". However, there still remained one thing to prove: that the new enterprise was capable of working independently and that it would be able not only to retain the market but even to expand its presence there as well.
At first, Demidovsky Consumer Goods was regarded in the SUAL group as a nonspecialized production unit. But it did not cause any problem for the company. "We did not ask for anything, we did not yield losses and we regularly submitted accounts of our activity", Inessa Smirnova goes on saying. "In a year we proposed a new business plan to substantiate the need for modernizing the available equipment", she notes. The plan was adopted and the company provided 2 million euros for acquiring a line to make cookware with the nonsticking coating by the latest method of roller burnishing.
The head of Demidovsky Consumer Goods does not overestimate the importance of the enterprise for the SUAL group’s structure: "We are just a small component of the large holding". Yes, against the background of large-scale projects being implemented by this aluminum company (for example, setting up a new alumina-and-aluminum complex in the Republic of Komi) cookware production problems sometimes seem nothing but tiny. Nevertheless, SUAL has not given up on this business, stresses Smirnova.
Being part of the holding’s structure the enterprise has secured a necessary support and an opportunity to dynamically develop while preserving its freedom of action. As Inessa Smirnova points out, the management at Demidovsky Consumer Goods determines the marketing strategy independently: "Everything that has to do with the market, with our policy there and our interaction with distributors, with what exactly we are manufacturing and in what quantity is up to the enterprise’s managers to decide".
Despite the natural assumption that since the enterprise belongs to SUAL, it uses the company’s aluminum only, Smirnova insists: "Demidovsky has the right to purchase raw materials wherever it is more advantageous and convenient". In her words, while that same KUMZ is the most optimal supplier in terms of logistics and business organization, it is not always in a position to offer a metal that can be used for manufacturing new types of products. As far as the production of cookware with the nonsticking coating is concerned, requirements with respect to plottiness, plasticity, graininess and other properties are very strict. "We tried to buy aluminum from Alcoa but our expectations turned out to be too high", says Smirnova. The rejection rate was even higher than the one received when using aluminum from the Russian company Sameco, although with high customs duties taken into account the American metal cost much more. Maybe, our lack of experience of working precisely with this metal had its impact as well", she adds.
In the policy of selling finished products Demidovsky Consumer Goods’ efforts are mainly focused on the Russian market and the enterprise is counting on new kinds of products. Today, the volume of ordinary aluminum cookware in its production structure accounts for 65% and the volume of cookware with the nonsticking coating amounts to 35%, says Smirnova. By 2008 the ratio will be the opposite, she stresses. According to Smirnova, Italians, the world’s leading producers, go on manufacturing ordinary cookware: "It is a myth that the aluminum cookware is harmful and that its production in America and Europe has been stopped a long time ago".
In Inessa Smirnova’s opinion, by their quality the Russian products are not inferior to the European ones. Demidovsky is trying to maintain its market positions by actively cooperating with European leaders, such as DuPont. The company has become the first in Russia to obtain the Teflon® Classic license and so far it has been the only one in the country that possesses the Teflon® Platinum license. The Teflon platinum coating is the hardest one that is not damaged when metal tableware, such as spoons, forks, is used.
Responding to the question about competitors Inessa Smirnova says the following. As far as cookware with the nonsticking coating is concerned, the competition in this market segment is very strong, especially with such foreign companies as Tefal, TVS, Ballarini, Bialetti and some others. But the situation is changing. "Just five years ago Tefal accounted for up to 65 % of the Russian market and cookware with the nonsticking coating was associated precisely with this brand. Now, by our estimates, the share of Tefal is no larger than 37 %. The share of Demidovsky equals 11 %. In 2003 it rose 1.5 % more, while the growth of the market itself reaches 25% a year".
Smirnova believes that Russian manufacturers of cookware with the nonsticking coating (and she lists among them the company Rusal with the Kalitva brand as well as the company Neva-Metal-Posuda, both of which also have the DuPont license) should not compete with each other at all: "Our common rivals are European companies. They manufacture tens of millions of plates and dishes a year". Figures for Demidovsky Consumer Goods are much more modest. "In 2003 we sold about 1.3 million items. This year our goal is to sell 3.5 million of them", says Smirnova. By her estimates, the capacity of the Russian market amounts to 15 million items and she thinks that the demand is bigger than the supply.
In order to be more successful in bringing its products to the market Demidovsky is creating its own retail chain. According to Inessa Smirnova, the enterprise "has already opened 8 stores and by 2008 there should be 50 of them". Under this strategy the new brand, ScovO, has been introduced. "We want to get cookware with the nonsticking coating to be associated in Russia with SñovO, to make ScovO become a brand name", says Smirnova. "After all, the declared goal of Demidovsky’s strategy is to become a Russian Tefal".
The ScovO brand is present in both ordinary stores, where a pan can be purchased for $3 to $4, and in places, where customers are ready to pay for it from $40 to $50. "It is clear that a well-off customer can always buy a costlier product by a leading European company paying $20 more but we hope to prove that ScovO Challenge is no worse and that it is no less prestigious", stresses Smirnova.

NOW:
Being a participant of the Household Goods and Furniture – 2004, the federal wholesale exhibition & fair in Moscow, Demidovsky Consumer Goods presented sets of the elite cookware with the ScovO – Challenge, Titanium and Italy brands. These products attracted the attention of representatives of major Russian and international sales networks, such as Ashan and IKEA, as well as of regional chains of the stores DIVO and Kangaroo. The enterprise’s commercial director Anton Larin says that in 2004 the volume of selling cookware with the nonsticking coating is expected to grow 33%.