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SUAL Group’s strategy is based on the principle of dynamically developing all technological stages of production, from extracting raw materials to putting out products with high finishing degree and pronounced consumer characteristics. The Demidovsky Consumer Goods plant symbolizes this successful strategy. Since 2000, when it was founded, the enterprise transformed from a small shop to an up-to-date production complex becoming a recognized leader among Russian producers of aluminum forged crockery. From the very beginning the best samples of quality were chosen as the plant’s guiding line. As Inessa Smirnova says, in 2001 the Demidovsky Consumer Goods plant obtained a license for the right to use the latest nonsticking coating Teflon® Classic (DuPont) and Skandia (Akzo Nobel) and in 2003 the covering Teflon® Platinum (DuPont) that today has no match in Russia. In 2002 a new Italian line of producing plates and dishes with nonsticking coating made by roller burnishing was put in operation. That was the start of making products with Russia’s first national crockery brand ScovO. Inessa Smirnova regards 2004 as an especially successful year. First, the Demidovsky Consumer Goods plant raised production volumes by as much as one third surpassing its own plans. Second, with a significant diversification of the ‘production portfolio’ there was a quality breakthrough on the market. Just recently the Demidovsky Consumer Goods plant was perceived as a producer of comparatively cheap dull crockery for fast food eateries, armed forces, etc., recalls Inessa Smirnova. But with commissioning of a new production line the plant immediately occupied the most prestigious niche of expensive and high-quality crockery with nonsticking coating. In the words of Inessa Smirnova, in 2004 the volume of selling items with nonsticking coating for the first time exceeded the volume of selling dull aluminum crockery. This significantly increased the enterprise’s profitability. In 2005 the share of crockery with nonsticking coating in volumes of production and sales will amount to about 60 %. The first steps were taken to develop partnership relations with popular network trade systems, such as IKEA. It allowed the Demidovsky Consumer Goods plant to get itself integrated in the international business on advantageous financial terms and consolidate its position on the market of crockery with nonsticking coating, where conditions are far from being simple. “I mean, above all, a rather aggressive behavior of the Italian firms Ballarini, Bialetti, TVS as well as Kulinar”, she notes. By mentioning this Russian name Inessa Smirnova explains that it belongs to a firm that was specially set up by DuPont for trading in Russia and, later, sold to Bialetti. As Inessa Smirnova points out, all these firms are actively expanding their presence in trading networks and closely working with distributors. It should be recognized that they have something to fight for. As Smirnova insists, in the last year alone Russia’s market of crockery with nonsticking coating grew up by 25% to 30%. By her estimates, such rates will stay intact for the nearest 3 to 4 years in the least. The share of the Demidovsky Consumer Goods plant on this market amounts to 14 %. The ScovO brand, under which the plant works, is getting better and better known in Russia and the CIS. The enterprise is producing over 200 kinds of crockery with nonsticking coating and about 150 items of dull and polished crockery. All products are certified in Russia, Ukraine, Kazakhstan, Byelorussia. The enterprise has a system to provide quality that corresponds to the ISO 9001 international standard. The high quality of ScovO items was marked many times with prestigious national prizes, diplomas and medals. “Our products are in growing demand all over the country, from Moscow to Vladivostok, as well as in other CIS member states. Our partners, over 200 firms and distributing companies, help us advance our crockery”, proudly says Inessa Smirnova. In 2005 the plant is planning to produce about 4 million items of crockery with nonsticking coating. However, the priority is given to the quality side of product development. Inessa Smirnova includes in this the broadest possible set of factors with improvement of management and intra-corporate relation quality being among them. “Our management team has gained a big experience. We know what to do and how to do it. Probably, it may be said that our potential and ambitions have, in a sense, outgrown the present business limits. By taking over the field we see the necessity to expand it, even more so that opportunities for growth are exceptionally favorable”, she notes. Not every market sector in Russia has such a high dynamics as the market of crockery with nonsticking coating. Today, its year-on-year capacity amounts to no less than $95 million or about 15 million items. According to forecasts, by 2010 it may grow up to $250 million and 50 million items. “To give up such a hot market to rivals would be unforgivable” says Inessa Smirnova. “That is why we submitted to the investment committee of the SUAL Group a proposal to build one more plant”. The leaders of the management company found this proposal quite timely and quickly made a decision on building such an enterprise. At present, the project is in the works. A new plant ScovO will be located 100 km from Moscow, close to the town of Stupino on a specially allotted territory that makes it possible to include this project in the so-called Green Field category. Inessa Smirnova explains the choice of this site by its closeness to markets and availability of the developed infrastructure. Precisely in Russia’s Central region the Demidovsky Consumer Goods plant does most of its sales: about 70 % of its products are brought to Moscow and from there they are distributed among neighboring regions. Establishing production facilities in this region will result in a significant reduction of transportation costs. Besides, in Smirnova’s words, its former ties with the Stupino integrated metallurgical plant, the supplier of aluminum semi-finished products, were taken into consideration. The future ScovO plant will be a compact monolithic building, where commercial, storing and management units as well as the headquarters of the crockery business of the SUAL Group will be located. According to Inessa Smirnova, the main characteristics of the plant are the following. The volume of investments amounts to about $16 million. The personnel will number about 200 employees. The construction works will start in March 2005. The plant’s will be commissioned in 12 months after the start of construction. The plant’s first phase will make it possible to produce 2.75 million items a year. Its full production capacity will equal 5.5 to 6 million items a year. The range of crockery with nonsticking coating includes frying pans, braziers, baking trays, stew-pans, saucepans, baking moulds, etc. “We will keep our partnership ties with our main suppliers” , promises Inessa Smirnove and she mentions them. KUMZ (integrated in the SUAL Group), Samarsky iron & steel mill, and Stupino integrated iron & steel mill are to supply aluminum raw material to the new plant, DuPont and Akzo Nobel will take care of providing nonsticking coating. By the way, the ScovO plant will have to get certified so as to obtain licenses for the right to use brands of nonsticking coating when bringing products to the market. There will also be certification procedures as regards its compliance with ISO 9001 (the quality management system) and ISO 14000 (the ecological management). Inessa Smirnova describes the technology and equipment, which will be used at the plant, as “the most advanced”. A tender with participation of leading producers helps choose the best. In addition to the traditional way of doing nonsticking coating by spraying and roller burnishing there will be another technology of “curtain”, kind of a cross between expensive spraying and economical roller burnishing. There will also be an absolutely new technology of embossing. In Smirnova’s words, by using it the enterprise will be able to make crockery of even higher quality. The embossing of the bottom increases several times the strength of nonsticking coating, allows to use crockery at any type of stoves or sources of flame, raises by many times its resistance to deformation. The final effect is similar to the one of a grill when it is used for preparing food. “ So far no crockery of this kind is made anywhere in Russia. For this purpose the plant will get a press with the force of 3,500 tons”, says Smirnova. There will be new approaches, of course, to arranging business at the ScovO plant, which will be situated near Moscow. To this end a group of managers are being re-trained using the experience gained by the Demidovsky Consumer Goods plant. For example, in order to get an all-round automation of financial and business activity the Navision MBS information system, which was successfully operated at the Demidovsky Consumer Goods plant, will be used. So, what will the Russian market get after the ScovO project is implemented? Above all, up to 2 million items a year will be sold in the so-called first-class price segment. Another 4 million items will be offered to the mass consumption market, including the system of popular trade networks But the company’s managers do not limit themselves to Russian customer only. Inessa Smirnova believes that consumer characteristics of the ScovO products will let it enter international markets in the nearest three years. As Smirnova says, “ to this end we presented our products at the international Frankfurt fair. It is not simple to get a niche on this market. Our crockery with nonsticking coating is often compared with the Chinese one, although by quality characteristics our items are better and correspond to the best Italian samples. We are holding talks with trading companies of Yugoslavia and Czechia and we hope that by supplying our products to these countries we will take the first step on the road to the European market”. By the company’s plans, in 2009 the total year-on-year volume of production and sales at the Demidovsky Consumer Goods plant and ScovO plant should amount to about 10 million items accounting for approximately one fourth of the Russian market of crockery with nonsticking coating. “Accomplishing this task is an important part of the SUAL Group’s strategy. This will help expand the sales market and raise the competitiveness of Russia in one of the most promising sectors of selling aluminum products”, stresses Inessa Smirnova at the end of our conversation Dynamics of production by SUAL Group, thou. Tons 2003 2004 Increment, % Primary process stage Bauxite 4425.9 5017.6 13.4 Alumina 2041.9 2067.5 1.3 Primary aluminum 889.9 923.8 3.8 Silicon 50.9 57.7 13.3 Processing stage KUMZ 66.9 82.1 22.7 Cable plants 31.4 36.6 16.7 Uralskaya Folga 10.7 13.3 24.4 Demidovsky 2.85 3.93 37.7 By data from SUAL Group