Dec 3, 2008

Business - Siberian ice cream beats crisis (G.Read)

Kiryl Sukhotski
Business editor, BBC Russian Service, Novosibirsk



Novosibirsk, the unofficial capital of Siberia, is definitely a city of optimists.

I came here to find people counting the losses in the wake of the financial crisis. Instead, I found a strong business waiting for the crisis to happen and ready to cash in.

But in a region where the temperature at this time of year is commonly minus 25 degrees, this successful firm does not make thick coats or warm hats. It produces ice cream.

In this town alone there are more than 300 kiosks selling ice cream and nothing else.

And they are all profitable. People here like to eat the stuff on the streets, even in winter.

No joke

So there is no wonder that a local ice cream producer, a company called Inmarko, is doing so well. In fact, it is the biggest ice cream maker in the whole Russia.

Understandably, the company's CEO, Dmitry Dokin, is in a good mood.

"It may seem that the winter in Siberia lasts all year round; there are very few people - so who will eat ice cream here apart from the bears? That was exactly our main advantage. Our competitors didn't take us seriously," the Siberian ice cream tycoon tells the BBC.

It is hard to be serious about ice-cream in Siberia. But, for these entrepreneurs, it worked.

It all started in 1992 when a young man was standing in a line outside of the main department store in Novosibirsk.

It was February and people were queuing for ice cream - but there appeared to be not enough ice cream for everyone waiting.

So the young guy spotted a gap in the market and started his own company, bringing on board several of his friends, including Dmitry Dokin.

Winter taste

After four years together, they built their first factory. The business is now worth more than $200m (£134.3m) and provides all Russia with ice cream.

When asked about the financial crisis, Mr Dokin just laughs.

"In November this year we sold more ice cream than in November last year. Our market share has increased by more than 2.5% this year," he says.

"When the crisis hit our competitors, we'll be ready to pick after them. We'll increase our sales even if the demand falls by 15%. We consider this crisis an opportunity," he says.

The firm did exactly that after the 1998 Russian debt crisis.

Cheap ice cream became the only treat many people were able to afford, and Inmarko geared up to increase production.

Now they are even better prepared, having created their own distribution chain, thus reducing reliance on ailing retailers.

Recession-proof

And it is not only ice cream makers who are that optimistic.

Novosibirsk is a large city without any of the natural resources which Russia as a whole relies so heavily upon.

There is no oil, no gas, no metals, and no giant industrial factories.

This is a town of universities and research institutes, where the main resource is the people with their creative ideas.

And there is a wealth of successful small and medium-sized businesses, thinking about innovation and expansion and who refuse to let themselves be frightened by the crisis.

Companies are creating nano-robots and new purification technologies, new drugs and a new generation of computer games.

One of the success stories is a company which invented a new type of printer.

It prints into the very structure of the paper rather than onto its surface. There is so much interest in this product that they talk about competing with Hewlett Packard one day.

Innovation

But what new can you bring to ice cream? Well, a lot, says Dmitry Dokin.

They already have ice cream with black pepper, ice cream with fish and an ice cream called Vampire - a small stake of aspen wood instead of a stick.

And they are planning to introduce even more products despite the current economic turmoil.

Some would think that these businesspeople are mad, but they are earning some very serious money.

They are not afraid of the cold and they are not afraid of any crisis either.

BBC Russian Service business editor Kiryl Sukhotski is travelling across Russia trying to measure the impact the current financial crisis has on ordinary people.