Russia development of new horizons STRUCTURE 1

Russia: development of new horizons

STRUCTURE 1. Geographical interpretation 2. Some macro values and prime analyses 3. Problem of functional doubling and marketing analysis 4. Concerning the structure it looks 5. Management economy and chain updates 6. Influence on market 7. Project team and it plans

RUSSIA - KEY IN THE EXPANSION OF THE EASTERN MARKET • Priority status: 5 year growth plan • Increased capabilities in Moscow • Step-up in marketing investment • Reorganize to efficiency • Maximize local marketing

STRUCTURE OF SALES REGIONS IN RUSSIA AND CIS FOOD & HPС, 2009 West: • the most sales volume • the biggest number of retail outlets • the place for retail and key accounts clients management • enterprises – international importers • the ruling top 43% Moscow 27% 29% Samara East: • big length of the region • the key region in the Uniliver’s South: • low competition on the market • high percent ofcompany’s sales • consist of two parts: season market and permanent market • low transports costs • high percent of year growth strategy of expansion to the eastern countries • remoteness from the management centre Novosibirsk

DEPENDENCY BETWEEN RUSSIAN GDP AND FMCG MARKET VOLUME 14000. 00 12000. 00 Billons of rubles 10000. 00 8000. 00 6000. 00 4000. 00 2000. 00 1999 2000 2001 2002 2003 2004 2005 Year FMCG market volume GDP 2006 2007 2008

DEPENDENCY BETWEEN RUSSIAN GDP AND FMCG MARKET VOLUME FMCG GDP Average 2671, 758345 Average Dispersion 1900105, 464 Dispersion GDP Covariance r=0, 997* 9094, 9625 2110155, 237 1997620, 818 FMCG market volume * Pearson's product-moment coefficient between Russian GDP and FMCG market volume. Data: 2000 -2007 in the prices of 2000.

RUSSIAN FMCG MARKET GROWTH FORECAST 14000. 00 ec F for IM 12000. 00 ast Billons of rubles 10000. 00 st 8000. 00 d “Para 6000. 00 ca ” fore ox 4000. 00 2000. 00 1999 2000 2001 2002 2003 2004 2005 2006 Year FMCG market volume GDP Average growth: 16% per year 2007 2008

RUSSIAN FMCG MARKET GROWTH FORECAST 5 years growth forecast 210%

IN THE ENEMY CAMP 2008 – restructuring Russian production companies- start of east export politics 2008 - restructuring businesses in Russia, buying minority stakes in companies - sales growth of 4 -5% 2009 – restructuring sales – local management improvement – market share growth 2 -3%

BUT… To achieve 210% growth after 5 years You Need to Remain Competitive

UNILEVER RUSSIA REFORMS OR REGENERATION? Reforms Regeneration + Smooth vector change guarantees + The most efficient structure can be stable work formed initially + No need in sharp staff reduction + Automatic clearance of inefficient or useless units - May not give a necessary incentive - Some delivery interruptions may for the fast development occur in case of reorganization - It is hard to modernize the outdated - Need of mass discharges by system disbandment of the old units

UNILEVER RUSSIA REFORMS OR REGENERATION? Reforms Regeneration + Smooth vector change guarantees + The most efficient structure can be stable work formed initially + No need in sharp staff reduction + Automatic clearance of inefficient or useless units - May not give a necessary incentive - Some delivery interruptions may for the fast development occur in case of reorganization - It is hard to modernize the outdated - Need of mass discharges by system disbandment of the old units Compromise: Regeneration through Reforms

REGENERATION THROUGH REFORMS HOW IS IT POSSIBLE? 1. The new structure is formed without taking the old one into account ü Aspiration to maximal efficiency ü Lack of affection for the old schemes 2. Analysis of current structure. Clearance of inefficient and useless units ü Current structure is optimized as if there is a process of smooth reforming ü Structure becomes facile and flexible 3. Determination of necessary steps for the full transition from the old structure to the new one

THE CHAIN OF COMMAND Top level National sales director (Field Manager) Regional Sales manager West Food Regional level Regional center Territory level

THE CHAIN OF COMMAND Top level National sales director (Field Manager) Problem of functional doubling and centralization of marketing decisions Regional Sales manager West Food Regional level Why is it dangerous? Regional center Territory level

PROBLEM OF FUNCTIONAL DOUBLING IS: Ø Congestion of managerial staff Ø Increasing costs on personnel wages Ø Degradation of documents circulation and data exchange Ø Inefficient use of highly productive human resources Ø Lack of system’s dynamics and flexibility Ø Barriers to company’s expansion on the market About 10 “different functional” sales managers at the regional level ( Food and HPC) Lim {utility} -> 0 per each new person Congestion with unnecessary instances Redundancy of regional problems solved at the territory level prevents from concentrating on real local problems Difficulties with localization of marketing programs under conditions of severe competition between different regions Growth of doubling in case of market’s expansion

ords er w oth In Ø Congestion of managerial staff Ø Increasing costs on personnel wages Ø Degradation of documents circulation and data exchange Ø Inefficient use of highly productive human resources Ø Lack of system’s dynamics and flexibility Ø Barriers to company’s expansion on the market About 10 “different functional” sales managers at the regional level ( Food and HPC) Lim {utility} -> 0 per each new person Congestion with unnecessary instances Redundancy of regional problems solved at the territory level prevents from concentrating on real local problems Difficulties with localization of marketing programs under conditions of severe competition between different regions Growth of doubling in case of market’s expansion

PROBLEM OF MARKETING CENTRALIZATION IS: Ø Weak power of territory and regional promotion managers Inefficient distribution of marketing budget, poor local strategic planning, MACRO view at regional marketing Ø Lack of direct relations between marketing departments of different levels Poor data exchange, data loss, needs of lower levels are not taken into account Ø Inflexible system of good’s localization Ø Geographic distraction of key managers in the regions Inflexible marketing system and poor data exchange conflict with: A) Promotion of Russia (Moscow) as a key point in east market expansion * B) Uniliver ‘s international policy of good’s localization The lack of real representation in some of the managers about local problems entrusted to them in the region * International program “Uniliver Local Roots”

CONCERNING THE STRUCTURE IT Reorganization at the Field Sales level LOOKS : Territory level From 80 000 to 120 000 rub. From 78 000 to 112 000 rub. from 50 000 to 89 000 rub. Base units Marketing cosulting Volgograd From 90 000 to 15 000 rub. Local Adaptation Manager ( LAM) Economy from 118 000 to 206 000 rub. Reports to: Territory Sales Manager Department / unit: Territory Sales Manager, Territory N Responsibilities and tasks: control and adaptation of sales programs and conceptions, relations with local retailers, registration of the market conditions at the territory level Interrelation: Regional Marketing Department, Channel Development and Modern Trade Account Why is this replacement necessary? 1. 2. 3. 4. 5. There is a small effort at the territory level but multifunctionality is necessary Flexibility of decentralization programs is guaranteed Does the work of 3 units Controls the situation, has advantages of “close relation with the market” Replacement is justified by the successful experience of such international companies as Nestle, P&G, Kraft. Food , etc. Information about wages - http: //www. headhunter. com/

CONCERNING THE STRUCTURE IT Reorganization at the Field Sales level LOOKS : Regional level Uniliver usually works with the major retailers and retail chains, that is why transactions are mostly closed in the Moscow head office – KEY ACCOUNTS CLIENTS Regional Sales manager Direct relation Сustomer Marketing Directors ( Food& HRC) – Customer Marketing Executive ( Regional) – Local Adaptation Managers 1. 2. Flexible promotion Corresponds with the international Unilever’s program of local market’s adaptation Information about the major retailers working with Unilever look up at the Attachment From 111 000 to 130 000 rub. From 143 000 to 168 500 rub. Trade connections specialist Why is this replacement necessary? 1. 2. Peculiarities of development of Russian FMCG market requires not only traditional European modern trade relationships but also work with traditional markets – striking example is the east region Positioning of Uniliver Russian as a junction of cluster for company’s expansion to the east market needs the consolidation of sales on both directions From 108 000 to 127 000 rub. Economy from 76 000 to 88 000 rub. Reports to: Regional Sales Manager Department / unit : Regional Sales Department, Territory N Responsibilities and tasks : manages the development of the key clients : international, local (including chains), outlets in the all cities of current region Interrelation : Territory Sales Managers, Regional Sales Managers, Key Account Department Information about wages - http: //www. headhunter. com/

Management economy Before 50% Food HPC manager After manager Food & HPC manager 60 % Wage economy = 40%!

CONCERNING THE STRUCTURE IT LOOKS : Top level At the top level management reorganization of Field Sales means integration of Food & HPC departments. However, marketing departments should be left divided. Customer Development Regional Council Vice-President Customer Development Moscow West Sales Director Saint-Petersburg East Sales Director Novosibirsk Same Regional Sales Manager (Food) Regional Sales Manager (HPC) South Sales Director Novosibirsk Same CIS Sales Director Minsk/Kiev Same

Concerning economy it looks: 6 RSM + 30 TSM + 5 MTAE + 59 MTE + 6 DS + 82 SCSS + 100 CSS + 32 CDAE = 20928333 rub. /month Counsel of territorial managers substitute regional managers Merger of food and hpc management departments New post of tcs manager, who perform the functions of MTAE and MTE 15 TSM + 5 TCS + 27 MTE + 3 DS + 52 SCSS + 63 CSS + 16 CDAE = 11318333 rub. /month Wage Economy – 9 mln. rubbles in a month

THE CHAIN OF COMMAND - MANAGMENT UPDATE Top level Customer Development Regional Council Vice-President Customer Development Moscow West Sales Director Saint. Petersburg Same East Sales Director Novosibirsk Same Trade connections specialist Local Adaptation Manager ( LAM) CIS Sales Director Minsk/Kiev Same Regional Sales Manager (HPC) manager Regional level Territory level South Sales Director Novosibirsk Regional Sales Manager (Food)

Influence on demand More active marketing policy more consumers want to buy a brand sales growth Faster distribution consumer always can find the good in the store brand become more popular sales growth The effect of known changes people can see, how company deal with workers, notice the company brand in the mass media sales growth

Influence on supply More complicated stuff no posts, where people doing the same work costs degree prime cost decrease sales growth Geographical position regional centres located in same regions logistic costs degree prime cost decrease sales growth More powerful medium management local management make local decisions company need less top managers costs degree prime cost decrease sales growth

PROJECT REALIZATION TEAM ü Representatives of all the company’s departments • • • Customer Development Department Supply Chain Department Strategic Brand Development Department Brand Building Department HR Department Finance and IT Department Legal Department PR Department Supply Chain Department Corporate Affairs Department Foodsolutions Department ü Representatives of key clients ü Psychologists ü Invitees from BRIC&CIS countries Directions leaders 11 specialists 5 key clients representatives optional 5 potential markets experts 21 different and engaged specialists

USING PRINCIPLES OF INTERNATIONAL UNILIVER TALENT MANAGER PROGRAM • Local VS consultants 11 locals managers + 5 foreign experts Project team’s working plan 2 month, team forming 01. 2011 -01. 03. 2011 • Nationality Russia - great opportunities to multicultural view 01. 12 - 01. 12 01. 03. 11 - 01. 07. 11 Moscow • Gender differentiation 10 women – 11 men • Internal vs. external 11 internal – 10 external 01. 04. 12 - 01. 12 West, head Novosibirsk Samara South East Less than 3 years 01. 07. 11 - 01. 12. 11 Kiev CIS 01. 12 - 01. 04. 12

Moscow Samara Kiev • Presentation of a new regional office • Psychological work with discharged managers • Public Speech about company’s prospects • Reorganizing promoting interactions • Psychological work with discharged workers • Office’s structure rebuilding 01. 03. 11 - 01. 07. 11 - 01. 12. 11 • Restructing company ‘s head office to the regional management office • Creating a new regional territory chain 01. 12 - 01. 04. 12 • Meeting with the retail groups • Public speech about company’s prospects • Opening of a new regional head office • Close meeting with new company ‘s staff Novosibirsk • Meeting with the retail groups and key clients 01. 04. 12 - 01. 12

A BIT ABOUT THE DEVELOPERS Artem Kozhemyakin Catherine Chudinova The designer and technical Supporter The motivator and analyst E-mail: ekaterinachude@gmail. com Ivan Lashin The analyst of makroproblems and creative tasks E-mail: myerto@mail. ru Para. Do. X E-mail: xenus. t@gmail. com Maria Zhalova The translator and corrector E-mail: zhalovamaria@rambler. ru Special thanks to National Research University Higher Scholl of Economics.

THANK YOU FOR ATTENTION!