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  1. 1. СТРАТЕГИЯ ВХОДА НА СЫРЬЕВОЙ РЫНОК Дмитрий Леонов Startupin commodity market
  2. 2. Entering new Company, I often face a paradigm Decisions were determined on base of logic and facts I could see another facts And basing on the same logic come to another decisions
  3. 3. Strategic goal of agro leader was to enter new commodity markets founded in 1994 $1 bln revenue 15.000 employees 40 plants and silos Razgulay company
  4. 4. We all know what beer is: Malt Water Yeast Hop + + +
  5. 5. And malt is produced from Barley
  6. 6. Which market is* $600M *by that time barley market was in short supply and growing
  7. 7. And barley’s margin is Twice more than market average
  8. 8. 32 Malting process 1 Grains are dried, and the result is called malt Barley contains starch Grains are sprouted, the starch turns into sugar, which gives extract to mash
  9. 9. Even before the project started I analized the market … Spot market, MALT Seed program, BARLEY Spot market, BARLEY Others …. and segmented the players into Huge multinational companies, local brewers, and independent malt -houses Users of malt or barley
  10. 10. On the concepts of the Company and common sense I did not rush into small breweries and independent malt-houses Non transparent tenders Credit risks Small delivery lot
  11. 11. And it was difficult to sell to multinational brewers … Difficult to meet decision maker I was not professional enough in malt Specifications, which I did not understand And then I started to learn more about the market from the clients and industrial organizations
  12. 12. That's what I did not know coming into the market To contract To buy To supply It’s not enough to contract, you also need to buy the product It is difficult to determine the quality when you buy commodity Malting barley requires totally different rework and storage All the crop is bought in September - October Different sorts cannot be mixed together, 2 + 2 ≠ 4
  13. 13. Why in barley 7 + 15 = 5 ? Malting cycle is the time of sprouting the barley Only germinated grain turns starch into sugar Barley with 2 weeks malting cycle costs 7 rur/kilo, with 1 week - already 15 rur/kilo – because malt-house capacity doubles If you mix these two barleys, you get less sugar than from each components, but malting cycle is the same +7 Rur/kilo = 5 Rur/Kilo15 Rur/Kilo
  14. 14. My competitors in purchasing were in different «weight categories» The major land owner provided new market for brewers Close relationships with farmers allowed me to work even more effectively than brewers Money of leading trader allowed me to pay farmers for the crop in advance
  15. 15. Half of success – to persuade management Largest brewers instead of ExWorks and prepayment wanted CPT and credit Silos needed to be re-equiped for barley technology process Changes concerned also field work Brewers wanted transparent relation- ships, including certification of silos
  16. 16. We sold all we had contracted Seed programs worked We entered spot market Silos were certified Razgulay was positioned as loyal and responsible supplier Operating profit of the first year was positive and above the target
  17. 17. Develop model Persuade boss Compete !Learn more My conclusions from the case