1. Gagarinskiy Commercial Bank
Russia
Moscow 107078
Introduction
Today’s business is on a global scale, and the Russian market is one of the many potential
countries to do business with—especially with a whopping $300-billion food-retail industry
market (“A Magnit”). The purpose of this proposal is to introduce Blue Bell Creamery which is a
well-established ice cream company in the United States that has potential to do international
business well through the Russian market.
In order for Blue Bell Creamery to be successful in this specific market, it is necessary to provide
a better understanding of the company’s background and history. Understanding the company’s
strengths as well as its weaknesses will allow a better perspective on how to position themselves
for long-term growth. The company would need to focus on its situational analysis from both a
controllable as well as uncontrollable perspective within the Russian market. Controllable factors
would include: production facilities, promotional strategies, products, and pricing. We’ll also go
in-depth with the uncontrollable factors that will be considered within the Moscow region. The
company will focus heavily on embedding itself and its manufacturing facility in the most vital
location in order to successfully attract the best target market and customer profiles. There will
be no need for a middleman as the company does this work themselves or incorporates a joint
venture with another company. The company will provide an analysis of the Russian market and
explain how its culture, economic, and competitive areas of interest will prove its success in this
specific region. Once these tasks are completed, Blue Bell Creamery will essentially become the
leader in ice cream sales within Moscow.
Company Background
Blue Bell Creameries (originally named Brenham Creamery Company) was established in
Brenham, Texas in 1907 known for its local presence and its superior quality and irresistible ice
cream flavors (“References for Business”). Strengths of Blue Bell Creameries is very robust and
expresses the power it has to do well in other markets. They have a reasonable size product line
consisting of frozen yogurt, sherbet, and more than 70 kinds of ice cream snacks and snack bars
(“References for Business”). Blue Bell is one of the top 3 best-selling ice creams in the country
and they have established plants in 23 states which include: Colorado, Texas, Tennessee, and
many more (“Blue Bell History”). Blue Bell Creamery only accounts for 30 percent of the
supermarkets in the United States, but has been growing exponentially due to the high demand
for the ice cream in other locations throughout the U.S (“Blue Bell History”). For a visual
perspective, visit their website and click on “Blue Bell Country.” From a production standpoint,
the company sells their ice cream products in half gallon and pint sizes which is important when
targeting to specific consumers. Currently, the company has both year-round and what they call
“rotational” flavors of ice cream. Rotational flavors come and go depending on the time of year
such as Spiced Pumpkin Pecan and Southern Peach Cobbler. The year-round flavors include:
Banana Split, Buttered Pecan, French Vanilla, Strawberry, and Rocky Road (“Blue Bell
2. History”). Flavors give consumers choice, and with choice comes different consumers and an
improved consumer base.
Aside from the overview of the company and its product, we will consider more controllable
factors such as their culture, product prices, and distribution as way to understand more about
Blue Bell Creamery and their domestic environment controllable factors. Since Blue Bell
Creameries was family-owned and operated, its culture lives on the feeling of locally home-made
ice cream with a touch of family tradition. Tours of the manufacturing facilities are also another
way to not only attract customer’s attention to the business, but expresses the company’s
immense interest in local presence and building its brand personality. Since there is only three
manufacturing locations in the United States, the tours can only be conducted at those specific
locations—Brenham in Texas, Broken Arrow in Oklahoma, and Sylacauga in Alabama (“Blue
Bell Creameries”). Establishing a facility within Moscow will allow for the building of
relationships with its customers in this specific area. In 2006, Blue Bell Creamery’s annual sales
jumped past $400 million which is an astonishing number for only being located in 23 states and
50 distribution centers (“Blue Bell Creameries”). Since the company relies heavily on publicity
and word-of-mouth, it’s important for them to attain to the highest quality standards that they
adhere to and assess their locations thoroughly in order to remain successful.
Within Blue Bell Creameries, the company holds an impressive overall positive sales figure and
retains the third best-selling ice cream in the United States. Both their production and quality go
hand-in-hand with their success. They produce approximately 100,000 gallons of ice cream each
day and accounted for 40 percent of the ice cream market share in a large part of the southern
region of the United States (where they are established) (“Reference for Business”). None of this
work could have been successful without the implementation of specific operational designs and
brand awareness. The company incorporates what they call “DSD” or Direct Store Delivery that
handles the distribution of the products to the specific distribution centers of interest. As
mentioned earlier, the company has as 50 distribution outlets throughout the United States and
each one has the ice cream delivered specifically to their location from their own trucks (“We
Receive Calls”). This can be very costly to the business but ensures the robust quality they
require in their ice cream.
Weaknesses to this company are very present in many areas as well. Unfortunately, Blue Bell
Creameries has a very small operation which only attracts a third of the United States. Being this
small makes venturing internationally much more difficult—mainly in relation to cost. From a
promotional standpoint, advertisement is very little but they rely heavily on word-of-mouth and
publicity to attract consumer interest.
Best Source of Product
Since ice cream in general is difficult to ship without reliable shipping companies and expensive
prices, conducting a joint venture with a specific factory nearby Moscow would be the next best
option. To lessen political vulnerability in Moscow Russia, a joint venture will “help minimize
anti-[multinational company] feelings [and also] adds the additional bargaining power of a third
country” (Cateora et al. p. 187). It is possible to invest in an ice cream factory, but the costs
would be too great for this sort of integration. Kerry Kubilius, an Eastern European Travel
Expert says that “when you travel to Russia, you’ll be pleasantly surprised by the availability of
3. ice cream sold in Kiosks around cities and offered as a dessert in restaurants with various
toppings, ice cream is everywhere” (Kubilius). Another strong source to Blue Bell Creameries
success comes from The Nielsen Report relating to the Food and Beverage markets in Russia:
“Russia is amongst the top list of dairy consuming nations and still has potential for further per
capita consumption development” (“In Focus” p.9) What makes Blue Bell Creamery such a
viable business to establish in the Moscow region is its ability to sell product effectively along
with Russia’s already craze for ice cream. Consumers in Moscow are increasing their spending
in the retail industry. In 2004, the total volume of the retail market was worth $200 billion and of
that, 45.5 percent involved food products (“Russia Country Profile”). Every year since 2009,
imports of services has increased in Russia and the United States accounts as being the third
main supplier of imports within their country (“Russia Country Profile”). With regard to this
information, it clearly shows how impressive an import-oriented distribution structure such as
Blue Bell ice cream would be beneficial to both the company as well as both the customers in
Moscow and their economy.
The Russian Market
The ice cream market in Russia is worth $500 million (“Ice Fili”) and this number can only grow
much higher. The Federation of International Trade Associations (FITA) suggests that the type
of economy that Moscow, Russia currently has is an upper-middle-income economy (“Russia
Country Profile”). Much of the consumer spending for Blue Bell Creamery will need to rely on
strong consumer spending and disposable income. Of this market, the age group leans heavily
towards consumers younger than 25, but 30 percent of the market consuming ice-cream is above
age 45 (“Archive”). It is also mentioned that “for the majority of consumers, ice-cream is rather
an everyday than festive product. The fact that 73 percent of consumers purchase the review
product in small ‘round the corner’ food stores proves this statement” (“Archive”). After
understanding the foundation, there are three main areas of interest that will be covered in
regards to the knowledge of the Russian market: cultural analysis, economic analysis, and the
competitive analysis. The cultural analysis will involve the geographic setting, social institutions
involving dynamics of family roles, education, political system, and religion. When looking into
the economic analysis, we will focus our efforts on population and the demographics associated
with it, economic activity involving GDP, minerals and resources, trade restrictions, labor force
size and unemployment rates, and how media is most effective. The last area will involve the
competitive analysis where we look to evaluate the product, understanding the market by
comparing and contrasting both the competitor’s product from the product of interest, and how
much the government participates within the region. When working with other countries, it’s
important to understand their self-reference criterion which according to Philip E. Cateora,
International Marketing 16th Edition says: “the SRC is an unconscious reference to one’s own
cultural values, experiences, and knowledge as a basis for decisions” (Cateora et al. p.16).
Without understanding a culture in its broadest, it could impact overall success of international
business.
Prices
4. Even with strong domestic production of ice-cream in Russia, it still attracts foreign companies
to sell their frozen desserts here. According to Sanna-Group, the average import price of ice
cream in 2013 ranged between 3.62 $/kg to 4.83 $/kg and ice cream import increased from 28.9
percent to 30.4 percent in both volume and value (“Review”). Even though the intent is to
establish a facility or implement a joint venture with a company in Russia, it’s important to
understand the prices that importers pay in order to get an understanding of the comparison of
both import prices and foreign company establishments. Since joint venture prices vary, it’s
difficult to determine a rough estimate on price.
Cultural Analysis
When looking at Russia’s overall perspective from a geographic standpoint, the country is
located in the northern-most part of the Asian continent. The region is very large and is in fact
the largest country in the world covering just over 17 million square kilometers of landmass
(“Central Intelligence”). When comparing it to the United States in terms of size, it is close to
double the landmass. Since Moscow is located much further west of the Asian land mass, they
adhere to much humid conditions. Winters vary for them, with cooling near the Black Sea area to
freezing cold temperatures in Siberia (“Central Intelligence”). Summers are typically warmer but
also vary on location. Moscow receives much warmer temperatures than areas in the Siberian
region due to their northern-most position on the globe. One issue that may need further
investigation when incorporating Blue Bell Creamery into this region is proper climate
conditions. Livestock is important for this business to do well and is an important part to their
success. Without livestock and the proper agricultural setting, sales would be impacted from lack
of productivity.
Social institutions are an important part of how a company can thrive in an international business
setting. Emancipation is not as strongly established in Russia and therefore, implements stronger
gender roles both in the workplace as well as in the household. Women tend to focus their efforts
within the household. “A Russian man is considered to be a provider who supplies the family
with tangible assets, while a woman is viewed as a housewife and the mother of children”
(“Russian Women”). It is not said, though, that women don’t try to enhance their opportunities
with an education or build strong careers, but females make family an essential part of their lives
(“Russian Women”). This information suggests that most men would establish the necessary
funds to purchase products at retail stores. Women would do most of the shopping and in
essence, provides Blue Bell Creamery with their ideal gender target market.
Education incorporates a whole new level of thinking for a business to thrive within an
international market. Russia has two types of educational programs according to the Ministry of
Education and Science of the Russian Federation—general education and professional education.
In the general education, much like the education in the United States involves four basic areas
which include: pre-school education, primary general education, basic general education and
secondary general education (“About the Centre”). They mention that school children in Russia
tend to finish their general education around 17 to 18 years old before advancing to higher
education if they so desire. Higher education has six types: National University which provides
special opportunities for education and research; Federal University which is the leading high
education in research at a national level; National Research University; University; Academy;
5. and Institute. Many developed countries have strong literacy rates that enable businesses to get a
much better perspective on whether or not consumers are informed consumers. The CIA World
Factbook represents that as of 2008, 4.1% of Russia’s GDP embeds into their education system
and 99.7% of the total population at ages 15 and over can read and write. It is also mentioned
that the school life expectancy rate is at 14 years of age. Russia’s education expectations are very
similar to the United States and makes marketing products in this aspect much similar in this
regard.
Political aspects are very important for a business to understand and follow because their
decisions can ultimately impact the businesses success. The World Factbook represents that
Russia gained its dependence for the Soviet Union in August 1991. It also entails that there are
three branches of government which are similar to the United States; Executive, Legislative, and
Judicial branches. Within the Executive branch, Russia has a federation government type in
which the chief of state is President Vladimir Putin who has been in his position since May 7,
2012. With regard to their elections, when the president is elected by popular vote, he establishes
a 6 year term (with a possible second term) (“Central Intelligence”). Suffrage (or the right to
vote) is a person at the age of 18 for both genders. The legislative branch consists of an upper
and lower house which make decisions based on term lengths as well as elections and election
results (“Central Intelligence”). Within the judicial branch, the highest courts are the Supreme
Court of the Russian Federation (23 members) and the Constitutional Court (19 members)
(“Central Intelligence”). The countries flag consists of “three equal horizontal bands of white
(top), blue, and red—the colors may have been based on those of the Dutch flag; despite many
popular interpretations, there is no official meaning” (“Central Intelligence”).
There are roughly four main religions that are a part of Russia. Religions and their believers
consist of: Orthodox (70%), Muslims (10%), Catholics (1.2%) and Buddhists (0.7%) and of the
population of Russia, 82% are religious (“Russia Country”). Religion can be an enormous factor,
especially if specific religions involve avoiding any consumption of dairy products. The only
religion that is included in this instance is Judaism, where they have specific requirements
relating to dairy consumption. The web site “Life is a Meal” explains this in detail: “The
consumption of certain foods, including dairy products and fish, is subject to restrictions; for
example, there are rules forbidding the mixing and consumption of dairy products with meats”
(“Food and Religion”). With this information we can conclude that religion will not play a part
involving our product into the Russian market.
Conducting business in the Russian market involves more than just overall information. It’s
important to conduct the required adaptation and cross-cultural understanding within a culture
when doing business. In Russia, it’s important to understand their etiquette and what is
considered acceptable, especially in a business transaction. According to Everyculture.com, “the
informal second person singular is used only among close friends [but] the more distant two
people are socially, the more likely it is that they will address each other with full formality.
Misuse of the informal mode is extremely insulting” (“Russia”).
Economic Analysis
6. The Federation of International Trade (FITA) indicates that the total population in Russia is just
at 143.5 million with almost 15 million inhabited in the Moscow region. Here are the major
ethnic origins: Russians (81.6%), Tatars (3.8%), and Ukrainians (3%). Our ethnic group of
interest would consist of mainly Russians which conclusively makes sense. Of the latest updated
information, in 2009, the mothers mean age of having a child averages at 24.6. Also, a 2014
estimate suggests that there are 1.61 children per woman (“Central Intelligence”) which is a large
majority of women with nearly two children in the household. This information is critical
because the age is fairly young, meaning that the mother is young and will most likely have
interest in purchasing ice cream even when the child is in its teens or twenties. The child will
also become interested in the purchase of ice cream, especially at a young age and with more of
them living in the household. When looking at the age structure, 45.8 percent of the population
has an age group between 25 and 54. Interestingly, in a 2014 estimate, of the 13.5 percent of
people ages 65 and older, women double the men in terms of gender total population (“Central
Intelligence”).
When looking at Russia’s economic situation in terms of activity, there have been very difficult
issues that have collected over the past year. Russia has been confronting issues with Ukraine,
furthering trading issues. The World Factbook from the CIA mentions several different factual
numbers of interest. The GDP or real growth rate is currently at 1.3 percent which is a low
number but not far behind from the United States which holds a 1.6 percent GDP (“Central
Intelligence”). According to World Factbook, “[in 2014], following Russia’s military
intervention in Ukraine, prospects for economic growth declined further, with expectations that
GDP growth could drop as low as zero.” This scenario would not be beneficial to a business
looking to establish itself in the Russian market—but does not mean it can’t be done. To add to
the fire, trade restrictions have been implemented in Russia recently and have made trade much
more difficult to conduct. An article from RIANOVOSTI, a large news agency in Russia,
mentions that: “[an embargo by] Russian President Vladimir Putin singed an order on economic
measures to protect the countries security. The decree banned for a year imports of agricultural
and food products from countries that have imposed sanctions on Russia” (“Imports Decrease”).
The United States was included in this ban and is currently the largest trade restriction issue thus
far that could have a possible impact towards Blue Bell Creamery. With imported products
reaching 45 percent in the Russian market, including a U.S. company product such as Blue Bell
Ice Cream will be another helpful investment into the Russian market (“Imports Decrease”).
Aside from restrictions, the Russia’s labor force as of year 2013 totals 75.29 million people with
62.5 percent of them in the service industry. These numbers help show the power of the service
industry in Russia and give a much larger perspective of how capable they are to integrate Blue
Bell Creamery into their market successfully.
Competitive Analysis
The product that is being introduced is Blue Bell Ice Cream, a relatively popular brand of ice
cream that flourishes throughout much of the Midwest of the United States. According to Culture
Cheese Magazine, “one fact about Russians only slightly less known than their obsession with
vodka, is their love of ice cream” (“Morozhenoe”). The advantage this product has is its ability
to target Russian ice cream lovers looking for more out of their ice cream. This ice cream has
year-round flavors as well as rotational (seasonal) flavors that allow Blue Bell Creameries to
7. target a variety of Russian ice cream lovers. At the Blue Bell Ice Cream web site, they describe
that they only choose the finest milk, sugar, cream, and other ingredients along with their
homemade recipe (“Our Ice Cream”). This product plans to be sold in the Russian market within
a good proximity of Moscow to allow for production and distribution to local retailers. Much of
the products will be distributed via freezer trucks. As mentioned earlier, the company
incorporates what they call DSD’s or Direct Store Delivery to ensure the best product is put onto
retailers freezer shelves. If a joint venture were to be conducted, they would need to adhere to the
DSD system as it is what Blue Bell Creameries takes seriously. The web site acknowledges that
each employee is responsible for receiving the milk, to its production, and of course they manage
the product all the way to the retailer. Doing this allows for the best quality ice cream (“We
Receive Calls”).
Understanding the Russian consumer is critical when implementing a new product to a foreign
company. According Region-Media, the Russian consumer market consists of seven different
primary consumption styles: Innovators, Spontaneous, Ambitious, Self-realized, Settled,
Traditionalists, and Thrifty, (“Consumer Behavior”).The web site explains each group in detail.
Innovators are consumers who make up 18 percent of Moscow—half are under thirty years old.
The core of this group is they love to spend time in many active sports and activities as well as
going out to restaurants and fancy cruises and events (“Consumer Behavior”). Spontaneous
which has 23 percent of consumers in Moscow, mainly men dominate this group and consist of
impulse buyers and unmarried (single) consumers (“Consumer Behavior”). Self-realized which
has 8 percent of Russian consumers focuses on value, reliability, and quality of goods
(“Consumer Behavior”). Settled has 21 percent of Moscow consumer market and women are a
large margin of this group. They have consumer preferences on specific brands and are attached
to them (“Consumer Behavior”). Traditionalists represent 20 percent of Moscow and half of
them are retired and are loyal customers (“Consumer Behavior”). Lastly, Thrifty has one percent
of Moscow which is very little. They are 50 and older and focus on prices and discounts
(“Consumer Behavior”).
Each category has importance when justifying the target market. Since Blue Bell Creamery
focuses most of its efforts on quality rather than price, efforts would be drawn towards
Spontaneous and Self-realized consumers. Spontaneous are a significantly large group that
consist of unmarried, male dominate consumers. Self-realized is a smaller percentage, but they
serve as a strong candidate because they focus on quality and value, which is what Blue Bell
Creamery is known for.
With approximately 300 ice cream factories in Russia, it shows that the ice cream market is very
competitive (Kornienko). Some major competitors in this market are Russky Kholod, Inmarko,
Nestle (U.S. manufacturer), Talosto, and Ice Phili (Kornienko). The most recent information
available mentions that Inmarko is the largest ice cream manufacturer in Russia in terms of sales
and volume (“System, Form”). The market needs a stronger candidate like Blue Bell Creameries
to invest in the valuable 500 million dollar market it has established.
Blue Bell Creameries will most likely assess indirect competitors as opposed to direct
competitors since information is difficult to attain. These indirect companies are the bulk of the
threats in the industry. The most accessible information that ties indirectly with Blue Bell
8. Creameries is Pepsico, one of the largest food and beverage companies in Russia. They have
several product lines ranging from beverages, snacks, juices, and even dairy products (“Pepsico”
p. 6). This company has acquired numerous mergers with other companies which include:
Quaker Oats Company, Gatorade, Tropicana, Lipton, and several more (“Pepsico” p. 4). They
are a company which invests in dairy products, which falls into Blue Bell Creameries category.
They have several production plants and distribution centers within Moscow which is the region
that Blue Bell looks to acquire.
Conclusion
The Russian food-retail market has an enormous amount of money which gives much needed
light on producers such as Blue Bell Creameries. Investing in a joint venture would be best
suited in the success of the business because of its cost-effectiveness to do so. When looking at
Blue Bell Creameries, it has shown it is capable of being a successful business in the Russian
market as it is in the U.S. market today. With impressive numbers and strong reputation in only a
handful of states, it only makes sense to have them as a candidate. When looking at their
facilities, experience and quality, Russian market cultural aspects, Russia’s economy and
competition, we can conclude that Blue Bell Creameries would be a successful industry to
include in the Russian market today.
For more information, contact adale3@msudenver.edu.
Best Regards,
Austin Dale, Student at MSU Denver
Blue Bell Creameries
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