UK Exports to Russia - Case Study
Lucrative business in Russian clean up - The London Oil Refining Co Ltd
For The London Oil Refining Co. Ltd. serious exporting to Russia began seven years ago when it exhibited its cleaning products at a Frankfurt trade fair and attracted the interest of a Russian distributor. It had already been selling smaller quantities into the country since shortly after the demise of the Soviet Union.
Russia has now become an important overseas market for the company, which exports around 40 per cent of its production. It sends out monthly shipments of its cleaning products to a distributor supplying the main retailers in major cities. Annual sales have grown to more than £300,000. In addition, it sells its automotive products via a different Russian distributor.
“We’re looking to increase Russian sales,” says chairman Alan Moss. “We’re working with the distributor and hope that will happen in the next year. I wouldn’t say it’s any more difficult exporting to Russia than it is to countries like Japan and if anything it’s easier.
“Most of the consumer products Russians buy are German and so they’re used to dealing with the European Union and importing many products. A lot of the retailers are also German or French and so it’s not that difficult. If you can make serious inroads into Russia then you have a very big market to go at.
“The Russian economy is growing very rapidly mainly through minerals, oil and gas. This feeds through to the wider economy. But Russia isn’t a mature market and hasn’t been going for that long. Therefore, there are opportunities to introduce important new products.”
Mr Moss emphasises that it is vital for exporters to make sure their paperwork is correct. He advises would-be exporters to fully research whether there is a market for their products.
He believes an appropriate starting point for those new to the market is to participate in a well-organised German or Russian trade fair. Another option is to work with a trade group from the UK.
“For a trade fair you’re talking about a modest investment of £12,000 to £15,000. And that will give you a first class insight into the potential of that market.”
Russia may also present challenges in terms of bureaucracy, customs clearance, tax collection, the resolution of disputes, product clarification and property rights. Despite having cleaned up its act, Russia retains a reputation for corruption and UK firms should be aware of tough new British rules introduced in 2011 imposing heavy penalties on firms found to be involved in corrupt practices abroad even if unwittingly.
As a result of rising oil and gas prices, more money is now circulating in the Russian economy and more overseas banks have a presence there. Operating in Russia can involve high overhead costs. Finding suitable local partners and Russian employees has become more of a problem and salaries in St Petersburg and Moscow have risen sharply. Finding English speakers can also present difficulties. Russia recently made it more difficult to obtain visas for foreign workers in a bid to persuade international firms to employ local Russian workers instead.