How can you sum up the economic situation in the Country and how do you think it influences the vending market in Russia?
Well, to sum up the economic situation for me is a large-scale thing. Furthermore, there are a lot of specialists who can do it much better then me. But if to say in brief - it is BAD, and moreover, I think it’s going to get worse. If to say concerning vending, it is equal to any other branch of economy. What happens outside doesn’t influence positively on Russian vending. Crisis just stopped its development. There was no growth for 2009 at all. Basically the market was in rearrangement.
How do you think, what the main reasons of this are?
Actually, they are similar for all markets. But if to outline the problems of chains of vending machines, they consist in several factors.
1) Almost all companies in our country started to decrease drastically – in all aspects.
What do you mean?
From 10 offices to 5. From 500 staff to 300. From 100.000 rubles of expense budget to 30.000. Accordingly, many vending operators had to decrease installation places for machines. That means that a lot of machines which used to bring income are now out of use. And though there are 10-15% of machines in Moscow and for the nearest 10-20 years there will be places for them, for many of us it was an overwhelming problem to move or re-arrange the machines. That’s why many companies just went out of business; some companies reduced its staff and machines.
2) At the same time any kind of credit financing was stopped being possible in any available forms. And it must be confessed that vending is an investment business. It can develop only in terms of good and long-term credits.
3) Euro exchange rate increased, along with this the expanses on duties and delivery also increased. As a result of this, the extension of machine in terms of rubles increased almost on 50%. Our customers were not ready for such situation and that’s why in 2009 there were almost no deliveries made. As I said, the market stopped developing. That’s a shame, because our country was almost falling behind the ex-USSR countries in this business development. We only just gathered pace in 2006-2007, but September 2008 made its effect.
You’ve mentioned of 10% of captured market in Moscow and, as I understand, there is much less in regions. Then what should we make of some companies’ claims that in 5 years they will take up almost 30-50% of country’s market and thus will become superior leaders?
There are two ways of sizing up such claims. The first is that these people have no idea of the real state of things; they’re just incompetent or they’ve been disinformed. The second one is that it’s all lie. I don’t know why, because everyone who is well-informed in vending knows what’s real, and who doesn’t - means he doesn’t care at all.
Can you prove that?
That’s easy. According to different sources in our country there are now 40.000-50.000 machines, taking into account Nestle, Coca-Cola, Pepsi etc. Accordingly, even now 30% of this is 12.000-15.000 machines. By average price of €4.000 per machine it is €60 million invested. That said, of course, other vending companies will develop too, which means that the market in whole will grow. And besides, all machines have to be placed the way they could bring profit and this have to be managed somehow. And vending is not easy to handle. It’s all about logistics – the most difficult business process. It turns out that today: a) there are no investors who could or would like to invest such money in business which has a lot of blind-spots; b) even if to imagine that you get this sum of money, you wouldn’t be able to use the budget in short terms (3-5 years) installing about 3.000-5.000 machines a year, there are no such companies; c) you would be treading water. It means that no matter how much machines you install – next day there will be much more around you. Russia is not the country where you can at once occupy a territory for vending. This is not a trading network where exist completely different laws of development. Here we need a retail space, notably in particular areas and etc. A vending machine needs a 1m2 place and a 200V socket.
We (both operators and VM users) are not ready for this, just evolutionally. Maybe in 5-10 years we would be able to deal with this. But not now. That’s why such claims for me are not serious; they have no logical foundation and common sense.
If I understand you correctly, there is a phrase between your lines which says that there is no business struggle on vending market in our country.
Why between lines? I was always saying and I am still ready to repeat that there was no business struggle, there is no struggle now and there will be no business struggle in the nearest future. Why? I’ve already explained it earlier.
Can we now get down to what is at issue in vending business, namely the purchase of “VendLand” and a merge with a big group of companies named “MAKS”?
Sure. What is the question?
What’s the reason of such merge or sale? What are further perspectives or development strategies on vending under the new coalition? What your personal commitment is intended to be under the future holding, also your colleagues – specialists on “VendLand”?
There are many reasons and they are so different. Let’s take it in order.
When 10 years ago I started to give my main activity up (political consulting and business), I started to run a new business - as I used to call it “worldly business” – and it was vending. Just the same as many other companies, which could be called leaders today. This was an absolutely family business. But time passed and I had to grow and develop it. There were some more investments and credits. I’m not going to speak of all twist and turns. But in 2003 the family business started to grow and become joint-stock companies of different formats. And what happened in the end of 2008 was happening to us every time. Shareholders were leaving and selling their shares. Other new ones were coming and investing money. And every time, as I think, “VL” was in benefit, because new shareholders were bringing new ideas, new contacts and additional investments. I am no more of those businessmen who want to control or to have a controlling interest in business. I was always a henchman of development strategy by Howard Schultz, the founder of Starbucks. It doesn’t matter how many shareholders there are, it only matters how much contribute each of them makes for development of the company. Then business will become better and richer.
Is it true that all shareholders have been relieved? If yes, then why?
Yes, it’s true. Each of them had their own reasons. Some had received good dividends and said it was enough. They didn’t want to carry a risk while crisis. Other ones got bored, because our business wasn’t developing as fast as we believed it will. Others summed up that their dividends were small and they decided to redistribute their money for some other purposes. Each one had their own reason. There is only one thing which is to be said – there wasn’t one and only reason for the business sale.
You said that such changes were happening to you all the time, but as I understand they happened inside the group of companies, and now we see the change not only of the founder members, but also of the brand. Am I right?
Yes. You’re right. Such a deal, in which I also took part, was the first one for “VL”, both in format and scope. As to changing the brand - the board of directors hasn’t decided yet if it will be changed completely or the name “VendLand” will stay for some trends. Concerning me and my “VL” colleagues - all I can say is that the core of basic trend – vending – will for sure stay unchanged, the same as the trend itself. And by the way, “MAKS” group is in vending business not accidentally. First of all, for a long time they produces industrial software, as well as for vending. Secondly, when they started to draw up programs for vending machines, they decided that it would be grate to develop this trade themselves, separate from the main activity. And by the time of our merge and takeover they already had their own quite successful network in five towns of Russia. As you can see, “VL” vending business only gained.
Over recent years, as we know, you had somewhat clouded relationships with NECTA Company, and according to different sources NECTA managers are blaming you for everything. Is it true? And what is the reason of such relationships? As we know, you’ve been one of the best vendors of this company in Russia.
First of all: personally I don’t have clouded relationships with anyone, inclusive of NECTA Company and its managers. Secondly: best vendors (resellers) were particular companies, included in “VendLand” group, not me personally. At different times these companies had different directors and managers, who are still well remembered by their clients – customers. And I was always claiming and still am claiming to become an analytic, an expert, and a promoter in this business. And by the way, this very role will most likely be assigned to me in new structure.
Third: why the blame of problematic relationships between “LV” and NECTA was on me? Because I’ve always been a “shop-window” for the group. That’s how it worked out.
But while the process of detailed study of the real state of things and the case, also of my personal participation in finding the solution of contentious issues, all the stress was calmed down and no more challenges were appeared. And again, I as a graduate in law always had and have one and only thought, which is clearly expressed in any standard contract – “all disputes inter parties are to be resolved by means of negotiations founded on mutual respect or in terms of prospective legislation by judicial process”.
Also the problem is that in spite of all efforts of our main owners, who were leaving for Italy in 2004-2006 to meet NECTA managers to sign a dealer agreement, there was no positive result. Italian managers abandoned signing the contract, and all companies which were selling vending machines and were working with us, had to content with resellers. Top managers of both parties had conducted several negotiations on the next step forward and now mutual relationship with NECTA will be built through their agency in Moscow. Agency manager have been already appointed and according to his plan in the end of 2009 there will be opened a warehouse of vending machines in Moscow, without a customs clearance. Which means that NECTA customer will buy vending machines in Moscow and get customs clearance himself. On which stage this project is now – I don’t know. 2009 was a bad year for selling vending machines. I’ve said that before. All I know is that those companies which risked buying new NECTA machines are now suffering troubles in their disposal.
Are you planning a further cooperation with NECTA Company?
I don’t want to forecast, because while crisis the situation changes every day and unfortunately it’s getting worse.
It all depends on the decision of the group’s board of directors. Today “MAKS” group managers, in case of trade expansion of vending machines, have plans to execute developing strategy with another trade mark. With which one, I don’t know yet. I am not performing any duties in this company yet; I am researching the market and drawing up development program for 2011-2014 as an independent expert. What’s going to be tomorrow, time will show.
As to your collective or its main core. Have you been able to keep the same team which you had started with? And what will happen to the experts in new format?
Let’s start with the last question. One of the conditions of companies’ takeover was to keep main experts of “VL” on their posts. And it is absolutely observed by new owners. So, many honored members like Alexey Finogenov, Alexander Ushkov, Mariya Ushkove, Alexey Kolesnikov are still members of the company.
Concerning the team which I have started to work with, the answer is easy – no, I couldn’t keep it same. I think it’s impossible. New levels of development always lead to new requirements, new rates of work and so on. Fewer then all can handle this and start to work in new behavior. That is why anyway team changes. But I want to say one thing – during all our work we were never appointing members from other vending companies. And those who quitted our company are now working in vending organizations only. Also, when they came to work for us, they had no idea about vending business, vending machines and payment systems at all. So they become qualified with our help, and knowledge they have now, for which they’ve been lured away, is what “VendLand” gave to them, which we are glad and proud for. And so we can be called a source of manpower for vending. I’m not mentioning all those vending expertise as for Russian vendors and for many foreign companies. Many industrial manufacturers, operators and sellers use our projects for their own purposes. And this creative and talented team together with me works on.
I see. And are there any new professionals with new ideas, offers and knowledge in your team?
For these years our company firmed up a lot almost in all fields. We have super professionals on engineering, electronics, programming software, managing, finance, marketing, PR and promo technologies.
Today I can be proud of my team and I can say that I got what I was aiming at and dreaming of. There are companies of like-minded persons, friends, partners, professionals, who knows what they want and how to achieve it and they make progress. We don’t have regulations for business day. We work as much as we need for achieving the result. And only according to the quality of work we arrange the payment. But as I’ve already said, the most important thing for us today is the aim, the team and the result.
This is what makes us feel comfortable and glad psychologically and morally.
I think that whatever is you work you have to love and enjoy it. Otherwise you better do nothing.
What can you say about all those criticism towards "VL" from different people on Internet?
First of all I'm glad to see Internet being a real democratic area, where everyone can express their opinions. When I was a kid I've learned one thing - leaders have to cope with criticism, chewing the fat, dirty wash, and etc. The one who's on top is a good target for everyone who wants to take his place, and they attack, because they can't think different. And I am quite ok with this, and moreover, I understand that we are really on top and we have to work faster and harder.
You said one can reach the top by repressing the competitor. Is this the only way?
Of course, it's not. And, of course, it's not our way. You should work a lot and work hard, and never pay attention to others. It's the best way I know. But there are too many ways of stopping your neighbors' way, more then just doing a good job.
Sounds like a fairytale. Good wins evil, work is a pleasure, enemies are small and it's all good and perfect. But it's not that easy in real life.
You're right, and it's all because pressing forward the light is a hard deal, but it's worth it.
You hypnotize me with all that you say. But let's get back to the issue. How vending will develop in our country? What is your opinion?
I can't say anything about vending development in Russia, especially during crisis. Imagine that tomorrow the government will decide to force into application cash-register equipment on vending machines. 'Cause state treasure is getting empty, and it's harder to steal. And this will be the beginning of vending's end in Russia. Let's take payment terminals. No one believes that this was made for people's comfort. This is just a new way of getting bribes. If cut one hand, they'll grow another three on its place. Nothing can be more idiotic then forcing into application cash-register equipment on ATM's. Oh wait, there are some. They also want to cut icicles with lasers and settle web-cameras on trash-cans. As you can see, they use their gray matter properly.
And what if to be optimistic, as you said earlier - pressing forward the light?
If to be optimistic, this business in Russia has wide and endless opportunities for the nearest 50 years. There will be no business struggles for a long time. And both of those who are already in this business and those who just thought about running it are on the right way, for sure. But vending as any other business need to be run deliberately, correctly, painstakingly and with love. Then it's going to work out.
Well, let's then finish on this positive words. Thank you for coming and your answers. I hope this is not the last time we see you.
Thank you for making such an interesting data portal, which I think has no analogues on Russian-language Internet.
And I remind our readers, all questions that you have to Alexander Maysov you can e-mail at - firstname.lastname@example.org.
We will necessarily send them to him.
He also has a personal web-blog - http://www.odnoistrokoi.ru - where he writes a lot about different things, as well as of vending. Also there he can answer your questions.