During the second quarter of 2016, euro-denominated net sales in Russia, Ukraine and other CIS countries increased by 18 percent. At the same time, this region became the largest market area for Aspo.
We have worked hard and with determination in order to reach this very strong position in eastern markets. We are typically in charge of the entire value chain of our customers, which means that we cannot easily be shaken from this position. For example, Telko offers high-technology products, services and R&D to its customers. These cannot easily be replaced by their local equivalents.
The rapid growth in the eastern markets was largely attributable to Telko. Telko operates in a pre-cyclical field and, therefore, leads the way for industrial development. We have seen signs of a slight recovery in the Russian economy. However, this recovery is in no way certain, and any growth would still be slower than after previous crises. In order to understand the eastern markets, we need to stretch our eyes far beyond a quarterly perspective. We are moving ahead, but the road may be bumpy at times.
Considering Aspo's businesses, any increase in Russian GDP is not even in our primary interests. A much more significant indicator is the strengthening ruble because it helps to increase trust, which in turn is reflected in increased investments by companies.
In the end, success always depends on our own actions – just like before. Growth comes from organic expansion into new product and service segments and new market areas. For example, Leipurin has expanded to frozen products and Telko to new technical plastics. We are still able to find new market areas in the largest cities in Russia and emerging markets in Central Asia.
We have also taken over many markets during the Russian economic crisis, as some competitors have discontinued their operational development or even withdrawn from the market. This has also opened up a wonderful opportunity to recruit good people in new expert and management positions.
A crisis allows us to take significant growth leaps in relation with our competitors. Speed is the crucial factor. We need to know when to push the gas pedal and when to brake. Usually, a crisis consists of a number of mini-crises that further emphasize the significance of quick decisions. Speed is also important because the ruble is a currency difficult to hedge, and the best way to hedge against currency risks is to be agile.
Speed comes from expertise based on experience. Being an expert in Russian affairs requires being a household name in the market, having witnessed many ups and downs.
Eastern markets of multiple truths
Last year, Telko's total net sales in Kazakhstan, Ukraine and Belarus were higher than the corresponding figure in Russia. This indicates the potential in the eastern markets, as well as their complexity. The concept of eastern markets covers various national economies where our businesses hold different positions.
For example, Telko benefits from Kazakhstan being a significant producer of oil, which is reflected in the rapid development of the country's oil-utilizing industry. Correspondingly, Ukraine has a number of companies in the plastics and chemical industries operating as subcontractors for western companies.
Then again, Ukraine is a more challenging market for Leipurin because the price of bread has been regulated. In Russia, Leipurin has increased local procurement based on its own recipes. In other words, the position of our different businesses differs by country and product group. There is no single truth when it comes to the eastern markets or any one country located in that region.
Ten years ago, it would not have been possible to see how significant markets Kazakhstan and Belarus, for example, would become. There are a number of similar success stories in the region. Foreign trade in Russia is developing the fastest among its neighboring countries belonging to the same customs union, and Russian trade with China and countries located in Central Asia is growing rapidly.
We are in a good position in this development as well; after all, our purchase volumes from China are high, and we have already set up several functional value chains between Russia and China. While getting established in a new market, we are able to utilize our previous experience in the construction of effective logistics flows and the recruitment of key employees.
Our operations are guided by leadership based on our values and code of conduct. We do not take any political stand in any work-related affairs, which can be seen in the close and productive cooperation between individuals from different countries. Good leadership and cultural expertise offer valuable capital to us, both in the east and in the west.
Aki Ojanen
August 2016