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Case Study New markets for wine Odessa Ukraine Marketing a winemaking plant in the Ukraine The introduction of a relatively free market in the NIS and Mongolia has presented many enterprises with a problemXhow do they find a market for their products Under a system of central planning someone else decided how much of a product was needed and where It was then directed accordingly Today if an enterprise does not sell its products it will have no income This was the challenge facing Odessovkhozvinprom of Odessa It is an established winemaking plant with a long history having been founded by a Frenchman Francois Nouveau in 1857 The State is now the majority shareholder Odessovkhozvinprom has not been making a loss however the State has been taking the profit and there has not been much reinvestment Moreover in 1998 the plant found itself under pressure from two sides Raw materials costs had doubled at the time of the 1997 harvest and had increased by a further 50-80 the following year Some production materials such as bottles and packaging had to be purchased from abroad with dollars the real cost of this was rising Odessovkhozvinprom was forced to increase prices by 20-40 This has affected demand which would have been reduced anyway by a decline in customer purchasing power According to earlier surveys wine had been in 12th place in the consumers shopping basket but in 1998 it was losing that position In February to make matters worse the Government of RussiaXa major market for OdessovkhozvinpromXtrebled tax on wine and increased it for champagne-type products by 20 And there is a strong competitor in the Russian marketXMoldova whose products are markedly cheaper As a result of all this plus the problems of the Russian economy in 1998 Odessovkhozvinprom reckoned that demand had dropped by half But OdessovkhozvinpromXthe managing director of which Mr Ruben Vartanovich Guliev is a former Olympic medallistXdecided to meet the challenge by stimulating
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