Anticipating the market to continue growing

With an annual income of 12,000,000 Euro, a complete product range that includes one-ply and two-ply toilet rolls and kitchen towels, table napkins, facial tissue and wet wipes, and a commercial network that extends throughout the entire Russian territory, Syktyvkar Tissue Group (STG) has embarked on a path of continuous development in order to conquer and maintain the leadership in the Russian tissue market.

Maura Leonardi

Syktyvkar Tissue Group (STG) is one of the best known companies on the Russian market for the manufacture of tissue products. Present in the paper and tissue business for over 20 years, starting in 2004 the company embarked on a new strategic path delineated by the new property: Mondi Business Paper Group which, in 2003 purchased the historical Syktyvkar Forest Enterprise company, with the tissue mill that was part of it and was dedicated since 1987 to the production of tissue.

The acquisition led Mondi Business Paper Group to the sale of some inactive company branches, and to the foundation of present-day Syktyvkar Tissue Group (STG). The new property conferred not only a new name but also a strategy aimed at the growth and consolidation of its market share which is currently around 10%. The renewal process has also involved the company’s management, with the arrival of managers and engineers having long-standing experience in the field and ready to guide the company towards the attainment of new goals aimed at the growth of the group in the Russian market.

The headquarters and production facilities are located in Syktyvkar, capital of the Republic of Komi, located in the northwest part of Russia, just two hours by plane from Moscow. 35,000 are the square meters allocated to production, warehouse and converting, employing 230 people.

GUIDING THE STRATEGIC CHOICES OF THE MANAGEMENT TEAM – comprised of Mr. Karen Samvelan, General Director, Elena Tyrina, Financial Director and Anatoly Chernyatev, Operations Director – is the conviction to improve production in order to expand the product range offer through continuous investments in technology, thus guaranteeing the company a strong growth in the years to come. An ambitious “work-in-progress” mission with a development plan estimated at an overall value of 80,000,000 US dollars, to be completed by 2010, aimed at improving the technological level of the machines, increasing production capacity threefold with respect to present capacity, entrusted to PM BP-82, supplied by PetrozavodskMash. The machine, in operation since 1987 with a Voith Yankee, guarantees a yearly production of 17,500 tons at a speed of 850 mpm and a paper grammage that varies between 23 and 30 gsm. 80,000,000 million are the rolls produced each year, satisfying about 10% of the market’s needs. A surely interesting market that approaches 300,000 tons, proof of a gradual but substantial consumption growth, aided by a greater product offer and an increase in the purchasing power of the population.

THE SLOW BUT PROGRESSIVE OPENING OF RUSSIA AND THE CIS COUNTRIES has contributed to a more varied offer in rolled products, very near to the consumption habits of Western Europe. From this stems the shift in demand towards a product having a greater added value, in contrast to the single, one-ply, smooth roll, historical heritage of the Soviet regime and “typical” product found on the market.

THIS EVOLUTION HAS NOT CAUGHT STG UNPREPARED: indeed, in 2005, the company was already engaged in the development of the marketing strategy of a new brand called Linia Veiro. A complete range of tissue products: toilet rolls and kitchen towels, table napkins (two-ply, embossed and decorated) facial tissue and wet wipes, the former representing the company’s strong point. For the production of rolls, STG is completely autonomous, while table napkins, facial tissues and wet wipes are bought from third parties. The reference target of the Veiro brand is mainly the middle class: “a target that ensures economic growth as well as the development in tissue products consumption,” explains Mark Reznik, Managing Partner of Syktyvkar. “The presence in the territory of important European tissue producers has pushed us towards a strategy aimed at anticipating market requests by promoting quality, innovative products capable of attracting the attention of consumers.

Softness, decoration and a greater number of plies are the driving forces for progress in this market. An evolution that is already under way and which will determine the gradual disappearance of coreless rolls as well as one-ply, low quality rolls which have always monopolized the segment,” continues Mark Reznik. “For this reason, we have decided to undertake a development plan that includes the investment in a new PM that is scheduled to start operating in 2007 and that will allow us to increase our production capacity. Also, the installation of new converting equipment will guarantee consolidation of our market share at around 10%” declares Reznik. “Surely it is an ambitious program: the company’s efforts will gradually result, by the end of 2015, in a total capacity of 80,000 tons of tissue and the attainment of an expected turnover of around 120,000,000 US dollars”.

TODAY, CONVERTING IS ENTRUSTED TO THREE SYSTEMS SUPPLIED BY FABIO PERINI SPA: the automatic rewinder model 813, the rewinder model Sincro 4.0 and the new EXTRA5 line. The model 813 rewinder, which has been in operation for 20 years, is dedicated to the production of the “Sykyvkarskaya 56 Metrov” product, a single, one-ply, smooth roll, made of raw fibers, conceived in respect of the environment. The company’s flagship product, well known and diffused throughout the entire national territory. The installation in July 2005 of the Sincro 4.0, with a production speed of up to 400 mpm, has determined the entrance in the market of Syktyvkar Tissue Group’s Veiro line, with toilet rolls and kitchen towels having 2 plies, embossed, optimum quality and sold in packs of two or four rolls. The creation of new products is a vital and necessary component of the growth and competition strategies of the company, as demonstrated by the purchase of the new EXTRA5 line, which began production of “state-of-the-art” rolls at the end of 2005. Two-ply toilet rolls and kitchen towels destined to conquer new customers.

AS WITH ALL STRATEGIC PLANS, THE MARKETING ACTIVITY IS SUPPORTED BY THE COMMERCIALIZATION OF THE PRODUCT in supermarkets and retail chains (Real, Auchan) throughout the entire national territory. Marketing and communication cover an important role in the brand’s development strategy, aimed at the promotion of the product range both through merchandising directly at the sales points as well as through a diffused network of representatives located in every region. Up to six percent of the income is employed in promotion of the Linia Veiro brand. This is a noteworthy figure that clearly demonstrates how much the company believes in an increase in the penetration of high quality products, two-ply, embossed and decorated – the future of the Russian market. An important role in consumption growth will be covered by kitchen towels, a product still not very diffused today, but which is destined to drive consumption increases in the years to come. Interesting and profitable prospects, attainable only through a long-term vision with respect to other players in the market. •

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