How long have you been in Ukraine, and what first brought you here?
I’ve been here for two-and-a-half years and worked with Coke for 14 years in total. My wife and I had always wanted to do an international experience with the kids, and I’d worked with a guy who had run this part of the world for Coke when I worked in New York. He mentioned that he had three opportunities for me: one in Saint Petersburg, one in Moscow and one in Kyiv. I said to him: “You know me, you know my wife, you know my kids. Which one should I choose?” He said: “Kyiv is your city.” We understood it would be a major challenge, but I really needed a major challenge in my career and I knew that coming here would allow me to experience an emerging market, opportunities in every single category and to assist in the evolution of a very dynamic marketplace. Also, from a personal side, I wanted to give my family the opportunity to experience something more than just the US. That’s basically why we came, and it’s been everything that I thought it would be, times ten.
What were your first impressions of the place when you arrived?
While the market here is very dynamic, I realised that there was a tremendous opportunity just in getting up to a baseline – opportunity from a developing market, from modern trade standards, and informing consumers on the brands, and more importantly, how to take a group of Ukrainians who work for Coca-Cola and bring them to a much higher standard through training and development. I’ve found the people who work for Coca-Cola here are extremely energetic and passionate, and they’re like sponges – they want to be trained, they want to develop – and when you provide that opportunity, they take it with relish. In turn you see significant improvement in skills and capabilities you really never thought possible. There’s a highly educated workforce here, but you have to give them the tools and resources to develop. Kyiv itself is a beautiful city, and the country is rapidly evolving. The people are extremely friendly once they get to know you. Initially there’s definitely a resistance, but once you’re past that they want you to be part of the family. We’ve made several friends with Ukrainian families, and when it comes to leaving Ukraine it’s going to feel like leaving family behind. We know that they will be friends for life.
How does the chaos of Kyiv compare to a completely developed market like that in the US when it comes to distribution and logistics?
There’s a lot of development to take place in distribution in Ukraine. We’ve got all the systems and capabilities in place from an IT standpoint and all the systems in place as far as the infrastructure to deliver is concerned, but it’s difficult. For example, in New York you have a distribution network in place that doesn’t make you have to drive trucks down the street. It requires investment, and Coke has been one of the biggest investors in Ukraine for the past eighteen years and we’re going to continue to invest in people and capabilities in order to further expand availability of our products throughout the country. A big problem we have is that the kiosks and gastronomes have very limited storage space, and so they require at least daily delivery, and sometimes three and even five times a day. When there is a tremendous amount of foot traffic going through an area that only has small merchandising and storage space, it can result in some places running out of our best brands. We have to understand the sales at every kiosk and gastronome and then measure frequency of delivery. That’s an exercise. And it’s an exercise that needs to be updated every single season.
One of the major commercial stories over the last few years was the company Coca-Cola, which has always been by far the largest soft-drinks provider, losing its first place to Pepsi due to Pepsi’s introduction of new products like water and fruit juices. Do you see the emerging markets as a way to claw some of that back?
Coca-Cola is the number one non-alcoholic beverage in the world and we are focusing very heavily on the emerging markets of Eastern Europe, and also on India and China, and we know the next frontier is going to be Africa. And throughout all this, our primary focus will be on our flagship brand Coca-Cola. There are currently 1.7 billion servings of Coca-Cola consumed every day around the world in 206 countries, and our goal is to double that by 2020. In Ukraine, once again Brand Coca-Cola is leading our growth with a double-digit increase over the prior year.
Bearing this in mind, does Coca-Cola look at local products when operating in new markets such as Ukraine?
Coca-Cola continues to look for unique opportunities in every single market, especially when it comes to products that are local to that market. Three years ago we acquired Yarylo Kvas, which is produced in Zaporizhya. We bought the manufacturing plant and the brand. We did this because the category is growing double digit every year, it’s unique to Ukraine, and we saw a great opportunity in taking a Soviet manufacturing plant and upgrading it to a state-of-the-art manufacturing facility. This is the sort of opportunity that we try to capitalise on in every single market, and while we focus primarily on our core business, there are also things that are unique to certain markets in which we operate that we believe are worth adding to our portfolio. I’m very proud to say we have 180 Ukrainians producing product every single day in Zaporizhya, and Coca Cola has provided international pay and international work standard to these associates.
When you acquire such a localised product, do you see any opportunities for export?
In New York there’s a neighbourhood in Brooklyn called Brighton Beach (otherwise known as Little Odesa), which is comprised of Ukrainians and Russians. We’ve had requests from an importer there to ship pallets of Yarylo Kvas because they have a strong demand for authentic Kvas. We are in the process of evaluating the logistics of this exportation.
We’re coming out of a global financial crisis, in which Ukraine was hit particularly hard. Do you have any insights into how the country is doing now through the sale of your products?
In 2009, the non-alcoholic beverages category lost seventeen percent. The category has not fully recovered. Last year it was up four percent, and this year it’s forecasted to be up around four-to-five percent, so by the end of this year we’re still not going to have recovered to the pre-crisis position. In this very difficult environment, Coca-Cola had its strongest year ever in Ukraine last year. This means since 2008 we’ve fully recovered, plus, and this year we plan on superseding the numbers we did in 2010. I think a growth of four percent in the overall category is an accurate one, and when you compare this to growth in the early 2000s of as much as twenty-seven percent, you can see that consumer confidence has not returned yet.
You were in country for fifteen months under the previous administration, and you’ve now experienced fifteen months under the new administration. Do you notice a difference in your operations?
The one thing I’ve seen since the new administrations been in place is movement. There’s progress. I’ve seen definite improvement in infrastructure, and we definitely feel we can get things done now that we couldn’t get done under the previous administration. I don’t know if it’s because there’s more international pressure now than there has ever been but things are getting done. Coca-Cola wants to continue to invest in this country, and we continue to solicit help from the presidential administration. I would say that we’ve seen some green lights, but we’ve also seen some reds, and so in general it’s a yellow light. In the last three months, however, we’ve definitely seen some positive movement.
The big news this year is the new tax code. How do you see that affecting business here in Ukraine?
The bad thing about it is that it really affects the local entrepreneurs and small business owners. I can’t go into too much detail because it doesn’t affect us directly, but it does affect those we sell to. The fear is that a lot of that might start shifting back into the shadow economy, because the tax burden on them now is much higher. VAT refunds affects us more directly, and we have millions of dollars tied up in that. Unfortunately that means that when it comes to asking for more investment in Ukraine, these sort of things show a return on investment that’s not quite as good as it should be so they can look to spend the money in other markets.
Finally, what do you like to do in Kyiv and where do you like to do it?
I love living in Kyiv. It has one of the tightest ex-pat communities. We’ve made some wonderful friends, and there’s always something interesting and dynamic going on. There’s also some great restaurants. Interestingly, we made some very good friends here who recently moved to Vienna and Paris, and every single week they’re telling me they wish they were back in Kyiv. When you have people living in places like that, and they’re saying they’re missing life in Kyiv, that says something about the place. From a family side, we’re big football fanatics. All my three kids play, and my sons, Tyler and Conner train with the Ukrainian national team. We love walking on Kreshchatyk, going to restaurants, and bike riding on the Dnipro. And of course, nothing beats the Hyatt Sunday Brunch.