Back to The Roots, Part II – Building Business From the Ground Up

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Coming back to Russia I was 25 years old. I had my entrepreneurial spirit, the drive and the age to do something great. So my story continued with building a new company.

On starting a new company

I was back in Russia. The plan was to build a factory that would produce a range of smoked seafood products. We registered a company and called it a “Pacific Product”.

A block of land was purchased to build on and the construction process started. Building from the ground up required careful planning and monitoring of all processes. I was learning new things every day. When I had time I helped at a construction site.

You got to grind and work hard

The fun, but also very hard, part was to work in winter. At 8 am. when it is usually -25 C to – 28 C, I had to unfreeze the engine of the snowmobile, good old Yamaha VK 540, and load up the sleds with equipment. We had to go about 1 km away to cut metal pipes which were later used in construction. Then I’d maneuver back and forth all day bringing pipes back. The only footwear my feet didn’t freeze in were the boots made of dogs wool, I don’t know how they make them, but they are sold in stores and you really appreciate the warmth.

We experienced a few major delays along the way which extended the construction stage greatly. Halfway through construction, the fishing factory was no longer in the picture, influential people made sure of that. We’d have to source raw fish from other factories until we figure out a way to have our own. Kamchatka has always been the biggest fishing region of Russia so finding a supplier did not pose a problem.

Construction stage lasted over 1.5 years. When the building was almost completed but legal papers weren’t yet ready, I decided to start the process. I smoked 30 kgs of salmon, grabbed a friend who was looking for a job and drove to the area with office buildings. We went door to door offering our product, a few hours later all 30 kgs were gone. It was an encouraging result, from that day on we started the production process. Action motivates success so that is what I practiced in the early days!

Pacific Product in winter startup starting a business ideas entrepreneur

Differentiate from competition as much as possible

“Pacific Product” in winter The product was smoked using a special technology, so the taste was unique. My father learned it from indigenous people of Kamchatka. Once people tried it they were hooked and wanted more. This uniqueness gave us a competitive advantage.

My friend has become a full-time sales person, later bringing his brother in too. A couple of months later we had a good portion of hospitals, schools, government agencies, banks, numerous small business offices etc. all waiting for us to come with bags full of our product on a fortnightly basis.

We also had a few spots at markets and a number of small stores. The coverage of existing selling places and scheduled addition of new ones was under strict control.

A special sales technique was developed which started from the knock on the door and a smiling face of our sales person before people knew it they had samples right in front of them to try, and that’s all we needed.

At one of our pop-up locations startup starting a business ideas entrepreneur

Perseverance is one of the keys to success

As it was mentioned earlier Kamchatka is a land of salmon, markets are full of it and many people go fishing. So selling it door to door was like selling bananas in Africa. The first reaction was always “are you kidding me?”, after trying samples the majority ended up buying. It was very hard at the beginning, but we persevered.

Our product got very popular, many people bought it as a present for their friends and family when they traveled to other cities. One of our very wealthy customers was apparently taking it as a present for a Queen of Monaco, or so we were told. We provided an excellent service with a free home delivery.

A start of the day in the office startup starting a business ideas entrepreneur

By then we have purchased all the necessary vacuum packaging equipment and were experiencing with new lines of product.

When we got all the necessary certification we started pushing our product to supermarkets and small stores. For a while we concentrated on widening our store’s distribution base, it didn’t take long to understand why distribution companies exist. It takes a lot of time and resources to develop a big distribution chain. We approached a distribution company and increased our production even more. Now our product was on the shelves of big supermarket chains and many different small stores.

Competing can be hard, but use it as motivation and learn from their mistakes

We competed with brands that were giants comparing to us, so we had to get the presentation of each line close to perfect and widen the range. We worked on the new improved design of the stickers we used and were developing our own plastic packaging.

           

We had 14 lines of product in our second year.

Most of Kamchatka’s smoked salmon producers used liquid smoke to reduce the production cost. It enhanced the flavor and added the golden/brownish finish to the surface of the fish so it looked like it was just made. Some didn’t even bother smoking and soaked fish in liquid smoke, those who know the difference can tell by the taste straight away. Liquid smoke is a poison and we never used it.

We thought that it was totally smart to do something different if we want to make a name for ourselves. Our point of difference was that we only used natural wood smoke in production and didn’t add preservatives. We produced an Eco product and were taking pride in it.

startup starting a business ideas entrepreneur

We were in the process of establishing connections with big distribution companies and supermarket chains in the central part of Russia. Additionally, we created our own online distribution channel, something that has never been done before for a product like smoked salmon. Our representative in Saint Petersburg organized an online sales platform with a 1 week delivery time. Once the order was produced it would then be frozen and delivered to customers within a week in a special thermal container. The distance between Kamchatka and the central part of Russia is 9000km. The first customers in Saint-Petersburg were very happy with the product, the second batch order was twice as big, the third one twice bigger than the second.

As was mentioned earlier we did not have a fishing factory anymore and sourced raw product from wherever we could find. By then I knew most of local dealers and companies that sold seafood. When I couldn’t find something, I started dialing numbers and eventually would be directed to the seller.

Kamchatka’s Halibut startup starting a business ideas entrepreneur

Business and entrepreneurship can face problems that can not be influenced. Sometimes you just got to deal with it.

As time went by it has become more difficult to find what we needed. The price of the raw product has also been steadily increasing. We had commitments from people we worked with and hoped for the situation to get better. We had to start to prioritize who to fill orders for first. Online distribution had to be stopped until the situation improved. At one point we had to buy salmon from Vladivostok and get it shipped back to Kamchatka, the salmon that was originally caught in Kamchatka.

What started to happen is businesses from the central part of Russia started to buy raw salmon straight from the ships in the sea and ship it straight to Vladivostok where it would find its way to the customer. A good portion of salmon never reached Kamchatka’s shore anymore, freezers became half empty.

Having no raw salmon in Kamchatka freely available for sale was an unbelievable scenario, everyone was adjusting the best way they could. We had an agreement with one factory that it will supply us with what we need if we manage to push through for another 6 months or so, so we did. It was painfully difficult to maintain operations at levels below what we could potentially do.

By the end of 6 months, the situation only got worse, we had to make some decisions. Our main supplier stepped in and assured that next summer, which was almost 9 months away, he’d provide us with enough raw product. In return, we would have to redirect our distribution channels through him. He also assured that till then we’d have enough product to sustain operations at the minimum level.

I knew I would not be able to support myself and have the factory running in those conditions, but we had to give the business a chance. I decided that it is time for me to turn back to Sydney. By then everyone in supply, production and sales knew their roles and didn’t require me to be present. The person in charge would just need to check daily reports.

In 9 months the supplier could not fulfill his promise and the processes had to be stopped.

Harsh reality..

It was the middle of 2014, Moscow bought a big portion of Kamchatka’s raw salmon factories making the price skyrocket. A year later they started sending their representatives to the rivers buying salmon and caviar even from those who were fishing illegally.

The fact is these days, Kamchatka’s salmon and red caviar cost less to buy in Moscow than in the region it was produced in.

Our disadvantage was that we heavily depended on the market price and the availability of the raw product. If we had our own supply we’d pay 5 times less for the raw product and would be able to adjust.

We managed to make it work our way and created a name for ourselves as one of the best-smoked salmon producers in the region. Unfortunately, we could not cope with tense market conditions at that time.

After another important business lesson learned, I was back in Sydney and ready for a new chapter.

To be continued..

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