With revenues of over $500 million, a sustained growth rate of 35 percent and no major rival in sight, you could say Anatoly Koulish holds a stress-free position as deputy general director of Russian OP giant Komus.
But life’s anything but relaxed for the former Red Army colonel as he trains his sights on some of the world’s most promising markets with annual potential growth rates of up to 100 percent.
With steely determination, the 63-year-old has helped create from scratch a formidable operation that in 15 years has expanded from being a one-store business to being the largest logistics operator in Russia as well as being the country’s largest wholesale business.
And with the precise planning and strategic thinking of a successful military leader, Koulish has been pivotal in driving Komus to the point where it can today fulfil next-day dispatches of over 5,000 orders across the huge Russian expanses from St Petersburg in the west to Siberia in the east.
Despite being unparalleled and with no serious competitor on the horizon, Koulish stills looks to the European and US markets for examples of best practice to take back to Moscow and integrate with his ever-evolving and ever-growing behemoth of a business.
On a recent fact-finding mission to London, UK, OPI caught up with Koulish to find out more about the company everyone’s heard of but very few actually know.
OPI: Can you briefly explain the history of Komus for readers of OPI?
AK: It all began with three students from Moscow University at the beginning of the era of the so-called market economy in Russia. Together, they made several attempts to start a business from washing windows to gardening. The company was created and the name Komus derives from the word ‘youth’, which was a state organisation for young people and students. At the same time the students became aware that there were a lot of small companies, a lot of family-run firms that were appearing on the market. To make their accounting easier they required a lot of standardised forms to be submitted to the financial departments. As a result, Komus started its own production of these forms.
Since that time the three students decided to concentrate their activity around stationery products. In 1992, they expanded their interests into paper-related products as well as beginning to supply writing instruments and pens to the Russian market.
In the same year, in May 1992, the first stationery store was opened in Moscow with two employees. Soon after, two of the three original founders left to explore other opportunities leaving Sergey Bobrikov. He decided to continue with the business and he now owns the entire company. Apart from the retail operations, Sergey started focusing on the dealers, he started working with other outlets that supplied organisations and they restructured the whole dealer policy to allow others to join one internal network, which operated from one single source.
I joined the company in March 1992 and my goal at the beginning was to combine the independent dealer network into one structure.
OPI: You travel extensively around the world. What are you hoping to learn?
AK: We are travelling around the world to look at some of the most developed office products markets that exist today. The British market, for example, is the most sophisticated and complicated in terms of competition. I always look at best practice models to take back to Moscow with me and to get as much information as possible from local distributors.
I also had the opportunity to meet with people from Office Depot to discuss all the burning questions – infrastructure, trends and what makes our business model different from that of Depot.
OPI: What condition is the Russian market in now and how do you see it developing?
AK: The American and British markets are more structured and are divided between the main players. The general trend for growth in these developed markets is about 5 percent. The Russian market is a bit chaotic, not so well structured and there are plenty of small and medium-sized players. There is no company similar in size to Komus anywhere in the country.
At the same time the Russian market is more dynamic and depending on the region the annual growth rate is somewhere between 30 and 100 percent.
There is plenty of opportunity in the Russian market for further development, especially within the niche sectors, such as new technologies for better working conditions.
OPI: What challenges do you face in meeting this incredible demand?
AK: Because our territory is so huge, there is a prioritisation process for Komus. We do the analysis region by region to identify what is the most prominent and promising area to target. For example, the St Petersburg market, the Ural and Siberia are all showing massive untapped potential.
We split the whole map into certain zones and introduce different tactics and strategies for each area. The central region and St Petersburg is the company’s number one priority that accounts for most of our revenue. The population in this area is about 60 million and Komus’ market share is about 25 to 30 percent.
Currently, there are 14 zones with regional offices that are based around 14 of the biggest cities in Russia, all with a population of no less than one million.
But we are in the process of shifting our focus onto smaller towns. There are six cities with a population of around 500,000 and they are all in the Moscow area.
OPI: How is Komus structured?
AK: We are unparalleled in the Russian market. We have the largest retail network of stationery and office materials in Russia, with 50 retail sales centres, 34 of them in Moscow. Komus is the biggest corporate sales operator in Russia and the largest wholesale company with 3,000 customers across the country.
We are also the biggest logistics operator in Russia with a fleet of more than 650 trucks and storage space in excess of 91,000 square metres.
OPI: Is there a potential conflict of interest being a wholesaler and a dealer at the same time?
AK: We actively go out of our way to work with our dealers as a wholesaler. We have no real competitors that match us in terms of size or market share, so we can really concentrate on helping dealers market our products through their channels. It benefits us to look after our clients because we are so much more than a dealer, we are a wholesaler as well as a manufacturer at the same time. It’s important for us to have several opportunities.
OPI: How diverse are your business interests?
AK: We have worked hard to develop a number of revenue streams. Our Bantex plant in Kolomna, for example, produces 50,000 binders a day. We have three production plants for disposable plastic dishes and we manufacture more than 10,000 tonnes of paper rolls for fax, cash and medical machines.
OPI: That is impressive, but is the dominance of Komus bad for the Russian consumer?
AK: There is no such thing as no competition. One of the main targets for Komus day in and day out is to watch our competition very carefully, especially companies that service the medium and small segments. In some cases these companies can be very effective in certain niches of those markets. We carefully trace the activity of our entire competition. In the same way we are investing a lot of resources in our internal infrastructure to implement the best and most modern technologies to satisfy our customers’ needs and that keeps us ahead of our rivals.
OPI: How huge is the task of satisfying customer needs in a country as large as Russia?
AK: This is a very serious issue for Komus if you take into account how big our territory is. Typically, our way of solving this type of problem is to create additional distribution centres in the regions. We are always examining ways of improving our distribution chain to enable our commercial branches to receive the goods each and every day for fulfilment. On top of that, we have smaller satellite distribution centres around each regional centre which allow local staff to make deliveries.
OPI: What’s been the worst business decision that you’ve made?
AK: I can honestly say that I have never made a wrong decision because all the decisions made and all the initiatives taken are discussed among the members of the operations committee. Fortunately, I have never initiated a loss-making project.
OPI: What’s been the best decision you and your team have made?
AK: The most successful strategy we have implemented so far has been to merge our retail and B2B operations in our network of outlets. Previously, they were located in separate retail stores, but now they are joined as one in a so-called trade centre. Our chain of trade centres is now well-developed and is operating very successfully as a retailer and a B2B agent. We target the two markets through just the one network.
Because we were very lean, agile and flexible, we were able to survive the dangerous Russian economic crisis that occurred in 1998. We were able to recover quite quickly from the collapse of the economy, but a lot of companies didn’t – they were ruined and went out of business. Komus was able to overcome the economic crisis because it was more streamlined.
OPI: What would you count as your greatest achievements?
AK: I am very proud of a recent survey which revealed that Komus has 94 percent brand recognition in Moscow and 78 percent among corporate clients. We had a 34 percent share of the formatted office paper market in Russia in 2005 and sold over 130,000 toness of paper. In addition, our plastic packing division took approximately 38 percent of the market.
OPI: How would you describe market conditions in Russia today, overall and specifically for the office products industry?
AK: Generally speaking, there is now a positive trend in the Russian economy. It’s growing slowly, although there is still room for it to increase faster. We still suffer from significant inflation and there are still some internal barriers against growing business within Russia, economic as well as bureaucratic.
The office products industry on the other hand is booming because it is so diverse. There will always be a need for paper, pens and pencils and general stationery by employees and the general consumer. This provides us with a safety net.
OPI: A lot of your business is derived from paper products. So what are your green credentials? And how important is it to be environmentally-friendly in Russia?
AK: It is very important for us to be aware of the environment and our suppliers all have their own environmental programmes. That said, the Russian consumer is not yet really that concerned with the green credentials of the products they buy, although I’m pretty sure that will change as the market develops and becomes more mature.
OPI: How difficult is it to create, develop and maintain such a widespread distribution network?
AK: Komus has developed a very complex logistics structure which centres around three big regional distribution bases in Moscow, St Petersburg and the Ural regions. They in turn supply the niche regional branches or sub-distribution centres on a daily basis. That allows all our regional branches to fulfil next-day delivery. There’s a certain level of stock in all the distribution centres.
OPI: How have you been able to maintain the company’s year-on-year 35 percent growth?
AK: There are two reasons for delivering such growth over consecutive years. First there is our organic growth, a result of our achievements in the market. The second is our aggressive policy in the implementation of best practices, modern IT and logistics systems. Our approach to doing business in Russia has enabled us to claim a large share of what is an emerging huge market.
All this helps us to double our growth in some areas and it always keeps us focused. A lot of these practices were observed during our visits to the United States and the UK.
OPI: Can companies around the world learn from your model?
AK: There are some good experiences we are willing to share with companies looking to enter the Russian market. I doubt very much, however, that companies could even begin to adopt some of our best practice models because of the massive differences in market conditions.
The big multinational companies sometimes fail when they try to enter the Russian market, because they get confused – it is a very different market from the rest of Europe. The only solution is to find a good partner in Russia and start a joint venture.
I would like there to be more communication between the big players in the markets. Also, I would like to look at collaboration with regards to the sharing of knowledge in the respective markets, so that we can hopefully learn something new. That’s the strength of OPI as a source of information for companies like ours.
OPI: What would you like to gain and learn from foreign partners?
AK: We are always on the lookout for any form of partnership, whether it’s for joint production or for manufacturing products on a licensed basis. We would like to introduce more US, European and British brands to Russia. There is more than one way of working together and we are looking to start dialogues with new companies.
OPI: On a personal level, what did you do before joining Komus?
AK: I am a former military man. I was an officer in the Russian army and served 29 years before retiring at the rank of colonel. I took many of the skills I learnt in the military to Komus. Principles like discipline, time management, planning as well as strategy, fulfilment and responsibility are all key areas of running and developing a business. My experience in the army makes me different from a lot of other people running large businesses like Komus. It typifies the management structure at the company. Our organisation committee is a big team across a range of divisions and departments, but what makes us all pull in the same direction is our integrity. We are a team of professionals that is working in the same direction. We can share our opinions and achieve our goals together as a team. The only difference is I have no insubordinates anymore; the only person who follows my orders these days is my secretary.