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Food Processing

Kraft grows from $4m to $400 under expert tutelage

How difficult is it for a foreign company to set up in Ukraine? Dr George Logush, Vice President Kraft Foods, Area Director: Ukraine and New Markets, Eastern Europe and Central Asia, explained to UBI how Kraft established its operations in the region, suggesting that perseverance and a positive attitude can overcome even drastic shifting of the goalposts

If the Ukrainian government were ever looking for an advocate to encourage Western companies to invest in Ukraine, they would struggle to find a better candidate than Dr George Logush.

Simultaneously authoritative and amiable,

Dr Logush immediately engages through his infectious enthusiasm for the country, and if he comes across as your favourite teacher – this may be influenced by his actual background as a professor.

“It’s no more difficult than Italy, and better than doing

business in Greece ” With a Ukrainian family background, but

brought up in New York City, Dr Logush is totally unfazed by the notorious difficulties faced by expatriates of overseas companies who emphasise the country’s dubious high ranking on world ‘difficulty of doing business’ indices. “Experts say that it’s no more difficult than Italy, and perhaps easier than doing business in Greece,” reminds George. Astounded, I have to ask if he means it – and he does, adding, “Ukraine is quite clearly a European country, combining features of a Black Sea/Mediterranean country and those of a more central East European country.”

Dr Logush explains how Kraft entered and

expanded in this market, and his understanding as to why the country has found it more difficult to make the transition from a State monopoly to a free-market economy than some of the other former Soviet states. “I had managed a university exchange programme between 1975 and 1981 with Poland. The Polish were already then preparing for the market economy. Ukraine failed entirely to

Dr George Logush

prepare, with senior academic and government figures in 1989-1991 believing that they could continue with business in the same way, saying ‘There won’t be any changes here’. They had no idea about economics as a science and about a free market economy, a real lack of knowledge of the basics. They had been totally isolated for so long, with all their information coming via Moscow, heavily censored of any western concepts of economic science which were considered subversive. When the central control collapsed …” (the system was thrown into chaos).

In the immediate aftermath – and by

implication, to an extent, today - there were ambiguous and even contradictory laws and regulations that were not applicable in the new world – but, Dr Logush emphasises, the people themselves were perfectly reasonable to deal with.

Dr Logush had been a tenured MBA

professor in New York City at the time, prior to heading up Kraft Foods in Ukraine. In late 1994 Kraft bought the small Trostyanets

chocolate factory in the north east of the country. Factory management conducted sales and their concept about marketing was: “If people want chocolate they buy it, so why spend money on marketing?” There was no notion of brand value. And there was no level of appropriate staff from which to choose to turn around the operation and allow it to compete in an open market. As a result, Dr Logush explains, “I picked 10 of the best 3rd year undergraduate students from 50 at Kyiv Mohyla University and appointed them as the board of management. We had 12 staff in total. I gave each a role – head of marketing, sales, finance, logistics, etc., – and we set about establishing a company from the bottom.”

“We had 2,000 customers and selected the

strongest 20 to become our distributors, then designed the Korona advertising campaign. It all worked. From a US $4 million pa starting point, Kraft’s Ukraine regional headquarters is now responsible for some US $400+ million per year of sales.”

Despite the economic storms, by October/November 2010 UkraineBusiness insight 17

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