Pavel Filip: Jump in Premium class or investment appeal of Tutun-CTC

Usually arrival of the new management on the enterprise is conditioned by variety of the problems. They are put not only by the shareholders, but also by the top-manager. In case of joint-stock company Tutun-CTC the state takes the role of the shareholder, and the role of the manager is played by Pavel Filip who possesses excellent reputation as the leader. The best definition which could describe the task put in front of him by the shareholder can be defined as “investment appeal” which tobacco industrial complex should gain with his arrival. The manager should create this appeal, relying only on the potential possibilities of industrial complex, but mainly, on the capabilities of the management team.

How was your first acquaintance with the industrial complex?

Firstly I made a quite optimistically conclusion for myself regarding the fact that in principle, there is no big difference between the output of confectionery and tobacco products. Probably, the only thing was that I knew more about sweets because after graduating the institute I started to work at factory as mechanical engineer, therefore I knew all professional subtleties.

From the very beginning I paid attention to the similarity of the problems endured by both enterprises. One of them is the exhausting struggle with the products of the Ukrainian manufacture in domestic market. The point is that the transnational corporations bought the cigarette manufactures in Ukraine which have the necessity for sale markets. Due to the functioning of free trade regime between Moldova and Ukraine, the import tobacco products are not liable to special customs duties.

As regards the existing excise formula on tobacco products, as experts of Tutun-CTC noticed neatly, it is more likely directed against them, setting the domestic producer in unequal conditions with competitors. Taking into account a strategic task at which the numerous team members of the industrial complex are aimed which is  to create its investment appeal at the expense of its own resources, this detail has value of principle. It becomes more actual if we compare valid excises in Romania or in Ukraine, for example.

It is visible with the naked eyes that the variable part of the excise is too small in Moldova in comparison with Romania, where its value constitutes 23 %, and in Ukraine - 20 %. The most simple arithmetic calculations show that according to the ideal and fair formula the expensive tobacco products should be liable to a biggger variable excise value.

Today the industrial complex share in the Moldavian market of cigarettes does not exceed 40 % because the rest part of it belongs to the products of import manufacture. Up to now, the domestic producer of cigarettes was presented only in Low price segment where the cost of product does not exceed seven MDL per pack.

What were your first steps at industrial complex as the general director?

First of all, I asked myself: “What is the bottleneck of the industrial complex?” Having experience of the successful manager of a big enterprise, I defined that this place are the sales. But it is impossible to solve this problem without a complex preparation. Therefore, preparing the break in sphere of sales of finished goods, in parallel I made everything in order to cut down the industrial complex expenses.

What efforts were undertaken for reduction of expenses?

For this purpose there was necessity to change cardinally the whole organizational structure of the enterprise. Evidently, we could not avoid the reduction of the administrative staff machinery. Thus, the managers came to a conclusion that for the industrial complex it would be more beneficial to purchase some services from the specialized companies. For example, we let our dining room in hire to the professionals, and instead of losses we began to gain the incomes, without having increased the expenses for the food of the workers and employees. Moreover, the main thing is that thus the quality of dinners improved essentially. These measures touched the other spheres as well. For instance, the specialized companies being cheaper and more qualitative in rendering services are responsible for the maintaining the order in the production floors and in industrial complex territory, and partially transport as well.

However, that fact is that the economy is not the only way of income increase. What was your solution for income increase task?

The most part of my time I dedicated to the analysis and the situation forecast. After long deliberation we came to a conclusion that it is necessary to change cardinally the image of the industrial complex. The team of the company set as a goal to solve two significant problems by means of the quality which are changing the perception and entering the market with new cigarettes in Premium and Medium classes. Such an impudent desire means that the enterprise wishes to be present in more expensive and qualitative segments of the market and to make consumers aware that Tutun-CTC is able to produce qualitative cigarettes.

The quality of products always remains an open question. How did you manage to increase it at the competitive level?

We concluded an agreement with the Swiss company “P.Lehmann Consulting” for the period of 1 year for the purpose of fundamental improvement of the quality of cigarettes produced by the industrial complex. Swiss specialists cooperate with us in the development of new brands of cigarettes which will be much more qualitative than the products manufactured now. It is referred to the quality improvement of such national brands as "Temp" and "Doina". But the major focus of partnership between the industrial complex and Swiss company is done on launching of new brands of cigarettes in Premium and Medium segments on the market where the products of Tutun-CTC are not present at all.

Why are you trying to place the industrial complex namely in the Middle price segment of the market?

It is connected to the fact that the great volume of cigarette sales belongs namely to this segment. At the same time the company will keep its positions in the low price segment, having improved the quality of manufactured cigarettes essentially. I think that the customers of the given segment will be pleasantly surprised, when in June-July they try marks the cigarettes familiar to them with the improved taste. I hold by the opinion that there are no problems which cannot be solved. After all, we can always find a decision if consider the problem in a complex.

What products are you planning to launch with in the nearest future?

In June we are planning to launch with the Premium segment brand; in July the batch of the improved “Temp" and in August of "Doina" will be manufactured; and in September a new brand of cigarettes in Medium class will be launched on the market.

What do you think about privatization of the enterprise?

I am all in favour of it.

What the tasks of prime importance do You set in front of industrial complex?

I distinguish three problems: to keep positions in the low price segment, to consolidate the positions in Medium segment and to be present in Premium class. I am sure that the domestic consumer will notice our diligence, but mainly, he will worthily appreciate the improved quality of the whole cigarette assortment made in Moldova.

Magazine "Banks and Finance"

www.profit.md

01.06.2009