International Executive are speaking
Keys to successful business in Russia
Jean-Luc Foucher-Créteau, Managing Director, Palais des Thés
« Russia is a huge reservoir of growth »
Jean-Luc Foucher-Créteau, Managing Director of Palais des Thés, lives in Moscow where he has set up a subsidiary and opened the brand’s first store…
Some career highlights:
2003 : After 14 years at L’Oréal (France, Denmark, Turkey), arrives in Russia as Managing Director of the L’Oréal, Garnier and Maybelline brands
2005 : MD of Garnier and Maybelline in France
2007 : International MD at Yves Rocher in France ( with Russia as the largest market)
2015 : CEO of Palais des Thés both at the French headquarters and in Russia
2019 : Palais des Thés in Russia: Annual turnover of 1,000,000 euros, 45% of which is at the nr. 4, Pokrovka St. store, with growth of 33% this year and + 44% last year
Mail : firstname.lastname@example.org
I first met Jean-Luc at a Managing Directors’ dinner organized by the France-Russia Chamber of Commerce. Thanks to our shared passion for tea we hit it off straight away. Since then, I regularly stock up at his beautiful shop on Pokrovka Street…
“There is surprisingly little international competition in Russia”
Jean-Luc, what do you sell in your shop at nr. 4 Pokrovka Street?
At the Palais des Thés, we sell both plain and scented teas, as well as accessories. François-Xavier Delmas, the founder of the brand, travels the world looking for plain teas. Working in direct collaboration with the producers, he spends his time tasting different teas in order to find Grands Crus which are rare, ephemeral teas made in an artisanal way. It is this work as a tea finder that underlies our reputation. Our scented teas are exclusive creations designed in Paris by a “Nez”. Finally, we sell accessories such as teapots, cups and also slightly more esoteric instruments for enthusiasts. Great importance is attached to gift boxes because nowadays it is easier to offer tea as a gift than cigars, foie gras or alcohol.
Who are your clients in Russia?
We do B2B retail with our main client Azbuka Vkusa (we are present in 80 points of sale) as well as Globus Gourmet (7 points of sale) and various gourmet stores such as Gum, Boulangeries François and many other resellers. We also work in HoReCa type B2B with the Moscow City Novotel, tearooms, beauty salons, sports clubs and restaurants. We also supply companies with end-of-year or Women’s Day gifts. And of course, we opened an e-Commerce site this year.
The highlight must be the 2017 opening of our store on Pokrovka Street in the heart of Moscow. Covering quite a large space, it incorporates a tea bar and a “school” corner. It is the Moscow version of our “School of Tea” which is found in our shops in Paris, Brussels and New York (Soho). Thanks to these “schools” we may learn how to taste and prepare the different teas properly, whilst at the same time discovering exciting things about how each one is produced.
What is the competition like in Russia?
Greenfield is the major player here in Russia. It makes roughly a billion dollars in turnover with local and imported products that are rather low-end. On this market it is a thousand times bigger than us. There is also Lipton, and many others…
In addition to these large distributors, there is also a host of small tea shops which mostly sell tea shipped from China via DHL. These teas do not undergo any food controls, in particular no test for the presence of pesticide, as this type of test is not compulsory in Russia. In this regard, we have a huge competitive advantage because an outside laboratory checks the pesticide content of all our batches. And our products are certified BIO Ecocert or SafeTea ™.
Finally, there are some international brands such as Newby, Dammann (B2B) and one may also come across, Mariages Frères, Kusmi and some English brands albeit less frequently. This is a surprisingly small number of brands, bearing in mind that Russia has the 4th highest per capita consumption of tea. Which means the market still has enormous potential. This can be attributed to the fact that all these brands are sold via agents who focus more on their margin than on investing to really “build a brand” over the long term. It is also due to prices being prohibitive for the Russian market.
“Retaining teams is difficult in Russia”
Jean-Luc, how do you go about recruiting and retaining teams?
Retaining teams is difficult in Russia, as staff turnover is high. Through my network and the hh.ru site, I recruit people who speak French, if possible. If not, we prefer to hire people who speak English, and who understand both cultures. Young people are attracted to our start-up. To begin with they are committed, but being individualistic and in a hurry to get ahead, some get bored quickly and often leave on a whim, without having clear career plans. In order to retain key people, I send them to our headquarters where they learn about the tea business. One of them passed the “Tea Sommelier” diploma course in Paris and subsequently left six months later for Nepal with François-Xavier and a group of new French and Belgian “Tea Sommeliers“. Recently, two staff members have participated in a network meeting at our headquarters. When they found themselves in the company of 120 people in Paris, they realized that they belonged to a solid and ambitious company. This greatly impressed them, boosted their commitment and gave them new perspectives.
Which partners did you rely on to set up shop in Russia?
Right From the outset, I chose to work with Bellerage for all pay-accounting-tax-law related matters… and with FM Logistic for supply. Given the complexity of the transport flow, customs clearance and certifications, I am very happy with this choice.
What is your growth target in Russia?
At this stage of our development in Russia, we are above all seeking to bolster our premium image and to broaden our clientele of tea lovers. Our strategy emphasises the quality of the product via its very modern retail concept and educational approach. Whilst retaining our B2B focus we specifically want to open franchise stores in Moscow, Saint-Petersburg and in the other millionaire cities (about a dozen). We also want to develop within Palaces-hotels and believe that e-Commerce can become a big money-spinner.
What are the challenges you are currently facing?
Today, the main problem we’re having in Russia is that of import restrictions. I can import anything that contains tea, but Russia does not allow us to import herbal teas: rooibos and our L’Herboriste and Les Jardins ranges, as well as many mixed boxes that contain them, are part of the “sanctioned” products. Fortunately, in order to get around this obstacle, I have found seven very good quality infusions in the Altai.
The second challenge we face involves the creation of franchises for new shops, particularly in shopping malls. We must attract franchisees using our know-how and our experience of more than 20 years in the French franchise sector. With this in mind, we participate in two franchise fairs in the course of the year, such as the Moscow Buy Brand, and we are registered on two leading franchising websites.
Would you like to recruit French franchise owners?
A French businessman that is well established in Russia will be able to understand the brand, its values and our business model. He will also be reassured by our experience and the strong position we hold in France, Belgium, Norway, Israel and the USA. This is obviously a plus. But we pay particular attention to the applications of Russian businessmen who are interested in tasteful products and who can demonstrate a real involvement in qualitative retail. Those who sell our products should do so with passion, a desire to share, to make others discover the best in the world of tea. Many Russians are looking for very fast returns, if possible without much effort. We need to find people who think longer term and can demonstrate their involvement with a product that has a social dimension, is healthy, makes a perfect gift and builds loyalty… Tea!
“To do business in Russia, you have to be close to the field”
What does it take to succeed in running a business in Russia?
To do business in Russia, you have to be CLOSE TO THE GROUND and even if you don’t speak the language, you have to keep your eyes open, OBSERVE consumer behaviour, surround yourself with Russians that are keen on French culture, and competent partners. KEEP AN EYE ON THE OWNERS when opening points of sale. This is one of the more complicated aspects of the business. As far as the other aspects are concerned I can reassure you: the clients generally pay very well, the suppliers are not very expensive and get the job done very fast. The rule of law applies in Russia. If you play by the book, you can easily achieve your goals.
As everywhere else, you also need some CASH because a business never develops as set out in a business plan. Only cash can last long enough for you to carve out your space in the market.
What do you think are the main failure factors in retail?
In my opinion, the first failure factor would be to neglect training needs. In Russia, the high turnover requires one to do constant training!
The second failure factor would be the lack of vigilance when it comes to price. Russia is a very price sensitive country. In view of the transport costs, custom and certification fees, as well as 20% VAT on tea (compared to 5.5% in France!), we have to set prices 20 to 25% higher than those in France. In this context, it is essential to respect certain psychological thresholds and to constantly monitor the reaction of consumers in order to guarantee a good value for money shopping experience.
Finally, the third factor of failure would be to think that today we have completely moved into the digital world and that it is no longer worth printing brochures. However, Russians love to read, to have factual and emotional explanations about the qualities of a product. They need documentation to be convinced before opening their wallets.
“To succeed here, work is the nerve of war.”
Jean-Luc, what are the qualities one needs to succeed here?
To succeed in Russia, one needs to have PERSEVERANCE of course, but also an INTEREST IN THE COUNTRY and FAITH IN ITS HUGE DEVELOPMENT POTENTIAL. The purchasing power of Russians will increase sooner or later. For a French or European company, I don’t see a better reservoir of growth than Russia.
And another important quality: WORK. It’s the nerve of war. One will have to work a lot, do a lot of multitasking. For example, one will have to run your own business relying on the French relations that you can build thanks to:
the Chambre de Commerce Franco-Russe
It will be necessary TO BE PRESENT and COMMUNICATE within these different forums.
At the same time, you will have to try to understand the Russian mentality, for example by reading:
Le Courrier de Russie which I thoroughly appreciate for the spotlight it throws on society.
In a word…
Russia has the particularity that it sometimes sees expatriates shed a tear as they step back on a final farewell before returning home. It is true that this country is very endearing. So, to any newcomer, I say:
“Welcome! добро пожаловать! And good luck!”
A look back at an Executive Coaching session …
Jean-Luc, a word or two about our Executive Coaching session?
What is truly amazing is that you allowed me to find solutions that were somehow buried in my unconscious through the questions you asked, and this without ever giving me any hints. Thanks to your experience and knowledge of the business, you know how to ask the right questions that open new avenues and facilitate choices. Thank you, Antoine, for this very instructive moment…
International Executive Coach and Consultant
Antoine Leygonie-Fialko is an International Executive Coach, ICF certified at PCC level, specializing in supporting international leaders "Towards CLEAR, CALM, CARING and POWERFUL thinking".
He is the founder of the CO-CREATiVE Communication® and the company CADRAN which operates globally. Previously, he managed 7 companies, from start-ups to corporate, in France and internationally (Europe, Asia, America, Africa), in various industries (construction, architecture, internet, HR…).
Today, with more than 2,000 hours of Executive Coaching, he works remotely with international leaders and their teams who want to unleash the power within their singularity in front of strong challenges requiring them to get out of their comfort zone & known mental frameworks.