1. Delivering Ice To Every House
Changellendge Cup SPb 2011
November 21, 2011
Re: action
Kaptelov B. Kosyrev K. Kotkov A. Vydrevich M.

2. OUR SOLUTION
Optimal distribution network employs both internal and
external logistics and storag
Strategy involves aggressive growth in
Central region besides Moscow
• Second-best expected revenue
• Way-lower competition than
Moscow one
• Relatively low logistic expenses
Distribution Decision Matrix
structures the problem
into several cost comparisons
• In a 5 year horizon, to buy and
service each Long Distance
trailer costs approx. 4mln rub
less than to rent one Production Interregional Regional Intercity Trade
• In a 10 year horizon, to rent each Logistics Warehouse Logistics
of regional Temperature
Controlling Warehouse costs
Trolley
approx. 15mln rub less than to
build and maintain one Buy Bulid Buy
• In a 5 year horizon, to rent each
of Intercity trucks costs approx. Tula Factory Kiosk
7mln rub less than to buy and
service Rent Rent Rent
Modern
Trade
Distributors
2
Примечание: (1) без ССГ, развитие в рамках текущей стратегии

3. WHAT TO DELIVER
Regional consumption statistics shows that Central region &
Moscow account up to 80% of whole Tula production
Expected Revenues by Region Impulse vs. Home consumption
Population Share is population in Centr. NW
Msc SPb South 20%
region to the overall Russian Besides Msc besides SPb
population. Disposable income
ratio is regional avg. income to avg. Population 15%
8,1% 17,9% 3,4% 6,0% 10,3%
Russian income. Unilever market share
shares are sourced from the case. Disposable Impulse
1,91 0,70 1,30 0,86 0,68 10%
Home
income ratio
Three ratios above contributes to
the Expected Revenue per region. It Unilever 5%
16% 16% 6% 9% 6%
clearly shows that two most Market Share
interesting regions are Moscow and 0%
Expected
Central region. Moscow Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Revenue, 1,65 1,33 0,18 0,31 0,28
competition is severe so the most
interesting in terms of future cash rub bln 1
flows is Central Region besides
Month average number of pallets needed Yearly consumption by ice cream type
Moscow.
3,000 2,843
15.4
Home consumption is relatively 11.2
stable except of September. 2,500 2,302 8.7 6.5
Impulse consumption escalates Ice cream multi portion
during the summer. 2,000
Stick ice cream
Having shares of ice consumption 1,500 150.9 Cone ice cream
76.1
by segments it is possible to
1,000 Wafer cup ice cre
calculate number of pallets
necessary for each region using 536 480 Cylindrical ice cream
500 305
average price per segment and
45.1 Sandwich ice cream
pallet capacity.
-
Bar ice cream
Msc Centr SPb NW South
Cup ice cream
166.4
3

4. HOW TO DISTRIBUTE
Buying a trailer and renting a truck is the most favorable
option
Type of distribution network1 Two stages of transportation scheme
Having estimated the costs for a
five year period for all 4 possible 60
Millions 49
options, buying a trailer and renting
a truck appears to be the most 50 45 Stage 1: delivery from the plant to a
41
cost-efficient possibility 37 warehouse
40
The analysis was based on: 30
initial cost of transport
maintenance 20
gasoline
personnel salary 10 Stage 2: intercity delivery
0
The present value of future costs All acquisition All rent Acquisition/Rent Rent/Acquisition
were estimated using the discount
rate provided by Bank of Russia
Data used for calculation of Trailer&Truck acquisition costs
Van acquisition Tula - Moscow
Stage 1: delivery from the plant to a warehouse
Initial cost of a van 4 000 000 2 000 000
Depreciation 5 800 000 800 000 800 000 800 000 800 000 800 000
Maintenance, 1/70 of the price 0,014 57 143 57 143 57 143 57 143 57 143
Gasoline, one return trip 4 375 1 093 750 1 093 750 1 093 750 1 093 750 1 093 750
Salary (poor road conditions), monthly 50 000 600 000 600 000 600 000 600 000 600 000
Management salary, monthly 129 000 1 548 000 1 548 000 1 548 000 1 548 000 1 548 000
Managerial overheads 1,500 2 322 000 2 322 000 2 322 000 2 322 000 2 322 000
Initial cost of a van 4 000 000
Cash flow 5 620 893 5 620 893 5 620 893 5 620 893 3 620 893
DCF 5 620 893 4 796 777 4 431 202 4 093 490 2 435 994
Present value of future costs 21 378 355 4 220 351
Stage 2: intercity delivery
1 440 000
Depreciation 5 576 000 576 000 576 000 576 000 576 000
Maintenance, 1/70 of the price 0,014 41 143 41 143 41 143 41 143 41 143
Gasoline, one day 616 154 110 154 110 154 110 154 110 154 110
Salary, monthly 30 000 360 000 360 000 360 000 360 000 360 000
Management salary, monthly 161 000 1 932 000 1 932 000 1 932 000 1 932 000 1 932 000
Managerial overheads 1,500 2 898 000 2 898 000 2 898 000 2 898 000 2 898 000
Initial cost (Franscold) 2 880 000
Cash flow 8 265 252 5 385 252 5 385 252 5 385 252 3 945 252
DCF 8 265 252 4 595 685 4 245 437 3 921 881 2 654 210
Present value of future costs 23 682 465 7 968 288
Notes (1) There are four types of All rent, Renting both a trailer and a truck, Acquisition/Rent: buying a trailer and renting a truck,
Rent/Acquisition: Renting a trailer and buying a truck
4

5. IMPLEMENTATION AND MANAGEMENT OF THE DISTRIBUTION NETWORK
Organizational structure is of highest importance for the
Distribution and sales performance
Strategic goals Organizational structure design
Company's distribution and sales National
organizational structure should be ■ To achieve leadership in premium segment of ice sales in Trade
Executive
optimized In order to fit the desired Central, North-West and Southern regions
Regional
geographical reach of chosen ■ The sales effort should focus on Central region besides Trade
Executive
regions. In the same time it should Moscow
reduce organizational cost. ■ Administrative expenses should be reduced by 10% TSM
■ KPIs should be widely involved in management compensations 2
On the basis of scenario analysis it
is possible to conclude that the TME TTAE MTAE MTE
most risky is salary fluctuations. 2 4 2 2
To analyze level of significance for SCSS CSS
administrative expenses is crucial
4 6
for future success of sales strategy.
Scenario analysis of administrative expenses KPIs
Pessimistic Basic Optimistic TSM Actual results to planned ones
Promotion expenditures
TME
Sales -3% 3% efficiency
TTAE Actual results to planned ones
MTAE Actual results to planned ones
Salary -8% 8%
MTE Actual results to planned ones
SCSS Customer satisfaction
Fuel -2% 2% CSS Up to date communication
-10% -5% 0% 5% 10% 5
Notes (1) без ССГ, развитие в рамках текущей стратегии

6. FUTURE TRENDS AND FORECASTS
Increasing attractiveness of the South region, consolidation
trend and new technologies as a driver of sales
Trends: consolidation Investments in the Sochi region, RURbn
Due to further consolidation, driven 2,5
by rising energy and raw materials Raw material’s Energy price 2,00
costs, competition between the prices increase growth 2,0
leading players is expected to 1,50
intensify, whilst many small 1,5
domestic manufacturers will be
0,90
driven out of the market. Trend on 1,0 0,70 0,75
consolidation
Growing investment attractiveness 0,5
because of increased financial
infusions for future Sochi 2014 0,0
Olympic Games, which leads to
Decrease in number
of small players 2011 2012 2013 2014 2015
future acquisitions of local
Source: Ministry of Finance
producers.
Emergence of a new sales channel
– Ice-cream Vending New sales channel Consolidation: acquisition of local producers
Traditional trade
Modern trade
Key accounts
d4 facilities in Tolyatti
Ice cream vending
4 facilities in Tolyatti
Young active customers
Source: Ice Cream in Russia 2011, Euromonitor International 6
Notes (1) без ССГ, развитие в рамках текущей стратегии