Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Polaroid Adjusts Its Focus in Russian Market

Polaroid has had quite a ride in Russia.

Since the U.S.-based company entered the market in 1989, it has sold approximately 6.5 million of its trademark instant cameras. According to market research commissioned by the company, Polaroid cameras can be found in 23 percent of Russian homes.

"We've got the highest household penetration of Polaroid instant products in the world, next to the U.S.," said Arthur Braunstein, the general director of Polaroid's 70-person operation in Russia.

By 1995, sales in Russia had reached $200 million a year, or roughly 10 percent of the company's total sales.

Last year, however, the Cambridge, Massachusetts-based company reported a loss worldwide. Much of that was due to a $325 million fourth-quarter restructuring charge, but a year-end report said 1997 worldwide sales were down 6 percent over 1996, partially due to lower sales in Russia and China. Polaroid now faces the challenge of turning unsustainable demand in one product -- instant cameras -- into a sustainable level of interest in its entire range of goods.

Polaroid can thank Soviet-era idiosyncrasies for its early success: Russian film and developing was of notoriously low quality, and Polaroid's easy-to-use instant cameras were a perfect antidote.

"Polaroid came into this marketplace when it had a lot of pent-up demand," said Walter Martinovich, the country business manager for professional products at Kodak, a Polaroid competitor. "There was a vacuum there for good photo products."

Braunstein said that most of the company's first years were spent just trying to fulfill a seemingly insatiable desire for the product.

"In the early days, demand for instant cameras was so high that we put much of our organizational energy into supplying the market," he said. But w ith 35-millimeter photography now established in Russia and Polaroid approaching market saturation with its instant cameras, the company has entered a new phase.

"As consumer interest in instant cameras used for household photos went down -- as we knew it would -- we wanted sales of other products to rise," Braunstein said. "As their growth has gone up, it hasn't been enough to keep up with the [previous] demand in consumer photo products."

One of Polaroid's recent moves was to pare down its production sites internationally. The company's Moscow production facilities -- which produced Polaroid cameras from 1989 to 1997 -- was shut down last year in favor of sites in China and Scotland.

Braunstein said there were "absolutely" no country considerations involved in closing down Polaroid's Moscow production facility.

While it is no longer producing here, Polaroid is rolling out a number of new products for this market, including flashlights with five-year batteries, sunglasses with Polaroid polarizing filters, a disposable 10-shot instant camera, professional film and imaging applications, and equipment that allows entrepreneurs to set up instant-photo services.

Braunstein said the company is placing long-term hopes on equipment packages for creating photo-identification badges.

"We think it's a promising market for Russia," he said. "Its huge growth boom is probably a few years out. But it's a steadily growing business."

The company is also offering 35-millimeter cameras and film, a market dominated by Kodak.

"As the 35 millimeter business grows [in Russia], it's a rising tide, and it raises all boats," Braunstein said.

Kodak entered the market at roughly the same time as Polaroid, with a few mini-labs in Moscow's Mezhdunarodnaya Hotel.

Martinovich said it took heavy investments to set up Kodak's mini-labs and retail operations, but once they're up and running, these services offer film and developing at a lower per-photo price than Polaroid.

Now, according to Tom Garman, the general manager of Kodak for Russia and the former Soviet republics, the company has 600 to 700 Kodak Express developing labs throughout Russia, and a "couple hundred" additional facilities that use Kodak developing products. Kodak's operation in Russia now employs about 300 people and has revenues "in excess of $150 million," Garman said.

Both companies agreed that the Russian market was disproportionately weighted toward Polaroid in the early part of the decade, and that cheaper 35-millimeter products would naturally take a share of the Russian market closer to what they would capture in other developed markets.

"It's a normalization," Braunstein said. "Polaroid shouldn't be used for all photos, just as 35-millimeter cameras shouldn't be used for all photo occasions."

Kodak's Martinovich noted that the companies have worked together internationally on seminars to promote products such as Polaroid's new "preview camera," a device that contains two types of film and allows the photographer to shoot a preview shot on Polaroid instant film before committing it to 35-millimeter film.

With 6.5 million cameras on the Russian market, Polaroid's other big money-generator is instant film. "A stream of products like that is important for supporting the entire company," Braunstein said.

Polaroid has switched its Russian advertising campaign from Ogilvy & Mather to the Russian A.R.M.I. ad agency. While declining to disclose specific figures, Braunstein said the company is placing more emphasis on advertising, and expenditures in that area have been increasing as a percentage of sales.

The Russian Public Relations Group, which tracks ad spending across all Russian media, estimated that Polaroid spent $2.25 million on Russian advertising in 1997, slightly off its 1996 level of $2.5 million and 1995 spending of $2.45 million.