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. Last Updated: 07/27/2016

Russian Brands Can Take Advantage of Crisis

Russian companies are trying to turn the current financial crisis to their advantage by strengthening their Russian brand names and stepping into the vacuum left by foreign products f now that imported products are very costly and hard to get.

An upbeat Oleg Chernozub, general director of the Moscow-based V-Ratio marketing agency, sees a bright future for Russian brands.

"Russian trade marks, which are young and weak, will now become strong. The crisis will have a positive effect," said Chernozub, speaking at a trade marks conference last week in Moscow's Renaissance Hotel.

"Russian candy manufacturers that import only 30 percent of their ingredients are in a three times better situation now than those that import sweets," he said. "So local firms will have the opportunity to increase the prices of their products and receive an additional profit.

"In the past," Chernozub said, "I would have said that this additional profit would just be stolen, but this is not the case in the current situation. Many managers of Russian enterprises nowadays will not build dachas or transfer the money to their offshore accounts. Many are prepared to invest the additional profits in the development of their production lines and in the promotion of their brands."

Investing is what Rostislav Ordovsky-Tanayevsky Blanco, president of RosInter restaurant chain, which includes Rostik's and Patio Pizza, plans to do. "This [crisis] is even useful," he said at the conference."The local brands f suppliers and manufacturers f will get their window [opportunity in the local market] and in a couple of years, when Russia will again turn into a successful country, they will have strong positions here."

Ordovsky said that Aug. 17 f when the government decided to let the ruble float, to restructure local debt and to introduce a moratorium on the repayment of some commercial foreign debt f became "a turning point in Russia's economy and policy," but added similar things happened in South America three times when he was there. He expected the Russian economy to revive in the next 12 to 18 months.

He said that RosInter, which has 32 restaurants in Moscow, St. Petersburg, Novorossiisk, Omsk and Minsk, will start selling licenses as of October to franchise more Rostik's.

"In the nine years RosInter has existed in the Russian market, we have prepared the infrastructure and are ready to support those entrepreneurs who are ready to join our family," Ordovsky said. Creating a larger empire will cut costs on promotion by paying jointly for advertising, he said.

Vladimir Pivovarov, deputy general director of Russkoye Bistro, said that his chain plans to develop its franchised network from the city of Moscow to the Moscow region. Ever since the launch of the chain in 1995, Russkoye Bistro has made use of government officials to promote the restaurants.

Moscow Mayor Yury Luzhkov was at the opening of the first bistro, attracting a lot of public attention. Former Prime Minister Viktor Chernomyrdin and President Boris Yeltsin also have visited Russkoye Bistro.

Companies that do not have access to personalities or money to promote their brands find other solutions.

"We had that unique offer some time ago from one milk company that could only pay with its milk for our services," said Alexander Ivanov, general director at Ivanov & Ivanov marketing agency.

A major problem for Russian trade mark owners is the protection of their brand name from unrestrained use by Russian and even foreign producers.

Speaking at the conference, Anatoly Diursky, general director of Krasny Oktyabr chocolate maker, complained that one of his most popular sweets f Mishka Kosolapy, a dark chocolate candy with bits of nuts and with a painting by Ivan Shishkin on the wrapping f isbeing manufactured by dozens of enterprises throughout Russia and abroad.

Robert Voskanyan, head of the Trade Marks Department of the Industrial Property Federal Institute, believes that general use of product names formerly used in the Soviet Union is a specific problem for Russia.

"During the transition from a state-run distribution in the U.S.S.R. to a more free market situation, some manufacturers registered well-known pre-perestroika product names, effectively prohibiting other manufacturers from using the well-known trade mark," he said.

Voskanyan said such conflicts are typical for the food, alcohol and pharmaceutical industries.

In the Soviet Union, "we only had one brand name f the C.P.S.U., Communist Party of the Soviet Union," Ivanov joked. About 180,000 trade marks are registered in Russia now, Voskanyan said.

Over the past two years, 212 law suits seeking to protect intellectual property were heard in arbitration courts.

Diursky said the Krasny Oktyabr factory prefers to resolve trade-mark conflicts in a sweeter way. He said Krasny Oktyabr allows other factories to produce the same products and sells them a license f sometimes for the symbolic price of 1 ruble (6 U.S. cents).