Ben Aris in Moscow -
To an Anglophone, “Splat” is a weird name for a toothpaste brand, but obviously not to the Russian ear. This home-grown company has expanded fast over the last 14 years and is now the second biggest selling brand in Russia after the multinational toothpaste giant Colgate.
The name actually has nothing to do with the onomatopoeia that comes from dropping a tube of toothpaste from a great height. It is actually a Soviet-style contraction of "Spirulina platensis" – an edible red algae found in Korea, Japan, Russia and the Bering Sea. In the 1990s there was a fad in Russia for the seaweed that was widely believed to make your brain work better. Some of this seaweed is still used in the toothpaste and indeed its extracts are used in vitamin supplements because of the high concentrations of important nutrients and minerals.
Russian red seaweed may sound like an unlikely basis for a toothpaste, but business is good. “Splat’s products are doing well and even getting more shelf space in Russian supermarkets, as people want to buy quality Russian-made goods over foreign-made ones,” says Anna Jackson-Stevens, communications representative, during a recent company visit by bne IntelliNews.
As might be expected, Splat is a mix of being very Russian and identical to any beauty and healthcare product maker in the West. The modern factory is set in the boundless (and mosquito-infested) forests located half way between Moscow and St Petersburg. The company was founded in 2001, but moved to its current site in 2009, taking over a facility that was originally built for Russia’s premier juice and dairy producer Wimm-Bill-Dann, which has since been sold to PepsiCo.
Splat reconfigured the facility to produce healthcare products, importing almost all of the equipment from places like Germany and Switzerland. Close to the Valdai resort, more famous for hosting an annual meeting between President Vladimir Putin and the international intellectual elite, a sort of Jackson Hole of Russia, the factory is not far from the M10 motorway that connects Russia’s twin capitals, two of the biggest cities in Europe. Indeed, thanks to the ongoing investment into Russia’s roads, the adjacent M11 motorway has already been upgraded and cut travel times to both Moscow and St Petersburg to about four hours.
It’s not a particularly big factory, but it churns out enough tubes of toothpaste to fill shelves in shops from Kaliningrad to Vladivostok, and increasingly beyond. Today, the company has a 14% share of the domestic toothpaste market and is currently exporting its products, which as well as toothpaste also include toothbrushes, mouthwashes and floss, to over 30 countries.
Light manufacturing, weighty problems
Splat’s success as a light manufacturer is actually surprisingly rare in Russia. In the first few years following the collapse of the Soviet Union, Western manufacturers flooded into the former Warsaw Pact countries looking to capitalize on the cheap but skilled labour force there, building up a foundation of light manufacturing as they went.
However, Russia almost entirely missed out on that stage of development. Its oil exports had driven up the value of the ruble, making Russian labour more expensive. More importantly, its 19-year-long saga to get into the World Trade Organisation (WTO) – the longest of any applicant country to date – meant few Westerners dared invest in the “wild east”. Russia eventually got a lot of retail investors interested in the 143mn strong population, but few companies that actually make anything.
Splat is typical of the few light manufacturers that have benefited from the wave of national pride that has accompanied the imposition of sanctions on Russia, but are also suffering from the flip side of those sanctions.
At the heart of the factory are three giant vats that cook up the hodge podge of ingredients that go into toothpaste, before the resulting mixture is piped into the next room where a variety of machines fill the tubes, label them and put them in boxes ready for the trucks to transport them across the nation. The rooms are scrupulously clean (with an ISO 14001 environmental certificate to prove it) and everyone wears hygienic uniforms so as to not contaminate the toothpaste. Even wedding rings are banned in the clean area, where the rooms are kept at a slightly higher pressure than outside to prevent dust drifting into the room. All the products are safety tested in Russia, Japan and the EU, certified to international standards.
But the problem is that like much of Russia’s industry, Splat remains almost entirely dependent on imported inputs: while 90% of the packaging and labels are Russian-made, 90% of the actual chemicals and essences that go into the toothpaste are imported, mostly from Europe. “There are Russian analogues for many of the things we need, but the problem with the Russian produce is the quality is not stable so we prefer to import,” says Andrei Tishin, the factory’s technical director.
The storeroom is a wholesaler’s Aladdin’s cave of ingredients. Edible gum from Germany, menthol tablets from Spain and sacks of silicon dioxide from Warrington in the UK. Splat’s ingredients have almost entirely escaped the sanctions regime imposed by both the EU and Russia. Bizarrely, the one exception is chemically pure salt (sodium chloride), which apparently has a military use in making rocket fuel. The company is hoping to replace it with a Russian equivalent soon.
The depreciation of the ruble has obviously driven up the costs of these imports, but that has been offset to some extent by increased sales. Growing nationalism means Russians are happy to choose Splat’s products over the obviously American competition, and as exports slowly start to rise the growing hard currency revenue is also helping. In a recent industry-organized blind tasting in Germany, Splat’s Blackwood toothpaste won hands down over the international competition and the company has now added Germany to its growing list of export customers.
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