Coke fizzes on the investment trail

The dust had barely settled from the chaotic collapse of the Soviet Union in 1992, when Coca-Cola was setting up shop in Belarus, where it remains one of the country’s most significant foreign investors.

That a consumer goods company, which has invested $100m in the country since it arrived in 1994, is still so prominent in foreign direct investment (FDI) rankings is a sign that the country’s recent outreach to attract foreign investment has not been a roaring success.

The most striking characteristics when Coke arrived were the stultifying bureaucracy and impenetrable regulations – these have remained hallmarks until recent reforms started by the government two years ago.

“It was an absolutely unfamiliar environment for the company,” says Alexander Denisov, the head of Coca-Cola in Belarus, an offshoot of the Greek-based operations of Coca-Cola Hellenic. “We were one of the first foreign investors here and the government was not familiar with how to deal with us.”

Despite the reams of paperwork, the beverage company managed to build an American-style bottling plant in only two years.

However, simply bottling Coke and other soft drinks was not enough. The product had to be advertised and distributed – and neither activity really existed in Belarus at the time.

Coca-Cola ended up being one of the first companies to run advertisements in the country, and also had to create a distribution network to service the retail sector – which was more than 75 per cent state-owned.

Although Belarus has the reputation of being a state preserved in aspic, Mr Denisov, a glowing fridge filled with Coke products next to his desk, has seen gradual changes over the past 15 years. Now there are local and foreign advertising agencies to make Coke’s ads. As well, the retail sector is now almost entirely private, with the few remaining state-owned shops to be found only in remote rural regions.

As Belarusians have become wealthier, they have become less concerned with price and more with brand. The company, which controls about a quarter of the country’s non-alcoholic drinks market, has even moved into the water and energy drinks segments characteristic of more developed countries.

Coca-Cola now bottles about 100m litres of drinks a year, double the level of five years ago, and Mr Denisov is planning additional investments despite the economic crisis.

The crisis has been relatively mild for the soft drinks market, with sales in Belarus falling by about 4 per cent, mostly due to lower club and restaurant sales. The falls have been much steeper in neighbouring Ukraine and Russia, where economic contraction has been more severe, says Mr Denisov.

“Because of our controlled economy, we are going through the crisis in a less painful way,” he says.

Mr Denisov says he has seen a dramatic speeding up of reforms as Belarus tries to attract foreign investors to lessen its dependence on Russia. “Over 15 years, I have never seen the kinds of changes I have seen over the past year,” he says.