Valery Elhov, president of the Moscow Association of Ice Cream Producers and Distributors and the National Union of Ice Cream Producers, often referred to as the man behind Russian fresh frozen-food products, spoke to The Leader about the sector.

Could you tell us a little about your educational background?

I graduated from a State Polytechnic Institute in the late ‘60s in Kubyshev, now Samara, as an electrical engineer. Later, I got a Ph.D. in public management at the Youth Institute.

Where did you work before becoming the president of the Moscow Association of Ice Cream Producers and Distributors and the National Union of Ice Cream Producers?

I have worked in various management positions in many ministries. I started as a teacher in my alma mater and later transferred to the NGO sector. However, for the past 15-20 years, I have been working in the ministries, first as a senior official in the Patenting Department in the Ministry of Science and Technology and, later, as a deputy director of Education and Human Resources Department at the Ministry of Meat and Milk Industry.
This ministry laid the foundation for my future career in the ice-cream sector, as I got acquainted with equipment, production techniques and deep-freezing technology in handling fresh frozen-food products (FFFP).
I have been in the FFFP sector now for the past seven years, including as executive director of Unia, one of the major local companies in the sector. It was during this period that we decided to form the Association of Ice Cream Producers and Distributors and, two years later, the Union, with membership drawn from all the regions, was formed.

Why were these organizations formed?

Because of the economic and political changes, the FFFP sector was in a deep state of stagnation and totally unprofitable for local producers, who could not compete with the foreign producers that dominated the sector in the early ‘90s. This prompted the formation of the Ice Cream Association in 1995, initially by eight companies, with the active backing of the city administration in order to remedy this negative situation.
The association, just like the Union, represents the interests of its members at all official levels, provides contacts, and helps in marketing, logistics, distribution and patenting of their products.

Could you also briefly highlight the Union’s activities, including its objectives, successes and future perspectives?

As time went on, we discovered that there were some problems in the sector, such as the issues of value-added tax (VAT) on ice cream and FFFP in general, which were not limited only to Moscow but affected the whole country. That was why 11 firms decided to form the Union in June 2000.
Since then, the Union members have increased to over 120 nation-wide, including banks, insurance companies, five research institutes of the Ministry of Science and Technology, higher educational institutions and nine publishing houses, importers of frozen-food production equipment and package facilities as well as several foreign companies such as Zhukovsky Nestle and Tetrapak.
The Union offers leasing, financial, patenting and insurance services to its members. The Union has a trading house and the Tekhnokholod Production Company, which are involved in marketing as well as modernization and local production of some components for the deep-freezing industry, with the ultimate goal of producing some of these machines locally.

Has there been any success in reversing the once-prevailing negative trend on the FFFP market?

The Ice Cream Association has been on the market now for over six years, and its members have increased from eight to 11, with the 12 firm almost on the final stage of joining. During this period, the Association members have been able to develop distribution networks for ice creams with over 1,000 kiosks and tens of thousands of ice-cream stands at advantageous positions in the city. These belong to Ramzai, Golion, Govod, Moscow Ice Cream and Eskimo-Fili, which now dominate the city’s ice-cream market.
Many factors have contributed to this favorable outcome. In the first place, we have been able to restore distribution networks and improve the quality and packaging of these products. Also equally important is the paradoxically positive effect of the 1998 financial crisis, which made imported products too expensive on the market to be competitive.
These changes are visible today on the market, as imported ice cream now accounts for less than 1 percent of the 340-350 tons of ice cream consumed annually in the city.
Also, we have built over 11 ice-cream cafes in the past three years, and we intend to build eight more in the future.
Besides, the Association is also associated with many official and unofficial activities such as the Ice Cream Festival at Luzhniki, the Ice Cream Carnival at VVTs and ice-cream exhibitions on the Arbat.

What are the conditions for membership in these organizations?

There are no complications here. To become a member, a company — be it a producer or distributor of ice creams — has to be working actively and normally, and this includes honoring all its partnership and other obligations in the sector.

How developed is the FFFP market in general in Russia?

In the first place, I would like to say the potential of the FFFP market is immeasurably huge. However, the market is very young, being only about 10 years, especially when compared with the ice cream segment, which is more than 65 years old.
The FFFP sector is not only capital-intensive, but also machinery- and technology-dependent, as the frozen products have to be maintained at all times at certain temperatures during storage, transportation and distribution and at point of sale. Also, most of the refrigeration equipment has to be imported. These are just a few of the numerous factors crippling the sector, which is only in the formative stage in Russia.

How easy is it for a new businessman who is not a member of these organizations to open an ice-cream or FFFP company in Moscow or in Russia in general? What level of red tape needs to be overcome?

I wouldn’t say the level of red tape is insurmountable and totally uncalled-for in the FFFP sector, which belongs to the category of public foods. Consequently, a lot of barriers needs to be set up to make sure only licensed companies operate, and only officially certified products traded on the market.
In addition, I think these legal and bureaucratic barriers are necessary to prevent foreign and local market operators, who sell second-class products from the FFFP market.
This is why stricter requirements have been imposed on sanitary conditions, temperature regimes and information for consumers on product contents. I think these measures are necessary to protect all conscientious market participants.
Apart from this formal aspect, the new entrepreneur will also have to know the sector’s specifics very well, including procurement of ingredients, storage, transportation, deep-freeze technology, laboratory techniques on strict control of all the stages of production, marketing and packaging. All these departments need to be manned by professional workers.
And, of course, the entrepreneur needs to know that he is entering a market where competition is very high.
If he can do all this, then he is welcome to join us in the sector.

How ready is Russian ice cream in particular, and the FFFP industry in general, to face life within the WTO?

The general conception is that this is an objective process and Russia must join so as not to be left behind on the roadside of the global economic trend.
However, the question is on what conditions. Presently, the conditions on the negotiating table are totally unacceptable for Russia. Our position is that we are joining, but not in haste at any cost, only when we are convinced that we are, at least, equal partners, and even, in some cases, have some privileges and preferences.
In the ice-cream sector, the market is import-dependent, including raw materials and machinery. Though there are means of protecting the sector, such as regulating import and excise duties, there are always of circumventing these regulatory mechanisms.
However, we intend to upgrade our GOST standards to the WTO’s level, which will make our products very competitive and reduce the fear of joining WTO.

What is a standard day for the man behind the Russian zamorozky both at and outside work?

I’m already at work at 9 a.m., but my secretaries and assistants usually load my bags the previous day.
Contrary to expectations, our work is not just about tasting different sorts of ice creams, as outsiders would like to think. Frankly speaking, that is not the most interesting part of the job. The most interesting part of my work is the endless contacts with different people both within and outside the sector.
In my leisure time, I either continue a monograph I’m writing on public management, which is my favorite subject, or I’m at our family dacha with my grandkids and, of course, fishing.