Beginning operations in Russia in the chaotic days of the 1998 August financial crisis, Beiersdorf had a lot of obstacles to overcome. But the skincare company, best known for its Nivea skin cream, has bounced back and is doing fine, according to General Manager Peter Treger.

The Leader: How did you start working for Beiersdorf?

Mr. Treger: I changed to Beiersdorf from another multinational company not connected with cosmetics — British-American Tobacco. I’ve been in Russia for quite a while. Before Moscow, I was in St. Petersburg for five and a half years. We established the company here in 1998, exactly at the time of the crisis. It was certainly an exciting experience, but we survived. It is like childhood — if you have a hard childhood, you will be stronger later on.

The Leader: What is the history of Beiersdorf in Russia?

Mr. Treger: We were producing in Russia before the Revolution. We started here in, I think, in 1911 or 1912. There was a factory here. Moscow changed so much in the ’30s that we can’t tell where the plant was.

In the ’60s, some Beiersdorf goods began to be available here, although in a sense they weren’t really Beiersdorf. After the war, the company lost some copyrights because we lost factories in German territory to Poland. They were expropriated and kept on producing the same kind of cream using the same trademark and brand name. So it was difficult for us to keep up quality standards, because sometimes products bearing our name would appear in Russia and people wouldn’t really know what Nivea was like. Now, though, that problem is solved. We bought these factories back.

In the ’80s, we started with regular export operations, and since 1986 or 1987 we have been a real presence here. In 1998 we started with real sales operations.

The Leader: How did you start out?

Mr. Treger: I started here with a small office with just a secretary. Then we hired a finance director. He is the only other German here — everybody else is Russian. There are now 40 employees.

The Leader: Will you be hiring more people?

Mr. Treger: We’re not planning on it. A lot of agencies are working for us. All logistics questions are handled by specialists to whom we outsource, as are warehousing and a lot of marketing. We don’t even have our own cleaners. You can always find a specialist who is better at doing something than you are. We have a lot of very steady Russian partners here.

We don’t want to have too many employees. When the [financial] crisis happened, some companies were too large and massive layoffs took place. It is not our policy to hire and fire people. We want to grow steadily, step-by-step. We want about 60 employees, eventually.

The Leader: What sort of background is useful for Russians trying to get jobs in a company like Beiersdorf? Or people looking to get into management in particular?

Mr. Treger: To answer the first question, I would say a higher education and knowledge of a foreign language, English at the very least. As far as work experience goes, I would say a minimum of one year’s experience in a foreign or leading Russian company specializing in consumer-goods distribution. To get into management, I would say the same, plus a minimum of three years’ experience in a managerial position in a foreign or leading Russian company specializing in this field.

The Leader: What is your management philosophy?

Mr. Treger: First, our company is absolutely marketing-driven, as are more or less all cosmetics and personal care companies. For us, the most important thing is quality. Then, family is important to us. We call it "blue harmony" — because most of our brands are blue — and this means having healthy and well-organized people, an attractive family. Values like family and harmony are very important to us.

The Leader: Could you describe your activities in Russia?

Mr. Treger: We are present in the entire Russian market, but mostly in the big cities. The most important place is Moscow and then, after a big drop, St. Petersburg, and then Yekaterinburg, Novosibirsk and maybe Nizhny-Novgorod.

I have noticed this year that more regional clients have been appearing in Moscow and starting independent businesses. In the past it was the case that it would always be Moscow-based companies establishing affiliates in Vladivostok or Novosibirsk or what-have-you, but now the opposite sometimes happens. That tells me the situation is getting better in the regions. One year ago, it was absolute chaos there and now things are somewhat better and they can come here and work with us directly — formerly it was only through our middlemen.

The Leader: Do you do any manufacturing here?

Mr. Treger: No. All of our goods are produced in Western Europe and imported. For the time being, we’re not planning on starting production here, but the possibility is not excluded. We’ll have to start thinking seriously about this in two years’ time because we’re having a sales boom and have the capability to begin doing some production here. We would be able to reduce costs. There would be tax privileges and customs advantages.

There is a problem, though — we have to be very careful in planning this in order to attend to quality control. We have a very high quality standard at Beiersdorf. There is a quality-control certification in Russia and reviewers check the quality of the whole process — production, warehousing, transportation and so on — very carefully. In our facilities in Western Europe, it is no problem to reach this standard because our equipment is top-notch.

The Leader: What would be the cause of these quality problems?

Mr. Treger: The quality problems would be caused by the climate. Transportation of raw materials would be difficult, especially considering the quality of infrastructure in Russia. Transporting cosmetics in sub-zero conditions without any harm coming to them is not easy. Some things simply cannot be transported during the winter months. Western Europe is small relative to Russia and you can transport things quickly, and it has a good network of roads.

The Leader: How is doing business in Russia different from Germany?

Mr. Treger: Germany is a very steady market. Russia is just the opposite. Every month something changes. You have a huge field for development, which is a challenge.

From our point of view, though, the population here is not so very different from that in Western Europe. We have the same skin type, we have more or less the same cultural behavior and so on. People are very open to skincare and to cosmetics, as you can see every day.

The Leader: How did the August 1998 financial crisis affect business?

Mr. Treger: It was awful. All of our Russian clients were in very deep financial trouble and it cost us at least a year. In the middle of 1999 the situation began to get a little steadier and last year was a success. We are currently back at the level of 1998 and next year will give us more success. It will be a good success story — until the next crisis, at least.

The Leader: What is the status of the domestic cosmetics and skin-care industry?

Mr. Treger: They used the opportunity provided by the crisis to mount an attack against all importers and were very successful at doing this.

There are companies with big Western investments behind them that are quite successful in the market, but mostly at the lower price segment. There is some competition but it is not a danger for us; it is only a challenge.