On the way to a world-class furniture company

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Valentin Zverev, 57, has made his way up in furniture company Shatura from craftsman to general director. He is the president of the Russian Association of Furniture and Timber Processing Companies, a member of the European Furniture Association’s board of directors and a deputy in the Moscow Oblast Duma. In 2003, he was recognized as best manager in Russia in the furniture sector and was a laureate in the Entrepreneur of the Year competition. The company, founded in 1961, is one of Russia’s largest furniture producers and sellers today with annual sales of $120 million, a market share of around 12 percent. It sells its products through a national network of 300 franchise stores.

On 2003

On the one hand, we have not achieved anywhere near everything we wanted. 2003 was not an easy year for Shatura. At around $120 million, our sales were up almost 20 percent on the figure for 2002, but were still lower than our planned target. We had our lowest profits in many years, partly because of large investment expenses such as developing a new brand and display stores, and television advertising aimed at modifying how our brand is perceived.

At the same time, 2003 was a very important year for the company. It was a year of transition and far-reaching change. Previously, everyone saw Shatura as the leading Russian furniture manufacturer, but now Shatura has become the leading furniture retail brand in Russia. We have invested a lot in developing production capacity. We acquired the European Furniture Company (Balakovo, Saratov Oblast), Russia’s largest and most modern furniture plant. We spent a lot of money, time and effort on building Russia’s most modern chipboard production facility. We plan to open this facility at the beginning of the summer and it will enable us to cover all of our basic material needs for furniture production. We also did a lot of work on improving our logistics system — it took more than $6 million to build one centralized warehouse. Now we are on the way to becoming a world-class company. We have brought independent experts with a world reputation onto our board of directors and we are moving over to international financial reporting standards.

When we were planning for 2003, we called it "the year of preparing for growth." This year then is the year of growth.

On personal and professional goals

I have been working at this company for 30 years now. My whole life and that of my family is connected to the company. I do not really have any personal goals that are not also connected to Shatura.

As for my professional goals, they have definitely been achieved. Two years ago, we began restructuring the company. This is always a difficult process as it implies personnel changes, which is never easy. But in the end you have to drive it home to people that this is being done for their sake, so that they, their children and grandchildren will have jobs. In 2003, we completed this work, created a new organization that meets today’s demands, carried out all the personnel changes we needed to make and, most importantly, convinced and trained people to work in this new organization and according to new rules. The hard part is behind us now.

On work

I like the work itself. I like the knowledge that this whole complex organization that is the Shatura furniture company functions as a single whole and produces good work; the fact that something is always happening and that new ideas and projects are always emerging. I like the process of development itself. I also like knowing, when something large is being undertaken, that you are a part of it and that a significant part depends on you as to whether it will succeed or not. Now, more than 40 years after the company was founded, we have finally resolved the issue of producing high-quality chipboard and have built the most modern plant in Russia. This whole plant cost us almost $50 million but we have finally resolved a problem that was an obstacle for more than a generation of furniture manufacturers in Russia, and believe me, it feels good to have achieved this.

There are also things I do not like about my work, when we have to deal with issues that would not arise if we lived in a normal rule of law environment. This includes attempts to take control of the company, through the use of state organizations, and open abuse of power by officials and the desire to get their palms greased. Yes, we have learned to fight and to win in such situations, but this does not mean that we like it. Our company runs an honest business, we pay all our taxes, develop social programs and are actively involved in charity. Why do some state officials not only not help but often actively hinder our work? We are the ones feeding them after all, their wages are paid out of our taxes. Why should we waste time, effort and company money fighting this? We could put this time to much better use, do much more and bring more benefit to consumers, our workers and society.

On taxation and customs rules

Many questions must still be resolved and this is not happening as quickly as we would like. There is still the issue of VAT rebates, for example, a question that was important for us last year when we imported millions of dollars of foreign equipment. Overall, though, I think the state is headed in the right direction by defending Russian manufacturers. Last year, for example, customs duties on imported cheap furniture were raised, despite all the fuss about breaking the rules of free competition. But free competition today looks like a race in which you have a professional sprinter wearing Adidas running shoes against a barefoot kid. Who would win such a race? The Russian furniture industry has grown a lot over the last decade and it has every chance of being able to eventually compete with Western manufacturers if it is given a little more time to develop.

On competition

A natural saturation process is now taking place on the market and this means that competition is growing. Shatura is in a somewhat privileged situation given that it has Russia’s only national distribution network. I do not want to offend anyone, but we do not see any serious competition, though there are some very interesting and dynamic Russian companies and we see them as potential competitors. Soon, however, we will see the arrival of more qualified foreign competitors. They have access to financing and know how to manage and lower costs along the entire chain. This is why we must become a world-class company.

On plans

It is very difficult to make forecasts and predictions. What I can say, however, is that we plan this year to sell 30 percent more furniture than last year.

We want to make Shatura an international company. Everything in the company, its work, structure and skills will be developed to meet the best world standards. We will be tough on ourselves because the market is tough on everyone. As for the details, we plan to reach a sales target of around $400 million a year in four years. We will concentrate on developing the areas we have already been working on — continuing to improve production, maintaining and strengthening our positions in the furniture distribution sector, and investing in brand development. We will use different finance sources, including external financing, to achieve these goals. We plan to attract a financial investor or investors from among large Russian or foreign financial institutions, and we eventually will look into entering the stock market. In short, we have no shortage of work.