Text: Tatiana Katasonova\r\nAlexander is the CEO of Vettorgpartner company located in Minsk. It\u2019s one of the leading pet suppliers in the Republic of Belarus. The conversation with him was extremely insightful, we talked about the current situation of the Belarusian pet market and its perspectives, the influence of politics on business, the reasons of lack of strong online players, and the coronavirus impact on reduction of the "grey import" in Belarus.\r\n\r\n\u2013 Alexander, what is the current Vettorgpartner\u2019s position in the pet industry in your country?\r\n\u2013 My country is small, with a population of only about 10 million. And unfortunately, there is no official pet market statistics in Belarus. I\u2019ll tell you how we estimate the market.\r\n\r\nIn our family business, I manage a wholesale company, and my brother manages one of the leading retail chains in Belarus, Doctor Vet. Literally all market players are familiar with each other. Major players, and we are among them, share their sales analytics with each other.\r\n\r\nAccording to the latest data, Vettorgpartner ranks 3rd\u20134th place in terms of sales in Belarus. I would like to emphasize that we are talking about a pet specialty sales channel, including e-commerce. Information about grocery retail is not available.\r\n\r\n\u2013 Alexander, we all know Belarusian leaders\u2019 attitude of to the spread of coronavirus. There was no lockdown, retailers were open, but meanwhile the pandemic could not but affect consumer demand. What was the effect on sales on the pet market, and how did customer behavior change?\r\n\u2013 Our government has chosen its own way to deal with the situation. Many people compared it to the Swedish one, but it is purely Belarusian \u2013 a complete denial of the COVID-19 existence and all the problems it had caused. But people behaved more responsible than the country leaders: they visit restaurants, public places, shopping centers less frequently. The drop in sales in the shopping malls, where we have our pet stores, was about 30%. We expected that some customers would prefer small pet stores near home, but this did not happen either, and the drop in sales there was even more significant, about 35\u201340%.\r\n\r\n\u2013 How do you explain it?\r\n\u2013 Customers were afraid to visit small stores and veterinary offices, where it is impossible to keep social distance. People thought it was dangerous. In this situation, the society itself initiated changes. For example, the government was not going to implement online schooling, but more than half of parents simply stopped allowing their children to go to school. And the authorities were forced to switch to distant learning in the last half-term of the school year. It was a decision of society, of parents.\r\n\r\n\u2013 Do you have such a high level of public awareness and influence on the system?\r\n\u2013 We have a clear separation \u2013 there is a state and a government on the one side, and there is a society on his own on the other. The awareness of people who self-restricted themselves in contacts and movements during the pandemic had a strong impact on retail sales. But at the same time, online sales were growing, but not as significantly as in Russia.\r\n\r\nMarch-April is usually a high season for insecticidal medicines. Store assistants always remind customers to buy necessary protection against fleas and ticks. But this year the traffic in the stores was extremely low, and online sales of these medicaments are illegal. For this reason, this category sales missed its usual spring boost and were at an average level.\r\n\r\nThe summer was stable, without any curves in sales. In the beginning of autumn the major market players sales were growing by about 5\u201310% compared to 2019. It was a surprise, and I think the reason of that was simple. Our economy was still stable and the National Bank kept the exchange rate on the same level, but people started worrying about potential further economic upheaval. To prepare to any escalation, they are used to stockpile products, including pet supplies. The devaluation of the national currency happened immediately after the presidential elections, and Belarusian people withdrew more than a billion dollars from banks in August and probably spent it on stockpiling goods.\r\n\r\nIn September and October, almost all major pet retailers carried out "Black Fridays" and other promotions with discounts up to 40%. People reacted to this, and this is probably the reason why sales increased so much. Pet business is fighting its best to survive. Small stores are closing, some players are trying to sell their business, but the leading Belarusian pet retail chains: Doctor Vet, ZOObazar and Zoomarket are trying to benefit from the situation and open new stores. And not even in Minsk, but in the regions of the country. Therefore, customers are just redistributed in retail.\r\n\r\n\u2013 What\u2019s the situation with veterinary clinics? Do they still have visitors and sales?\r\n\u2013 Small veterinary clinics faced a footfall and consequently drop in sales. Large veterinary clinics experienced a good sales growth throughout the spring. Probably, when people stopped going to theaters, cinemas and restaurants they switched their attention to their pets\u2019 health. Maybe the stress of self-isolation also affected the dogs and cats, and they had health problems. Perhaps there are other reasons that we do not fully aware of, but we have an effect \u2013 the leading clinics have had a significant increase, as can be seen as well from the purchase of vaccines this year.\r\n\r\n\u2013 According to you the pet market in Belarus didn\u2019t really suffer any negative effects of the pandemic. Have you managed to reach your this year's objective, and how do you evaluate the future of your business?\r\n\u2013 Our wholesale company plans to grow by at least 25% this year. And so far, at the end of September, we are on the right track. But key customers, whose chains consist of 50 or more stores, are now facing serious problems. A drop of 25\u201330% is significant for them, and they are coping by agreements of rent reduction, by cutting other costs, and we as suppliers try to alleviate conditions for them, i.e. payment delays or rebates. All clients are still alive, and the overdue receivables in our company today is record low, because business in Belarus, even at such a critical time, is quite reliable in terms of obligations.\r\n\r\nUsually our sales "grew" due to inflation: sales values "increase" and helped us demonstrate financial well-being and business growth to banks \u2013 this is important. But sales volumes remained at the same level or even went slightly down. So, with official 10% increase in value and 15% inflation in Belarus, we understand that this is more of a fall than an increase.\r\n\r\nBut, so far the value of Belarusian pet market is growing 10% a year. Belarus lags behind Russia, Russia lags behind Europe, but our market is still very capacious, it is developing, the demand for pet products is growing, because more and more pet owners want to care about their pets better and in a more civilized way. There is still enough space for all players.\r\n\r\nThe number of pets has also increased, as evidenced by statistics of new clients in veterinary clinics. Breeders did not stop their activities during the pandemic period, and almost all of new pets remained in Belarus due to restrictions and were distributed to new owners here.\r\n\r\nToday there are about 300\u2013400 thousand dogs and 400\u2013500 thousand cats in Belarus. There is no official statistics, but I personally estimate that half of all pet owners visit veterinary clinics and pet stores and buy industrial food for their pets.\r\n\r\nHowever, the issue is not the quantity.\r\n\r\nFor many years, our sales were driven by suppliers\u2019 plans. For example, one of the international pet food market leaders estimated the planned volume of sales. Then these tasks went down from the manufacturer to the distributor and moved to the leading retail chains and other clients.\r\n\r\nThe key point was how much products we need to buy from the supplier, and then sell to our clients in order to maintain the terms of contracts or get something extra \u00a0for selling more than planned.\r\n\r\nWith this approach it is the supplier who benefits, not a distributor or a retailer. And in the end the company or a retailer which will change this and will switch to planning according its own interest and capacity, and not under pressure from major suppliers, will become a real market leader.\r\n\r\n\u2013 Wow, that\u2019s an insight! Any other effects of the pandemic on the market development?\r\n\u2013 The Belarusian pet market is not as big as the Russian one, but the problem of "grey" import-export affects both. Major suppliers set different prices for two countries connected by a common customs space. At the same time, it is quite easy to move goods across the border. If the incoming prices for some product are lower in Belarus, the product can go to Russia, and vice versa.\r\n\r\nThe coronavirus slowed down the "grey" import from Russia, and this allowed the Belarusian market to grow. The main problem is that official distributors lose sales and money that they could have invested in market development, for example, in product marketing. And take, for example, veterinary products that thus get from Russia to Belarus, they do not pass the necessary registration, so they will be sold only for cash. Well, most often such products are purchased by smaller retailers who do not have a license to sell veterinary products at all. Then there is an issue of unfair competition and tax evasion. Unfortunately, it is easier for regulatory authorities to issue a fine for violation to those who work under a license than to catch " black marketeers".\r\n\r\nMany Russian companies also encounter "grey" imports from Belarus. First of all, these are products of leading international pet food companies. Unfortunately, the price difference in this sector between the Republic of Belarus and Russia is significant. And the three leading pet retail chains in Belarus, which account for 30\u201335% of retail sales in the country, constantly apply to representatives of world multinational brands to raise purchase prices in Belarus to the level of those in \u00a0Russia. That would solve the problem with the availability of goods for retailers, which is now an issue due to the fact that smaller players sell great volumes from Belarus to Russia.\r\n\r\nThe other problem is that those smaller online stores, pet stores and retail \u2018chains\u2019 of 2\u20133 stores get the same purchase prices from the suppliers as major players do. Meanwhile, they do not have to merchandise, present, to have full range \u2013 all that a supplier usually requires from a large retailer. And it is much more difficult to maintain merchandising, to present the full range and meet the supplier's standards in 50 stores than in two small stores, the owner of which sends three full pallets of food a week to Russia.\r\n\r\n\u2013 I thought that prices in Belarus are lower because you have fewer surcharges: customs duties, taxes, etc., and not because of the purchase price. Isn't it so?\r\n\u2013 We are in the same economic area with Russia, and we have the same customs duty, the same VAT. The only difference in VAT on veterinary products and diets is 10% in Russia and 20% in Russia. With selling over a cash register and paying VAT, with the same purchase price and the same distributor's margin, veterinary products in Russia will be 10% cheaper. The main problem with "grey" imports is different cost prices from the manufacturer. The other unacceptable case is when distributors do not fulfill sales plans they \u2018wholesale\u2019 products to neighboring territories.\r\n\r\nWestern companies perceive the Russian Federation and the Republic of Belarus as different countries and consider them to be two independent markets, so the pricing for these markets is different. However, they do not take into account that we have a single customs zone.\r\n\r\nThere is only one way to solve the problem of "grey" import: set the same purchase prices for mass pet food in both countries, and fix at least comparable prices for licensed veterinary products in both markets.\r\n\r\n\u2013 What is the current situation with e-com in Belarus?\r\n\u2013 As the pet market in general, Belarus lags behind Russia in the development of online sales. The country's leading Zoomarket retail chain launched its online store just last year and is now promoting it. According to our observations, some of their offline customers went online. Numbers indicate that with the opening of an online store, they did not get a sharp increase in sales. Major chains Doctor Vet and ZOObazar launched online stores this year, but so far, no serious results are achieved.\r\n\r\nFor a long time, the leader of e-commerce in Belarus was Garfield online store. The owners also opened offline retail stores \u2013 now there are two of them left. All this suggests that those who are doing good online do not understand how offline works, and vice versa. So far, there are no multichannel players in the Belarusian pet market.\r\n\r\nBelarus does not have its own marketplaces, such as Ozon in Russia. There are online supermarkets that sell pet products as well as FMCG and they have an increase in pet products sales. But I don\u2019t think that these supermarkets will soon become monsters that will crush the pure pet market players.\r\n\r\nAliExpress has not yet reached Belarus. Russian Lamoda, Wildberries and Ozon operate on the Belarusian market, but the sales are rather modest. There are no players similar to the Russian petshop.ru. In Belarus, suppliers and players try to keep the market price fair for everyone, so none aggressive company that quickly captures a serious market share has never appeared.\r\n\r\n\u2013 How has the current political situation in Belarus affected the attitude to pets and customers\u2019 priorities?\r\n\u2013 It's hard to say yet, but here's an interesting observation: sales of pet supplies over the weekend dropped significantly off and online. No deliveries on Sundays. All the Belorussian people are either at rallies, or this is the result of constant disconnections of mobile communications and the internet in big cities, and particular in Minsk. Nothing related to renting and ordering via internet, like car sharing, food deliveries, works on Sunday.\r\n\r\nThere is no clear understanding of when and how this will end, but we hope for positive changes in our country within a year.