Russian juice firm wins US listing

By BBC News Online's Alexander Koliandre

"Not just oil" is Russia's mantra today.

The government and investors on the rallying Moscow market insist that although oil is still a cornerstone of the country's economy, other sectors are getting more and more important.

No wonder that the first ever listing on the New York Stock Exchange of a non-oil and non-telecom Russian company was regarded in Moscow as an extremely symbolic.

"It highlights the return of Russia," said Kim Iskyan, an analyst at Renaissance Capital.

Peculiar company

A peculiar creature with big pointed ears is the corporate mascot of Russia's dairy and juice company, itself lumbered with the no less strange name Wimm-Bill-Dann (WBD).

For WBD, the listing is a sign of success

The company is only the fifth Russian firm listed on the NYSE.

Of the other four, three are telecoms firms, and one is an oil company.

WBD controls one third of the country's dairy and juice markets, with customers including the president's office, the parliament and Aeroflot flights.

"When we set up the company in 1992, we had five employees and a small loan," said chairman David Iakobashvili.

"Today, we employ almost 11,000 people and are a leading producer of juices and dairy products in Russia."

Success story

Like many other Russian companies in the early 1990s, WBD tried to produce locally what looked and tasted like an imported food.

Russian stocks listed on the NYSE

Vimpelcom (telecom)
15 Nov 1996

Rostelecom (telecom)
17 Feb 1998

Tatneft (oil)
30 March 1998

MTS (telecom)
30 June 2000

Wimm-Bill-Dann (food)
8 Feb 2002

Russian consumers then still had memories of a poor quality and scarcity of Soviet goods, and preferred anything foreign.

WBD squeezed into the market with slightly cheaper products, which were, unlike those produced by its Soviet predecessors, nicely packed, with Latin letters, even on the producer's logo.

Ironically, the company's fortunes were boosted by the sharp devaluation of roubles in 1998, which prompted consumers to abandon expensive imported goods.

The company now owns a dozen of factories in the country and exports its juices and dairies mainly to the former Soviet republics.

It also exports to some Western countries with strong Russian communities.

Buying into a growing market

WBD shares are expected to be relatively successful, although the company faces a strong competition from Western companies with subsidiaries in Russia.

The company's J7 trademark is omnipresent

But analysts are upbeat about the company's sales.

The listing is also thought likely to attract fresh attention to the booming Russian stock market.

The country is entering its fourth year of growth, after 1998's devastating collapse, the Moscow bourse is performing better than virtually any other in the world.

But foreign investors are proving shy to enter the murky market, which has punished them so hard three years ago.

Importance of being honest

"The development is very positive as it will encourage good sentiment for other Russian companies," said Nikolai Lukashevich, equity analyst at Raiffeisenbank Austria.

But what is probably even more important, the listing may persuade Russian companies to come clean about potentially murky issues which might raise corporate governance questions.

Just several days ahead of the listing, WBD said that one its executives had a criminal record, an admission which did not seem to dampen demand for shares.

Only good news?

But amid all the bells and whistles of Russia's comeback, the economy is still dependent mostly on oil, gas and metal exports.

Abandoned imported goods helped the company

Oil companies represent more than two thirds of the stock market, which still stands far below 1997 levels.

Economic growth, although solid, is slowing, while inflation has risen above government targets.

And corporate concerns still remain among Russian companies unsupported by the levels of consumer demand enjoyed in the US or UK.

WBD's listing might be seen as mirroring Russia's recovery, but the reflection might be brighter than the original.