Expo-Trade keeps Russia warm with Australian sheepskins

Russia is famous for its long and bitterly cold winters. But now people in this rapidly emerging economic powerhouse are staying just a little bit warmer thanks to the boldness and persistence of a remarkable Australian exporter.

Port Adelaide-based company Expo-Trade has carved out a significant niche for Australian sheepskins in the Russian market. It currently exports around 40–50 containers full of lambskin and sheepskin material to Russia each month — and the aim is to double this volume in the next few years.

"With a population in excess of 140 million, rising personal incomes and massive expansion in consumer activity, Russia is a ripe market for Australian exporters," said Expo-Trade Managing Director Larisa Vakulina. "Expo-Trade has been doing great business in Russia for many years and the potential for future expansion is virtually unlimited. We are always looking for new opportunities to bring outstanding Australian agricultural products into this market."

Founded in 1999 by Vakulina, a Russian migrant, Expo-Trade initially focused on exporting Australian lamb, mutton and beef offal. After convincing reluctant suppliers that it was safe to do business in Russia, the company soon established itself as one of Australia's most successful new agricultural exporters. In 2003, Business Review Weekly magazine named Expo-Trade as the third-fastest growing company in Australia.

Over time, Expo-Trade diversified into other food areas, including seafood, wine, cheese and dairy products. Fresh and chilled meats remain core product lines, but the company's business really took off in mid-2002 following a chance approach from a Russian tannery seeking high-quality sheepskin from Australia.

"It took a lot of hard work, but after a couple of years Expo-Trade's name was starting to become known in Russian business circles," Vakulina recalled. "We are identified with quality service and quality Australian products. Expo-Trade is considered as a solid and serious partner in both Russia and Australia."

When the Russian tannery contacted Expo-Trade, the company used its agricultural contacts to identify high-volume suppliers of lambskins, sheepskins and hides. Yet the initial reaction fell somewhat short of expectations, as many suppliers worried about doing business with Russia.

"Russia was not a traditional market for ovine skins, so at the start there were a lot of doubts," said Expo-Trade General Manager Greg Dyner. "Many of the suppliers had outdated perceptions about the market and it took a lot of persistence by Expo-Trade to convince them that the opportunity was worth pursuing."

Fortunately, Expo-Trade's determination helped convince the suppliers to give it a go. To the suppliers' surprise, the first 'test' order was for 50 containers worth of sheepskins spread over two months. The buyers were delighted with the quality of the merchandise and Expo-Trade is now shipping up to 40 containers per month.

Most of these skins are bought by tanneries that use them to manufacture warm women's and children garments for the cold Russian winter. Sheepskin garments are very popular in the Siberian part of Russia but they are also gaining popularity in western regions, including ultra-chic Moscow and St Petersburg.

"The garments are not just fashionable — they are a necessity for winter months," Dyner said. "We are also exporting smaller quantities of high-grade skins for floor rugs, car-seat covers, footwear linings and medical applications. The Russian market for Australian hides and skins is growing and offers a lot of potential."

Another challenge the South Australian company needed to overcome related to veterinary clearances. At the time Expo-Trade started exporting skins to Russia there was no official veterinary agreement on skins between Russia and Australia. This forced the company to undertake significant commercial risks.

"It was a huge risk to export the skins without knowing if the containers would be cleared through customs by the Russian veterinary authorities — which potentially could have meant we had to bring them back to Australia," Vakulina explained. "However, Expo-Trade decided to go ahead and export the skins, we succeeded and now we are reaping the benefits of that risky decision."

Growing exports to Russia encouraged Expo-Trade to open a representative office in St Petersburg, which is headed by Vakulina's husband Andrei. The company now has six employees in Adelaide and five in Russia. The local team coordinates sales activities in Russia, ensuring rapid response to new business opportunities.

Vakulina said Austrade's Moscow office has provided valuable support to Expo-Trade for many years. "We really value Austrade's experience and assistance," she said. "We work very closely with the Austrade team in Russia and regularly discuss our current and future Russian projects for feedback and advice."

Austrade was particularly supportive of Expo-Trade's push to establish a formal veterinary certification process for Australian hides and skins. Austrade assisted Expo-Trade in initiating negotiations with both Russian and Australian veterinary authorities. This hard work was rewarded in 2005 with an inter-governmental agreement on certificates that will significantly speed up customs clearance and reduce business risks.

"Expo-Trade's recipe for success in any market is very simple: you must be persistent in your actions and committed to the market," said Vakulina. "This approach has helped us grow at 50—100 per cent every year since we started and we will continue in the same way. Russia is a major field of opportunity for Australian exporters who are persistent and committed.

"Another very important factor in Expo-Trade's success is employing the right people. Our team is multilingual and comes from many different backgrounds. The proactive thinking of our employees is what allowed us to go global so quickly — without that, it would be impossible."