Russia

Selling ice cream in Siberia – case Inmarko

From a local producer to Russia’s leading ice cream brand

Inmarko was founded by three young graduates of Novosibirsk University in 1991, when the Russian consumer market was practically empty and people started to substitute the old closed-market system by importing goods from abroad and selling them locally. Inmarko’s ice cream was brought from Denmark and, in the beginning, ice cream was distributed in the street in handmade wooden boxes by “babushkas”; Russian “grandmothers.” A few years later, in early 1997, Inmarko started to produce ice cream in a newly-built facility in Novosibirsk and in 1998 it acquired a much larger factory in Omsk.

When Inmarko was introduced to CapMan Russia in 2003, it was already the largest producer of ice cream by volume (21,400 tons) in Russia. Inmarko was the first Siberian company that the CapMan Russia team had worked with. Convinced by its entrepreneurial management team, CapMan Russia invested in Inmarko together with EBRD in 2003, acquiring a 29% stake in the company with a target of making Inmarko the undisputed leader of the Russian ice cream market. The new investors saw a lot of value creation potential in Inmarko as there were significant expansion and consolidation opportunities in the fragmented Ice cream market.

CapMan Russia saw a lot of value creation potential in Inmarko as there were significant expansion and consolidation opportunities in the fragmented Ice cream market.

The fragmented ice cream market offered many growth opportunities

The Russian ice cream market had been steadily outperforming its European peers, growing at 10.5% annually in 2001–2006, and its estimated value for 2006 was $1.4 billion. At the time of the investment in 2003, the market was already stagnating in terms of volume, but there was a lot of potential in increasing Inmarko’s market share. Altogether, there were approximately 300 producers in the market, most of them manufacturing low-quality, unbranded ice cream. The market was very fragmented: the ten biggest players controlled only 30% of the market and international players, such as Unilever, still remained absent.

Ice cream in Russia was considered a “substitute for lunch” – people could eat it instead of a warm meal. A large territory and fragmented retail market resulted in complex distribution, logistics and storage requirements. In the low-margin ice cream market, Inmarko’s secret was a highly efficient distribution network of small integrated shops combined with innovative R&D – new types of ice cream were introduced all the time. Ice cream prices were also rising.

Inmarko’s secret was a highly efficient distribution network of small integrated shops combined with innovative R&D – new types of ice cream were introduced all the time. 

Inmarko during CapMan’s ownership:

After CapMan joined in 2003, the first target was to expand Inmarko’s presence in the European part of Russia. Thanks to the company’s innovative ice cream concept and efficient distribution network of small integrated shops, it became a national player in four years and soon had the largest distribution network among its competitors. In addition, Inmarko’s production was focused on branded high-margin products. Between 2003 and 2006, the company invested approximately $58 million in production, warehouse facilities, transport and point of sale equipment, allowing the company to produce innovative, high-quality ice cream on a par with the global ice cream producers.

Furthermore, the team supported Inmarko in institutionalising its operations – they restructured the company, introduced reporting and accounting standards and, at the same time, improved the company’s transparency, which was very important considering Inmarko’s exit plan to an international player. In addition, new highly-skilled experts were recruited to Inmarko’s management team.

Inmarko caught the interest of multinational companies

In April 2008, Unilever, the world’s largest ice cream manufacturer, acquired 100% of Inmarko. As a result, Unilever became the market leader in ice cream in Russia with 500 retail kiosks and 48,000 ice cream chests installed in food stores. Unilever kept the company’s original brand name, and so Inmarko is one of the six leading players that control 70% of Russia’s ice cream market today.  

Main goals achieved:

  • Expansion to European part of Russia
  • 11% market share in Russia
  • Sales grew 4.5 times in five years

Investment: 2003

Exit: 2008