Russia in focus - Ahlers develops at a high pace in this fast-growing market

Ahlers is a Belgian company but profiles itself as a regional specialist in and to/from the CIS region, including countries such as Russia, Kazakhstan, Uzbekistan, and Ukraine. The company offers logistics routes to market services especially for Western companies wishing to establish sales in these countries or develop further their distribution. Over 1000 local colleagues drive the success of a large warehousing network in the region. Today the company operates warehouses in Saint-Petersburg, Moscow, Chelyabinsk, and Novosibirsk and has on-site people in many more cities in the region.

How do you help companies to overcome challenges in this market?

"Importing goods into Russia is not easy. Transport to and from the region is much more complex than in Europe, as are the customs formalities. Moreover, only companies established in Russia can pay import duties, VAT and therefore act as Russian importers. However, due to the political situation, financial risks and bureaucracy in the region, many companies are reluctant to establish themselves there. More and more Russian customers and businesses want to buy imported goods, which is more convenient for them. Reconciling these two challenges of uncertainty in addition to a complex market and selling locally DDP with a warehousing solution, is exactly where Ahlers comes in and provides the solution to the challenges presented.

"By managing the overall logistics and administrative activities from Western companies, the customers can now fully focus on the actual sales in the region. Today, we are a so-called master importer for several companies, such as coffee roaster Lavazza. We take care of the import administration as well as warehousing activities and distribution. We are also responsible for the related value-added activities. For example, the so-called 'digital marking' obligation applies to many imported goods. Each package must contain a specific QR code with the new mandatory information. We take care of such matters as well."

More warehouse space. How has the strong growth of recent years in the region affected your activities?

"Especially the rise of e-commerce is giving the region an enormous boost. It is expected that e-commerce activities in Russia will triple in the coming years. There are two important reasons for this growth. Firstly, e-commerce was not mature in the region, so the growth margin is much greater. Secondly, the advantages of online shopping are much bigger than in the Western world, given the longer time distances you often have to travel to a physical shop and the work-home time distance can go up to 5 hours a day. For many people, therefore, e-commerce is a godsend."

"But if we check the square meters of warehouses in the Moscow and St. Petersburg region, we see that compared to the number of inhabitants it is still a lot lower than in Western Europe. Therefore, at the beginning of this year, we decided to invest EUR 13 million in the construction of an additional warehouse in St. Petersburg. With its 23,000 square meters, this warehouse will offer space for 33,000 pallets. These are in addition to the 55,000 pallet spaces already available. In addition, during a second phase doubling the latest warehouse expansion is already in motion. At the same time, we have signed a long-term lease of 10,000 square meters in Moscow. The demand for high-quality warehouse space in these regions is very high. Together with the additional warehouse space, we are equally driving rapid growth in the number of employees we employ."

Do you also automate warehouses to make the best use of the available metres?

"Certainly, in and around the cities, companies increasingly desire to fix long-term contracts. In those cases, we proactively look for opportunities to automate. If there is a short-term return on investment, the customer is usually informed. Then we talk about conveyors, for example. The local e-commerce players who have their warehouse are more inclined to go one step further in their automation.

But labor costs in the region are still too low to speak of a real automation wave. In time, however, we see this changing. For example, since the corona crisis, people from Central Asia are more restricted to entering Russia just to work. That will not change immediately. If the shortage of labor becomes acute, it will drive more companies towards automation."

Evolution towards Factory Logistics Has Ahlers' offer been adapted to the evolutions over the years?

"We need to respond to changing needs. For example, we now offer warehousing and distribution for e-commerce activities as an integrated service in major cities. We are also taking further steps in supply chain management in the region. In the CIS region, for example, there is increasing demand for on-site logistics. In this case, we take over all logistics activities at the factory or warehouse. We do this mainly for multinationals. For example, we recently signed a contract with cigarette manufacturer Philip Morris to take over the logistics activities of four factories: two in Russia, one in Kazakhstan and one in Ukraine. This means that the company no longer has to worry about the labor force and equipment associated with these activities. We also offer the necessary flexibility when they want to scale up or down, as well as taking in the lead in safety and the optimization process."

Your primary focus is on Western companies that want to do business in Russia. Can local players also come to you?

"Certainly. For example, we also work for Gazprom, one of the most important gas companies in Russia. But since we can offer even more added value to Western companies interested in exploring Russia, with its 144 million people market, they remain our main focus. About eighty per cent of our approximately 250 clients in the region are Western companies. These can be both large and small companies, as long as the aim is to build a long-term business in the region. But just to be clear: it is not because we are currently strongly focusing on growth in Russia, Ukraine, and Central Asia. that we are neglecting our forwarding activities in Belgium. The market here is also still growing, although it cannot be compared to the potential that the CIS region offers."