HVAC market of Krasnodar

DISTINCTIVE FEATURES OF ECONOMY AND CLIMATE OF THE REGION, WHICH INFLUENCE DEVELOPMENT OF HVAC MARKET

The Krasnodar region is the biggest region of the Southern Russia. It is situated between the Black Sea and the Sea of Azov on the one side and the republics of Northern Caucasus on the other. The population of the Krasnodar region is more than 5 million, about 700 thousand people live in the capital of the region city of Krasnodar.

The Krasnodar region has a temperate – continental climate (subtropical on the Black Sea cost to the South of Tuapse), average temperature of January is -5 C, average temperature of July is 25 C, annual average of precipitation is 400-600 mm.

Climate determines the structure of HVAC market of the region. In the Northern part of the region, the share of more complicated equipment, such as PAC, powerful split systems, central air-conditioning systems and ventilation systems, is relatively high. The more you go to the South, the higher is share of RAC, room splits and window air-conditioners. The specifics of the South of the region is that the market there is formed mainly by individual customers.

The Krasnodar region has a well-developed transportation structure. Main transportation lines, which connect the Center of Russia with eight Southern ports, pass through Krasnodar. The territory of the region is crossed by four main railroads and two state highways. There is an airport and a cargo river-port.

About one third of region's industrial potential is concentrated in the city of Krasnodar. There are enterprises of food, machine-building, metal-working, timber and woodworking industries, factories of light industry, huge enterprises of rower industry and industries of construction materials, chemistry, petrochemistry, microbiology etc.

Krasnodar city is an important scientific, educational and cultural center. There are 24 educational institutes in the city, among them are 4 state universities and 3 academies. The Chair of Refrigeration Equipment and Compressors of the Technological University prepares mechanical engineers for operating, installation and repair of refrigeration equipment, compressors, compressor plants, trunk gas-pipelines, and also specialists for maintenance of room refrigerators and modern air-conditioning and heating systems.

Krasnodar city is the main trade center and the biggest marketplace of the Southern Russia.

The Regional Administration pursues a policy directed to creation of a favorable investment climate. Due to it the Krasnodar region is ranked the 6-th in Russia upon the attracted investments. About 342 company with participation of foreign investors were registered in Krasnodar by the beginning of the previous year. Foreign investors took part in creation of the biggest enterprises of the region, among them are: the branch of ZAO "Moscow beer and beverage factory Ochakovo", OAO "Kubanskiy Guips – Knauf", OAO "Philip Morris – Kuban", OOO "Nestle – Kuban", OOO "Bonduel – Kuban", OOO "Cargill – Yug", OOO "Klaas", ZAO "Tetra-pack – Kuban".

According to "Rating of investment attractiveness of regions 2005/2006", the Krasnodar region is within ten leaders in the main nomination "For the least integral investment risk".

CONSTRUCTION ACTIVITY

The general growth of the economy of the Krasnodar region and its attractiveness from the investment point of view, have given an impact to the rapid development of the real estate market in the region. From January to September, 2006 organizations of all type of ownership constructed 1,5 million sq. meters of living square. Krasnodar city is within five cities of Russia which have General Plan of Development till 2025. Besides the mass construction within the city of Krasnodar, the cottage construction is planned in its suburbs. It would require the construction of water and heat supply systems, as well as air-conditioning of newly built houses.

The City Administration works on attracting investors to construction and reconstruction of public buildings and installations in the center of Krasnodar. More than 40 investors have already been selected, at least half of them already started their work. Reconstruction of the Krasnodar Regional Philharmonic Center and Musical Theatre is already completed. Reconstruction of the Krasnodar Regional Theatre of Drama, Historical and Archeological Museum and Art Gallery is under way.

Residential construction in the city increases annually by 20-23%. In almost all districts of Krasnodar, the construction of luxury and business-class living complexes is under way. It would surely provoke the increased demand for luxury HVAC systems. At the same time, buyers on the secondary real estate market prefer to purchase more economic splits and window air-conditioners. In general, the market of climate equipment of Krasnodar is assessed by its players as a hyper-competitive.

Construction of commercial real estate – trade centers, trade and entertainment centers, business centers, hypermarkets, auto centers and service centers – is also very active in Krasnodar. Recent years were opened some hypermarkets and multifunctional trade & entertainment centers: "Metro", "SBS", "City-Center", "Red Square", "Gorbushka", "Meridian", "Baucenter", "O'key". Since October, 2006, the multifunctional trade & entertainment center "City-Park" is under construction in the center of the city. The square of construction site is 9700 sq. meters. The unveiling of "City-Park" is planned for 2008. Besides it, there should be opened soon in Krasnodar hypermarkets "Ashan", "Leroi Merlen", the third stage of the multifunctional trade & entertainment center "Red Square", the multifunctional trade & entertainment center "Mega-Ikea". Different sources say, at least 8 hypermarkets will be opened in the city in 2007-2008.

TOURIST INDUSTRY

Growth of the tourist industry in the Krasnodar region reached about 150% in 2006. The biggest tourist potential have the towns of: Eysk, Anapa, Sochi, Gelengik, Tuapse, Adler and their suburbs. Since 2007 is planned to develop special tourist & recreation economic zones in the region. It means that enterprises who invest into the construction of tourist infrastructure in these zones, would have substantial tax remissions. According to different assessments, the investment influx within this project would be of about 200 million roubles. The additional incentive for development of the tourist and recreation zones in the Krasnodar region became participation of Sochi in the competition for playing host of the Olympic Games – 2014.

The most advanced technologies of air-conditioning, ventilation and heating are used in construction of the comfortable hotels, cultural, entertainment and sporting installations along the sea coast. It is caused by the plans to use them all the year round. As to construction of small private hotels, which is also under way, it means the installation of more cheap split systems.

In general, the volume of the HVAC market in the Krasnodar region remains big. At the same time, the quality requirements of the majority of customers are still not very high. This fact explains the success of not expensive brands and firms.

According to the market research done by the trade chain "Climate Control", the bulk of selling of air-conditioners to end-users moves now from the city of Krasnodar to adjacent so called stanitsas, towns with population up to 100 thousand, and to the Black Sea coast of the Krasnodar region. It accounts for more than 20% of total sells and determines high demand for window air-conditioners. The company says that 30% of its customers are ready to pay not more than 10-11 thousand roubles per unit. Questioning carried out by "Climate Control" allowed the company to forecast the growth by 30% of sales of the climate equipment in 2007 (price increase for air conditioners in March of this year, shortage of window air-conditioners and anti-damping policy of distributors were taken into consideration).

PLAYERS OF THE HVAC MARKET

The market of Krasnodar is very attractive for distributors of HVAC equipment in Russia. Unlike the Moscow one, at the Krasnodar market are practically no local importers and manufacturers of the climate equipment.

According to assessment by the market players, now more than 200 companies work at the Krasnodar HVAC market. These companies mainly are trade chains, non-specialized stores and some companies, who work only during high season. There are not more than 100 specialized companies at the market, about 20 of them are big companies with serious working experience at a local climate market. Among these companies are: "Arctica-K", "Atek", "Vertex-Service", "Voltry", "Promventilyatsiya", "Imperiya Climata", "Climate-Lux", "Climate-Stroy", "Comfort-Lux", "Kuban-Climate", "Rosspetsmontazh", "NST", "Sintez-Climate", "City-Climate", "Ensol", "Unika", "Fresh Air Rush".

They all have strong positions and good working ties at the corporative market, among their partners are "Daichi", "United Elements", "Arctica", "Euroclimate", "Climate-Prof", "Nimal", "Rusclimate" and others. These companies work with reliable equipment and have some determined position in HVAC business.

"Atek" is one of the oldest companies at the market. It positions itself as a company who works with industrial equipment, and offers full range of service – from design to commissioning. Among completed works are big industrial enterprises and commercial buildings.

Company "Vertex-Service" specializes in wholesale of air-conditioning systems. The company has a well-developed dealer network in the Krasnodar region. Among its clients are not only big corporative customers, but also many local climate companies.

Company "Kuban-Climate" works with expensive and mid-expensive brands. Its main customers are big construction organizations, which are engaged in construction of luxury and business-class living complexes.

Company "Climate-Lux" was created not so long ago. It stakes on the segment of high-quality equipment. According to its own assessment, the company already has leading position in selling equipment "Daikin", and is one of five leading companies of the Krasnodar city.

Company "Eco-Rost" works at the market of air-conditioning, heating and ventilation systems. It owns the biggest chain of specialized stores "Climate-Control". The chain has four own stores in the Krasnodar city and five franchising stores in other towns of the region – Anapa, Novorossiysk, Sochi, Primorsk-Akhtarsk and Timashevsk.

Last two years appeared new trend – the companies who used to specialize in heating systems only, started actively penetrating the adjacent segment of air-conditioning systems. There are at least 40 such companies, including chains of stores of heating equipment, in the city of Krasnodar only. At the same time, their share of total sales is rather small, not more than 7-8%. But in the nearest 2-3 years these "good heating companies" could catch strong position, if realize clever approach of complex engineering. They also would be able to force out some companies who specialize exclusively in air-conditioning systems.

In Krasnodar actively works the representation of "Daichi" – "Daichi-Yug". There are also opened representations and regional storehouses of companies "Climate-Prof", "United Elements", AUX, "Lissant", "Elite", "Ventrade", "Rosenberg", "VTS-Clima", "Euroclimate", "Termotrade", 'Vertex", "AYAK".

You can find a wide range of climate technique in chain stores "Eldorado", "Poisk", "Technosila", "M-video", "Atlas" and also in the local retail chain stores "Domostroy". There are specialized shops LG, Samsung, Panasonic in Krasnodar.

Assessing the activity of some chain stores, the market players say that they compete mainly with small climate companies. At the same time chain stores make problems for mid- and economic-class brands, as they offer climate equipment sometimes of unknown origin with knock-down price.

In accordance with the forecasts of climate companies, in the nearest future the climate market of the Krasnodar region would become more professional, the set of services would be enlarged and dealers networks would develop. More Moscow and St. Petersburg based companies are expected to open their representatives in the region. Choice of HVAC equipment would be enlarged in different segments and price groups because new Chinese products enter.

MAIN BRANDS OF CLIMATE EQUIPMENT

Players of the Krasnodar region HVAC market say they happened to deal with the following climate equipment brands: RAC – Akira, Balu, DAIKIN, De'Longhi, Fujitsu General, GREE, Hitachi, Jax, LG, Midea, Mitsubishi Electric, Mitsubishi Heavy, Panasonic, Polaris, Samsung; PAC – Airwell, Carrier, DAIKIN, Fujitsu General, GREE, Jax, McQuay, Midea, Mitsubishi Electric, Mitsubishi Heavy, Panasonic; multizonal systems – DAIKIN, Fujitsu General, GREE, Jax, Midea, Mitsubishi Electric, Mitsubishi Heavy, Sanyo; chillers and fan-coils – Airwell, Carrier, Clivet, DAIKIN, McQuay, Rover, Trane, Wesper, York; ventilation equipment – Rosenberg, Rover, Systemair, Ostberg, VTS-Clima, Wesper, Arktos, Veza, Lissant; heat curtains – Frico, Pyrox, Thermoscreen, Vektra, Teplomash, Tropik; air humidifiers – AIR-O-Swiss, Boneco, Scarlet, Vektra; air dehumidifiers – Calorex; air cleaners – AIR-O-Swiss, Boneco, DAIKIN, Jax; heated floors – Ceilhit, Devi, Heat-com, Nelson & EasyHeat, REHAU, Thermo, Teplolux. Expert assess, that around 30 brands are represented in the Krasnodar region HVAC market.

ADVERTISING EVENTS AND MARKETING

The biggest in Southern Russia specialized construction exhibition "Southern Architecture and Construction Forum" is held in Krasnodar city annually in March. The organizers of exhibition are Exhibition center "KrasnodarEXPO", Leipziger Messe International GmBH and ADG International Trade Fairs (Turkey). The exhibition has the following subdivisions: "Stroymarket", "Aquaterra", "Electroterra", "Windows. Doors. Facades. Roof". An international architecture festival "Days of Architecture" also is held within the exhibition. About 400-500 participants from Moscow, St. Petersburg, Rostov-na-Donu, Stavropol, Voronezh, Krasnodar city and Krasnodar region take part in the Forum.

Many companies from Krasnodar city take part in exhibitions, which are organized in Sochi. It dives them possibility to win contracts with big corporative customers.

There are some professional associations in construction business of Krasnodar: "Union of Builders of Kuban", the Krasnodar regional organization of the "Union of Architects of Russia", Chamber of Commerce of Krasnodar.

Manufacturers and suppliers of HVAC equipment regularly organize seminars for dealers on new equipment and its advantages. Recently were held the following seminars: "GREE GMV-II" ("Euroclimate-region"), "Multizonal systems of air-conditioning DVM (Samsung)", "Design of the systems of air-conditioning and ventilation with usage of equipment "Veza" (company "Ventcomplect"), "New equipment "Lessar" ("Climate-Prof"), "Up-to-date methods in air-conditioning and ventilation" (companies from Moscow, St. Petersburg and Krasnodar).

Seminars for customers and designers – are a rare thing in the region. One of a few companies who organizes professional trainings for installers and f servicemen is "Daichi-Yug". It also works actively with the design organizations of the region.

A number of big climate companies hold professional trainings for managers of their companies – partners within their all-Russia programs. These programs are aimed to improve the professional skills of salesmen. Among the programs are "School of managers of Daichi" (company "Daichi") and "Professional Contest of salesmen GREE" (company "Euroclimate").

DIFFICULTIES FOR HVAC BUSINESS IN THE REGION

The main problem the players of HVAC business of the Krasnodar region encounter is the lack of professionals in air-conditioning and ventilation. This problem is typical of the whole HVAC business in Russia. The problem is aggravated by continuous growth of the number of the climate companies. New companies are usually created by middle and top-level managers, who gained professional experience working in a big climate company. The market constantly splits, and it causes price damping from the part of both newly-created companies and firms-for-one-day. Damping there is not a strategy to promote some new equipment and service, but a way of life. This approach dominates the selling of both split systems and heavy technique.

The situation is aggravated by the special price policy of trading houses, which is called "season dumping", and also by the absence of the unified price policy of suppliers of some brands, who periodically exercise direct sales in the region.

At the same time, serious companies steadily improve their service, popularize the idea of buying complicated equipment from professional companies and try to solve the issue of civilized pricing. It yields: recent years customers started to change their orientation in favor of quality and expensive manufacturers and reliable professional installers.

Editors of the magazine " World of Climate" sincerely acknowledge help and assistance of the top executives of the Krasnodar based companies:

Madina Urusova, OOO "Daichi-Yug", Director:

Krasnodar has some specific features -center of the city is mainly private, sales of equipment have a clearly season character. Share of cheap technique is around 50% of the total volume of the market of the climate equipment.

Our company works with a wide dealer network of specialized climate companies. The main our achievements in the previous year are further expansion of our sales channels and increase of the share of our company at the market of central air conditioners. We believe that prospects of the Krasnodar's market are connected with development of the market of central air-conditioning systems and other complex systems of air-conditioning, and also with improvement of service.

In order to solve the main problem – lack of professionals – our company organize professional training of the staff of our dealers. After training we check the knowledge of trainees and give them certificates of qualification, which confirm that they successfully passed the course.

Anna Solovieva, Group of Companies "Vertex-Service", Director:

Since 1997 our company came a long way from small trade organization to big serious enterprise, which enjoy the confidence of its customers and has reputation of reliable business partner.

Our company started foreign economic activity in 2006. We are situated near the sea-port of Novorossiysk, it allowed us to shorten supply line from manufacturer to end-user and to organize direct delivery of equipment AUX – one of the biggest Chinese manufacturers of air-conditioners.

As a result of hard work in 2006, enterprises of our group of companies "Vertex-Service" and "Aerobus" gained the exclusive right to sell air-conditioners AUX in Russia.

Our company plans to expand its dealer network further and open specialized stores AUX.

Vladimir Milman, Krasnodar regional representation of ZAO "Firma Atek", Director:

Our company specializes on fulfillment of the whole range of work – from design, delivery and installation to commissioning. Exactly this way we carried out serious climate projects at the plants "Nestle-Kuban" (Timashevsk), "Imperial Tobacco" (Volgograd), "Saturn" (Krasnodar).

Fedor Kulaguin, OOO "Arctica-K", General Director:

Krasnodar region becomes one of the most developed regions of Russia. Recent years the whole region has become a huge construction site. Lots of different buildings and installations grow like mushrooms. HVAC companies grow along with these construction objects. In the city of Krasnodar only there are more than 200 climate companies. Our company is the leading dealer of GREE in the region. We have very good position in the market because of our nine-year experience of work in the industry. We offer to our customers a full set of quality service, and they are satisfied with it.

Vitaliy Kovtun, "Eco-Rost", Marketing Director:

The strategic directions of our activity are the work with dealers and franchising. To our franchising partners we offer exclusive terms of co-operation, corporate style of sales area and design of facades, wide and permanently renewing set of product. We don't like price dumping, we believe that every one should keep to recommended by manufacturer price and have profitability.

Our company steadily put into practice organizational and economic changes in all its fields of activity, such as trade, marketing, finances, foreign economic activity. It allowed us create and successfully position in the market a competitive corporate brand.

Vadim Pavluk, "Group of companies NST", General Director:

Krasnodar is a nice city, it has some unique picturesque image. Nowadays the intensive reconstruction of the city is under way. It includes the reconstruction of its ancient center. The main distinguishing feature of the Krasnodar region is its clearly expressed decentralization. The distance between Krasnodar city and many of objects, where we work, is some hundred kilometers.

The previous year our company fulfilled some serious contracts and commissioned two swimming pools, three offices of banks, hotel, and many minor residential and commercial objects which are also very important for us.

Our approach to design, installation and maintenance is the following: we try to understand and take into consideration all factors and specific features of the customer's object, strictly follow technological process, be creative in solving engineering issues. Our first priority is to satisfy all interests of the customer.

Valeriy Lebedev, "Dorogaya zvezda", General Director:

The previous year our company consolidated its position in the field of central air-conditioning. We go on expanding our position in the field of industrial ventilation, we purchased new equipment for manufacturing air-ducts and shaped components. We develop our service center and increase the number of our employees there. It allows us to enlarge possibility of our company in maintenance and repair of the climate equipment.

Albert Karyakin, OOO "Kuban-Climate", Technical Director:

Nowadays in Krasnodar actively develops construction of residential buildings as well as different commercial and entertainment complexes. Naturally, each object should have sane and comfortable climate inside. "Kuban-Climate" can carry out all types of work, connected with air-conditioning and ventilation, including design, delivery, installation and maintenance of industrial and room equipment. Engineers, designers and installers of our company successfully passed professional training in specialized training centers and have corresponding certificates.

Dmitriy Dobrovolskiy, OOO "Clumate Lux", General Director:

Our company is a leading seller of equipment DAIKIN. It works at the segment of quality equipment and focuses on comfortable room air-conditioning. Main customers of our company are trade, trade and entertainment, business centers, and also private persons. Some changes of the Krasnodar market in favor of expensive equipment is noticeable nowadays. I found that steady improvement of quality of service is the most prospective. We also plan to open a new store to increase selling.

Alexey Podshibiyakin, OOO "Tekhnologii komforta", Director:

The specific feature of the market of our region is that there are no direct season changes. Construction is under way all year round because of the unique climate of the region.

Within a short period of time company OOO "Tekhnologii komforta" demonstrated its professional approach to construction field and proved itself to be a reliable partner. Last year our company could significantly increase the volume of works and sales of equipment upon big contracts in the recreation area of the region.

With the growth of well-being of population is connected a trend of increasing of sales of more expensive climate equipment with better quality. Private customers buy split systems, big corporative customers trend to central air-conditioning equipment – multizonal systems, systems chiller-fan-coil, etc.

Serguey Prisivko, OOO "Climate-Story", General Director:

Our company was established in the beginning of 2003. It specializes in creation of effective integrated engineering systems for industrial, public, commercial, residential and other buildings.

Last year our company completed some big projects, among them are systems for ventilation and air-conditioning of the administrative complex, auto body-repair shop, clinic of children infectious diseases, recreation center and other objects. Under way is installation of ventilation and air-conditioning system at the following objects: 15-floor administrative building, owned by "Transneft"; museum of merchants family of Bogasurkov; some recreation centers in the resort zone of the region.

The main problems for business in the Krasnodar region, we believe, are the lack of professionals and absence of coordinated retail price level.

Serguey Drandrov, RG "Ideal-Media", General Director:

No doubt, the South of Russia is the most capacious region for room air-conditioners. By July of the previous year there was reached capacity of 36,3% (100% is the whole residential sector of the city) in the city of Krasnodar. Potential capacity of the market was on the level of 27,4%. It is typical of the citizens to by the second and the third air-conditioner for their home, in addition to one installed earlier. This group makes about 9,1% of total population of the city, that is not common thing for Northern regions. To compare, in Moscow such a group makes less than 1,5%. Despite high interest of the citizens of the Krasnodar region to the climate equipment, customers there don't know a lot about represented brands of equipment, and that is typical of the whole Russia.

Overwhelming majority of the Krasnodar city citizens consider it acceptable if the price of room air-conditioner is $400-600. For comparison, acceptable price in Moscow, Siberia and North-West of Russia is $800-1000.

These specific features of customers' requirements in the region determined the success of relatively unknown OEM-brands in the Krasnodar region, first of all in private sector.

Special thanks to information project HVACNEWS.RU for active participation in collection and preparation of information.