The Russian giant

Under new management since 2003, Ostashkov have developed into a tannery incorporating all the latest technology, a professional management system and a positive and international outlook. Russian entrepreneur Leonid Parfenov acquired a share of the tannery in 2001 and brought with him a team of young managers from Moscow who significantly improved the tannery's operations. Then the Victor Smorgon Group, a leading Australian industrial group, became a partner in 2003. 'The Australian group has long been involved in leather manufacture and trading worldwide', says Rodin. 'Their expertise and vast experience helped us promote our products on the international market and maintain our technological leadership. The group had been trading with us since 2002 and joined as a partner in 2003.' Since the management takeover in 2003, the tannery's cooperation with Russian and international partners grows every day. 'We believe our strong industrial infrastructure, flexible raw material supply and our worldwide trading contacts are the basis for our continued success', says Rodin. The tannery imports chemicals from the world's leading manufacturers and follows all the latest technological advances to create products that are strongly competitive on the international market. Local water supply Ostashkov Tannery is located on the edge of the beautiful Lake Seliger, about 350km from Moscow. This lakeside position was key to the tannery's success in the early days, with the lake's pure water lending the leather a certain unique quality. To ensure the highest environmental standards, Ostashkov have installed all the latest pollution controls to ensure careful disposal of tannery effluent and preserve the ecological balance of their lake. 'The water supply from Lake Seliger is one our main advantages', explains Rodin. 'The tannery owns a complex two-level water treatment facility which prevents water pollution by not only treating the tannery's effluent but also that of the town of Ostashkov. It combines modern Russian and European technologies and we are currently finalising investment plans to further upgrade our water treatment.' A colourful history Ostashkov Tannery has a long and colourful history. Founded in 1730 by merchant Grigory Savinov, the tannery soon made a name for itself, not just in Russia. The British navy remained a steady customer throughout the 1800s and the tannery was honoured by a visit from Emperor Alexander I as a sign of personal gratitude for supplying boots to the Russian army during the 1812 war with Napeleon. Before the management takeover in 2003, the tannery underwent a major overhaul of its facilities. Between 1990 and 1991, Yugoslav specialists Invest-import constructed a brand-new 570-metre long building to house all the latest Yugoslavian and Italian machinery. Additional Italian and Spanish machines were purchased, including stacking, fleshing, splitting, polishing, measuring and embossing machines among others, and the tannery is now fully automated. 'The cost of the upgrades around ten years ago was US$85 million. Since then, the tannery's expenditure on machinery and new technology is around $1 million a year. This enables us to maintain our position as the undisputed leader in the region', says Rodin. At full capacity, the tannery can produce 120 tons of raw material a day, with annual output well in excess of 45 million sq ft of finished and semi-finished articles. The tannery has been working 24 hours a day, seven days a week since December 2003. Before then, the operating schedule was based on three shifts, five days a week. 'The switch was aimed at increasing machinery usage and labour intensity', explains Rodin. According to statistics published by the Russian Leather Union, nearly 30% of all chrome leather in Russia is processed at the Ostashkov Tannery. 'There are slightly over 40 tanneries in Russia and the former CIS countries, only a few of which can collectively compare with Ostashkov in terms of volume and quality', says Rodin. Quality control Ostashkov Tannery pride themselves on their exclusive sorting system that has been researched and developed specifically for the special features found in Russian hides. The key to the Ostashkov quality standard is to create a system of sorting and process control that is capable of forecasting exactly what the customer will get from a particular raw material. 'Years of experience and know-how have shown us how to predict the resulting leather quality right from the point when the hides are unloaded from the trucks', explains Rodin. To achieve this, the tannery has compiled extensive data on raw material from each region in Russia, such as the average quality, weight, most common defects and seasonal varieties. 'All our hides are purchased in Russia', says Rodin. 'Russian hides are generally of a good quality, although they are occasionally affected by poor husbandry in some regions. Russian hides were mostly exported to Asia and Europe until 2000 when a new export duty was introduced to promote the national tanning industry'. The tannery's quality control department tests all leather products at each stage of production. At the raw material stage, each skin that arrives at the tannery is individually assessed; it is scraped and cleaned, weighed, biologically tested and the quality is analysed. The skin is carefully sorted into lots ready for further processing. At the semi-finished stage, more tests and sorting are carried out, and all finished leather is tested for a third and final time before it is shipped to the customer. 'Our biggest customers are large tanneries, shoe, automotive and furniture leather producers in Asia and Europe', says Rodin. 'About 70% of our products are exported as finished and semi-finished leather. The remaining 30% is sold in Russia as finished leather.' Customer satisfaction One of the keys to the tannery's success is the attention to detail, essentially the human element. 'This has created a benchmark of quality which, we believe, is hard to match in today's market in Russia or abroad', explain Rodin. 'Our mission is to achieve maximum customer satisfaction by supplying Russian-made leather of a world-class standard. With more than 300 years of experience and tradition, we aim to further strengthen our leadership and hope to contribute significantly to the national economy and give our staff confidence in the future.' Ostashkov have a local population of around 25,000 and by employing over 1,000 workers, the tannery is the biggest employer in the town and one of the biggest employers in the whole Tver region. The tannery provides regular wage increases and local social activities for their staff, something that is regarded as a long-term investment by the company. In the next two years, Ostashkov plan to launch into the automotive and upholstery markets and consolidate their position in the raw hides market. Ostashkov's semi-finished leather is already used by other tanneries to produce finished automotive leather. 'And in the next ten years, we hope to become the largest integrated leather corporation in Europe, encompassing all areas of leather manufacture and a wide range of leather products from footwear to exclusive leather interiors', says Rodin. State of the union Rodin also spoke more generally to Leather International about the current state of the Russian leather industry. There are around 40 tanneries in Russia and the former USSR, all of which operate to varying degrees of success. Most were built in Soviet times, a few like Ostashkov are over a hundred years' old and a handful have been built more recently. The majority of Russian tanners produce just bovine leather as this was the traditional material for footwear in the past. Only a few tanneries can process sheepskins, while most have the ability to process pig skins but choose not to because of the high fat content. 'The Russian leather industry has improved over the past 50 years, despite the fact that many tanneries went broke during the 'transition period' between 1993 and 2000', explains Rodin. 'But the Russian industry can be significantly improved through technical upgrading, professional management and an increase in quality of the raw material. This is one area that we would like to see improved - a better organised and more structured raw hides market.' Rodin adds: 'Nowadays, it is not difficult being a Russian tanner. Russia has gone through hard times marked by social and political biases and criminal influence but, today, things are looking better. There are hardly any serious political obstacles to doing business in Europe, although certain bureaucratic and fiscal hassles still remain. The Russian trade and tariffs policies are generally balanced so far as the leather industry is concerned.' However, Rodin believes that the Russian leather industry has an unfavourable reputation that was caused by chaotic raw hide trading and poor quality in the early 1990s. 'This situation has been improving since then', says Rodin, 'but the image of the Russian leather industry is still affected by the general sentiment towards Russia among the international business community. Whatever the reputation, it can be improved by hard work to exceed customer requirements. And we truly believe that our success will also help to promote the prestige of the Russian leather industry and the new business profile of Russia', Rodin concludes.