January 11, 2007, The story of Kosmos - conquering outer space

In 2003 Topservice Group arranged an entertaining demonstration at one of the Moscow trade shows: a public competition of pink rabbit toys, one powered by the battery giant Duracell, the other – by a Kosmos battery of equivalent power. Both rabbits ran for over 24 hours, but in the end only one of them lasted longer – the one powered by Kosmos. An impressive marketing move? No doubt. But there is one important detail about the whole thing – Topservice was not simply a dealer of both brands, but the creator of the whole Kosmos brand. This brand was established in batteries as a potential competitor to global brands, including Duracell (property of Procter & Gamble). “We are not saying that our battery is better than Duracell’s. All we want to say, is that it is definitely not worse,” says Alexander Saveliev, president & CEO of Topservice Group.

The consumer seems convinced in the quality of the new battery. Ever since Kosmos appeared on the store shelves it has competed successfully with other global players such as Energizer, Sanyo, Panasonic, Varta and Toshiba. According to market research data, Duracell currently ranks first with its 40% market share, followed by Kosmos (10%), Samsung (9%) and Energizer (8%). Duracell with their pink rabbit commercials can be seen on nearly every TV channel, while Kosmos has never held a TV advertising campaign – Topservice is well aware of its competitor’s advertising budget and sees no point in trying to overcome it. But then what would give Kosmos a co
mpetitive advantage? Its price – Kosmos batteries are nearly twice cheaper than Duracell or Energizer batteries.

Topservice was founded in 1993 and soon became a major distributor of batteries. At that time smaller wholesalers came to Moscow to buy batteries from larger importers such as Topservice, who bought from China in large volumes. Saveliev was one of the first people who began creating a full-scale distribution network, convincing the district wholesalers to stay at home and wait for their ordered cargo to be delivered to them from Moscow (by now the company has over 700 dealers in over 110 of the country’s cities). On the Moscow market Saveliev supplied the batteries to photo centers.

By the mid 90-s Saveliev had figured that a private brand would not only be a good source of income, but also an important investment in future success. At that time Topservice decided not to create their own trademark, but instead came up with a proposal to a famous international company. “They had the name, but no distribution, while we had a great dealer network, but no brand. So we decided to promote a trademark that would have no disadvantages” – Saveliev points out. Thus the project began and in 1997 began to sell Samsung batteries. The Korean Samsung shared their brand name, while everything else including product and package development was done by Saveliev and his team. Now Samsung batteries have a completely different design. “Russia was more of a testing area to them. They had never manufactured batteries before. But they succeeded and now they are selling batteries all over the world,” Saveliev states proudly. Samsung are not as enthusiastic about the history of this project, but admit that it was Topservice that helped them begin their battery production.

The Samsung experiment was a success and inspired the management of Topservice to finally create their own trademark. Saveliev initially decided not to compete with global battery brands, but create products that would be prices significantly lower (no more than 17 rubles per item). In this segment of the market there were about 40 Chinese brands competing at that time. Topservice decided to give their brand a Russian name that would stand out among all others. But what name could they choose that had to do with Russia? Saveliev gives us a list: ballet, vodka, the “Kalashnikov” – neither of those would make a good name for a battery. Names like “Sputnik” (Satellite) or “Raketa” (Rocket) seem much better. Topservice checked with their local patent office and found that the word “Kosmos” (outer space) is still free.

Thus is was settled. By the year 2000 the Russian market was flooded with Chinese-made batteries under the sonorous name of Kosmos. “We managed to convince our dealers not to increase the price level we had set for them, as we proved that they would earn more on the new brand as soon as it receives initial market appreciation”, Saveliev says. There is of course the competitor’s opinion: “Actually we were the ones to have created the first Russian battery brand, - says Stanislav Chepel, business development director at the AZ distribution company, - but our trademark “Start” was established as an addition to the main foreign brand we work with – GP. Kosmos chose a different strategy, and that was a great move.”

The distribution of batteries of global brands (Duracell, Sanyo, Varta, Samsung etc.) remained Topservice’s key area of business activity. However Topservice became worried that their suppliers might refuse to sell their products to them once they began to manufacture their own batteries. Thus the brand rights for Kosmos were passed on to the company Eastpower International registered in Great Britain, whose Russian office was headed by Saveliev as well. By now over half of Topservice’s total sales are Kosmos brand items. The annual turnover is not disclosed, but it is estimated on the market at 40-60 million $.

Kosmos has soon become a brand with a real name and high brand awareness. What came next? Four years ago Kosmos brand energy-saving lamps were introduced. Just as before Saveliev and his team developed the product and package, found the ultimate Chinese manufacturer and began selling the end product at a price 2-3 times lower than their popular Western counterparts. According to Topservice’s estimates their market share amounts to 36% of a market valued at nearly 100 million $.

A 20W CFL emits light comparable in luminous flux to a 100W incandescent bulb, while lasting 8-12 times longer. The energy-saving market has good growth trends, and Kosmos continues to experiment with this market, developing more and more new products.

Production today has gone global, the brand owner only has to find the necessary product to meet market demands, find an adequate supplier and arrange sales. And if you have a strong distribution network – that can be your biggest competitive advantage.