Sofia Spring (formerly Visma)

2023: Arrest of Valery Geryugov in a fraud case worth 1.8 billion rubles

On January 11, 2023, the Kommersant newspaper reported an "unexpected turn" in the criminal case of Valery Geryugov, who was recently released from the colony, where he was serving time for fraudulently stealing a loan from Sberbank worth 1.8 billion rubles, but almost immediately again ended up in the dock. Now the entrepreneur is accused of deliberate bankruptcy and the withdrawal of assets worth 1.47 billion rubles from Visma (a former producer of mineral water Arkhyz). Read more here.

2017: Sofia Mountain Water Launch

Even before the bankruptcy procedure of the company, part of the assets were withdrawn in advance, rewritten to new firms so that their bankruptcy would not affect them, so that the client base, official website, staff, cars and much more remained in the ownership of Arkhyz LLC, a company that no longer has anything to do with Arkhyz water, the rights to which were transferred to Delta LLC.

While Delta LLC is establishing production in order to launch an uninterrupted production of water from the Arkhyz brand, Arkhyz LLC also does not waste time in vain. On March 22, 2017, all customers of the company were given an information newsletter about the start of sales of the new mineral natural drinking canteen water Sofia Gornaya from April 2017.

As stated in that letter, this water is completely identical to Arkhyz water, since it is produced from the well 1-E the Arkhyzskoye field. Explaining the reason for this rebranding, the general director of Arkhyz LLC refers to the unfavorable information background and associations that arise around Arkhyz water in connection with the bankruptcy of Visma.

From the presentation of the water "Sofia" or "Sofia Gornaya" 19 liters (this is how the full name of this water sounds according to the document), which was part of this mailing list, we can conclude that the company Sofia Glacier LLC is producing and spilling water. It is stated that the company previously collaborated with CJSC Visma and has a license to extract the waters Sofia and Arkhyz. Externally, the shape of the bottles used for the new brand is completely identical to the bottles of Arkhyz water, so familiar to customers. It can be seen that the manufacturers of the new brand are counting on the success of Sofia due to the recognition of the Arkhyz brand.

2016: Bankruptcy due to debt 2 billion rubles

In June 2016, it became known that the producer of the most famous North Caucasian mineral water canteen Arkhyz was on the verge of bankruptcy: the Visma group of companies owed creditors more than 2 billion rubles. The mineral water market suffered a lot during the crisis, but in this case it is not only about the crisis: management errors also played a significant role.

Valeria Geryugov, the only beneficiary of the Visma group of companies, is said to be a very peculiar person. The 53-year-old business owner with a billion-dollar turnover lives in his hometown of Cherkessk, in a spacious but not amazing house, goes to work every day and is philosophical about difficulties.

"I'm doing great, I think," he told Money. "This is a business, it's striped: there is a white stripe, it can be dark. I don't see^[1] getting upset about this^[1]

At the end of May 2016, Sberbank filed a lawsuit declaring Geryugov bankrupt. The companies included in the Visma group owe the bank 1.8 billion rubles, and the guarantor for these loans is personally Valery Geryugov, the owner and general director of the group. The total debt of companies, according to Geryugov, reaches 2 billion rubles, the Arkhyz brand, like the production assets of the Visma group, is pledged by Sberbank, enterprises record a collapse in sales of mineral water.

sales we have had has happened because so many people have gone abroad for permanent residence. These were just our clients, "explains Geryugov in his ironic manner.

In fact, all consumers from the country, of course, hardly left. But several important management miscalculations and personnel leapfrog, coupled with a decline in the market, brought the group to bankruptcy.

Visma's problems are "quite in the context of the market," said Dmitry Petrov, president of the Union of Producers of Soft Drinks and Mineral Waters. The Russian drinking and mineral water market began to fall in 2015, and in 2016 the trend continued. According to Global Reach Consulting, at the end of 2015, its volume amounted to 5.6 billion liters, which is 5.8% lower than in 2014. Certain market segments, for example, mineral table water, which includes Arkhyz, sank even more: according to Dmitry Petrov's estimates, by 10%.

The Russian consumer, for the most part, did not particularly favor bottled drinking water before, and during the crisis he began to favor even less. Demand is shifting towards cheap local manufacturers and networks' own brands. The latter are often produced by well-known brands on the market: it is possible to keep market share in this way, but it is unlikely to get super-profits. "The entire market for drinking and mineral water is now working either on the verge of profitability or at a loss," says Dmitry Petrov.

Sberbank, which sent an application to the Arbitration Court of Karachay-Cherkessia at the end of May 2016, demands that Valery Geryugov himself, who acted as a guarantor for loans issued to the group's companies in 2012, be declared bankrupt. According to the press service of Sberbank, loans were taken to replenish working capital and purchase equipment. Borrowers stopped paying on them in November 2014. Observation procedures were introduced for four companies of the group - Visma CJSC, Visma Lux LLC, Visma-Arkhyz CJSC, Visma Management Company CJSC.

Geryugov explains the group's problems by "a significant drop in consumption volumes." According to him, in the second half of 2014, Arkhyz's sales fell by as much as 40%. However, according to Money, the reason was different.

"When the crisis happened, Visma, which operated at the top of the middle price segment, decided to re-position its products and make them much more expensive. The logic was this: to put the price that imported water had before the crisis, for example, 60-70 rubles. instead of 33-37 rubles. for a one and a half liter bottle. Geryugov hoped that the consumer, who before the crisis bought imported water such as Evian or Vittel, would leave these brands and instead acquire Arkhyz, "a source on the market told Dengam.

This, however, led to another effect, the interlocutor of Money claims: part of the retail chains simply abandoned Arkhyz - they feared that the water would take up space on the shelf, but no one would buy it at such a high price. In 2015, Visma tried to play back, offering the networks the same price, as a result, now prices for its products vary almost twice depending on the network: in Perekrestok, water with a volume of 1.5 liters can be sold at a pre-crisis price of 37 rubles, in "Platypus" (also not the most expensive network) - 60 rubles each.

Valery Geryugov, however, claims that he has been increasing prices gradually, since 2014, to compensate for the shortfall in income and in the hope of consumer loyalty. But, one way or another, Visma lost its market share: according to Nielsen estimates, in 2015 its sales decreased by 29%, and in 2016 they fell by another 11%.

"In my opinion, there is a lack of competent supportive advertising. Take, for example, Borjomi: everyone knows that this water was in the Soviet and post-Soviet times and was no different in price from other mineral waters until access to the market was blocked for political reasons. A few years ago, water again entered the market, but as a premium product - its price is very high, nevertheless, the brand managed to gain a significant market share thanks to effective advertising, which did not happen with Arkhyz. At a price, the product is already in the premium class, but it has not been able to convince consumers of this, "says Dmitry Petrov

According to other sources, not only this led to the problems of Visma. According to the sources of "Money," the reason for many problems lies in illiterate management: Valery Geryugov too often changed managers - he demanded quick results from managers, and when this did not work out, he parted with people. For all that, the company did not even really establish a reporting system. "And water is a low-margin business, here you need to calculate every penny," adds Evgenia Anno, co-owner of the Water OnLine company.

In addition, a geographical factor works against the company: the remoteness of Visma from the regions of the Central Federal District leads to the fact that logistics costs in it reach up to 30% of the cost of products.

The regions of presence of the Visma holding were Moscow and the Moscow Region, North-West, Volga, Central, Ural, Southern and Siberian Federal Districts.

2013: Payment of "Kvasko" 54.2 million rubles

KvasKo Bottlers, which spills Pershin kvass, tried to bankrupt Visma: in July 2013, it sent a statement to the Arbitration Court of Karachay-Cherkessia. Until 2009, Pershin produced another enterprise, Eugene Buzhele Vine, owned by the brand owner Yevgeny Pershin and a former employee of the Russian special services, known for the "polonium case" to State Duma deputy Andrei Lugovoi. However, then the company went bankrupt, and kvass disappeared from the shelves for several years. In 2012, the kvass plant was bought by KvasCo Bottlers, believed to be owned by Eurofinance Mosnarbank. The new owner decided to return the brand to the shelves and agreed with Visma to use its distribution system. However, after a few months, the partners quarreled. According to Kvasko, Visma stopped paying for the products it ships. Visma, in turn, accused Kvasko of not paying the costs of entering the network if the kvass sold poorly. However, the company was not going to take responsibility for bad sales. The partners sued in arbitration, but in the end they came to an amicable agreement: Visma paid Kvasko 54.2 million rubles. debt.

2012: Launch of "Zhivitsa"

In addition to Arkhyz, Visma also developed other brands - children's water Arkhyzik, drink Vitalina with a taste of berries and fruits, water Slavyanovskaya, Tract of the Narzan Valley, power engineer Mega Vita, and in 2012 presented the innovative drink Zhivitsa: Arkhyz with an antioxidant dissolved in it. True, they were reluctant to buy Zhivitsa - the sales volumes of new items, according to Valery Geryugov, were very small. The locomotive of the company's sales, according to Geryugov, has always remained the Arkhyz brand, which provides 90% of the turnover.

2006: Refusal to sell the company to France's Castel

In 2006, the French group Castel, which produces Cristaline water, became interested in the company, then Visma supplied its water to France in small volumes under the Caucasus Spring Arkhiz brand. The parties negotiated the purchase by the French of a stake in Visma, but in the end Geryugov refused to give up control. By that time, Visma was one of the ten largest producers on the Russian water market, controlling a share of 3.7%, and its sales grew rapidly. The company made grand plans and expanded production. Three Visma plants in Arkhyz, Cherkessk and Pyatigorsk produced 1.35 million liters of water per day. In 2008, the company more than doubled its capacity - it invested €9 million in the construction of a new enterprise capable of producing 1.8 million liters of water per day. The calculation was quite justified: the Russians got used to bottled water. The drinking and mineral water market grew: from 2000 to 2015, it only once showed a slight drop - in the wake of the 2009 crisis.

2000: Arkhyz Production Start

By the early 2000s, competition in the lemonade market intensified, and Geryugov decided to bet on water. But the brands, as it turned out, chose unsuccessfully: "Essentuki" then poured dozens of other manufacturers, among which it was easy to get lost; with Narzan, the situation was exactly the opposite: the brand was registered with the OJSC of the same name. Geryugov, who poured water from a well near Narzan in Kislovodsk, believed that the brand was popular and could not belong to anyone alone. "In Karachay-Cherkessia, where more than 90% of all sources of Narzan are located, this water has been mined for more than 300 years, which is why I was sure that it could not be the property of one plant," says Valery Geryugov. The owner of Narzan OJSC, Vladimir Borodavkin, had a different opinion: he sued everyone who poured water under this brand and won one process after another.

Geryugov also fought for a long time in the courts, but in the end he stopped the release of Narzan and was forced to search for a new brand. The source was found in the village of Arkhyz (one of the translation options from Karachay-Balkarian is a "beautiful girl"): 120 km from Cherkessk, at an altitude of 1507 meters, a third plant was built: Geryugov liked not only the water itself (it has low mineralization, which means it is not harmful to drink it every day), but also the place around it could create a beautiful legend.

Nevertheless, the promotion of the new brand was hard. At first, Visma supplied water to the southern regions of Russia, but there it had to compete with a strong local manufacturer - the Mercury company, which produces water of the same brand, as well as the Biba and Pilgrim brands. Starting to spill Arkhyz in 2000, two years later Visma decided to enter the Moscow market. There were also enough strong competitors - for example, the Holy Source, Shishkin Forest, Aqua Minerale and BonAqua brands - but there were more consumers. The company invested $300 thousand in advertising, launching, in particular, a video in which actor Armen Dzhigarkhanyan brewed tea "Arkhyzom" and told how the iodine contained in the water is useful. Advertising worked: the company's sales more than doubled: in 2003, Visma's turnover amounted to almost 300 million rubles. against 124 million a year earlier. The company also promoted water in the regions, and it often acted very dodgy. To begin with, Visma supplied Essentuki retail chains at bargain prices, and then persuaded retailers to replace the water on the shelves with Arkhyz.

1990s: Pasta, polyethylene, lemonade production

"And I just liked Lemonade Joe - a very life-affirming hero," Valery Geryugov smiles, explaining why in the early 1990s, having decided to go into business, he began with the release of Fructi's lemonade. Geryugov's initial capital, he said, was "taken in his pocket": having retired from the army in the late 1980s, the former tanker first traded "everything that was traded," and then decided to start production. Having founded the Visma company with his brother in his native Cherkessk, Geryugov just did not produce anything - polyethylene, pasta... Sales of lemonade, however, were successful, in addition to it, Visma spilled mineral water under the Narzan and Essentuki brands.

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