Full ahead to Russia

‘A man and a toolbox’ grew into a major export company. Now there’s a steady supply of food industry equipment from Nastola, Finland, to Russia.

Managing Director Mikko Lehtinen

Vulganus Oy is a Finnish SME that manufactures bakery equipment. About 80 per cent of the company’s production is exported – of this, more than half goes to Russia. The first export deliveries were made already during the Soviet era. Now the family enterprise with a 30-year history has the second generation at the helm. Lassi Lehtinen (66), the company founder, is the Chairman of the Board and his son, Mikko Lehtinen (42), is the Managing Director.

“Father founded this company on the ‘man and a toolbox’ principle. Gradually the operations expanded, and in 1987 the former Kylmä-Kesko company asked whether it would be possible to build an industrial appliance for freezing. We made the first specimen, and a couple of years later we had sold a few appliances,” says Managing Director Mikko Lehtinen. Thus, the basic product was created almost by accident.

“Although Vulganus is a SME, we are a major operator on the European scale in our own narrow sector,” Lehtinen continues.

Bakeries are the main segment among export products, but Vulganus also manufactures freezers, coolers, proofing systems and automatic product handling equipment. Today, food production involves heavy-duty processes and the equipment are dimensioned for large volumes: the freezer line for unbaked products, for instance, freezes 1,500 to 2,000 kilos of, say, ready-to-bake cinnamon buns per hour.

Vulganus is fortunate in that Russia is busy modernising its food industry, and many Finnish companies operate in the country. “We began to build our own sales network in Russia, and business took off in 2005. Today, nearly 50 processes are using our equipment there,” Managing Director Mikko Lehtinen explains. Big industrial processes are project work; nothing is manufactured for storage.

Finnvera involved in financing

Lehtinen says that the Russian financial market works well in normal circumstances, and the Russian customer is an extremely fair and good payer. Finnvera’s role was highlighted from 2008 onwards when the world economy sank into financial crisis and banks were no longer willing to provide financing for their customers.
 
“It seemed that even agreed projects were put on ice because banks withdrew from granting credit. The food industry had needs and we had the wish to deliver equipment, but there was no financing between the two,” says Lehtinen when reminiscing about the situation a couple of years back.

“I contacted Timo Pietiläinen, Head of Finnvera’s Representative Office in Russia. We investigated a few projects with him and some other experts from Finnvera, and concluded that our customers were doing well. Finnvera helped us to arrange collateral and guarantees, but banks were still reluctant to grant financing.”

The next step was that Finnvera provided collateral and Vulganus itself financed its customers by granting them an 18-month credit. “We shared the risks with Finnvera. I didn’t believe that Finnvera could be so flexible with a small operator like us. Even though Finnvera is a big State-owned company, we got very personal service. They have competent people who understand the realities out in the field,” Managing Director Mikko Lehtinen says with satisfaction.

Flat out to Russia

What have you learned, what advice would you give others about business in Russia?
“I can’t really give advice as I’m constantly learning more myself, but I’d encourage them to go full ahead. And one should be glad that Russian trade is difficult; if it were easy, everyone would be there. No need to be afraid.”

For small enterprises, Mikko Lehtinen also recommends that they should try to find the right kind of partner in Russia. “That’s the way to go about it and to succeed.”

The language is no problem if you invest in Russian-speaking staff who also know the country’s customs and practices. “Finland has competent, motivated and well educated immigrants, and I recommend employing them. Here at Vulganus, we have very good Russian staff members, who can also speak Finnish.”

First-rate personnel

Two generations – father and son – are pulling together. Chairman of the Board Lassi Lehtinen is fully involved in daily work. “Father has always been a visionary, casting an eye to the future. He has believed in things that many others would have considered impossible.”

Mikko Lehtinen has worked in the company for 16 years. When he joined the family enterprise, a large industrial hall had been constructed five years earlier and, as was customary, the company had taken out a loan denominated in a foreign currency. Devaluation multiplied the loan sum. In 1996, the Lehtinens applied for restructuring of their enterprise. The application went through and a 10-year programme was confirmed.

“We were able to pay off all our debts already in 2000. I have had to learn these things the hard way. Now we’re a growing company free of debt,” Mikko Lehtinen points out.

The third generation is also growing: Mikko’s 16 and 17 year old sons. “I do what my father did; the boys can take their time in deciding whether they are interested in running an enterprise. Of course, it would be great if either of them continued the business.”

The Managing Director praises his staff: “I have managed to gather around me a team that is committed, motivated and is pulling together. This is one secret of success.”

I have to ask: how did the name Vulganus find its way to Nastola?
“The name originates from a time when father tried to propose all kinds of company names for the Trade Register, and none of them was accepted. One night in desperation, he took out the encyclopaedia and picked the name from there. Vulcanus, or Vulcan, was the Roman god for fire and metal working. But father was not good in languages and he confused g and c. Instead of Vulcanus, he wrote the word with a ‘g’ in the application,” Mikko Lehtinen explains with a laugh.

Vulganus Oy

• Established: 1987
• Domicile: Nastola, Finland
• Turnover: EUR 8 million
• Personnel: 40
• Products: Equipment and processes for the food industry
• Over 80% of production is exported; over half of exports go to Russia.

Text: Helinä Hirvikorpi, Photos: Vulganus