Olexander Zbanko, the Director of Viessmann LTD, told LDaily how to receive the regularly increasing income by working in the premium segment and producing equipment which works smoothly by decades, on the prospects of the heating systems market and on the latest technologies thanks to which customers become almost energy-independent.
Viessmann is a German company which celebrated the centenary anniversary last year. It is a family-owned company established in 1917, and today, the company is run by the fourth generation of the family. We have been working on the Ukrainian market for almost two decades. If we talk about the market segment, I have to mention that we work exclusively in the premium segment, which I would divide into two directions – household heating and industrial heating equipment. In the household segment, our market share is approximately 13%. If we take the industrial equipment segment, boilers of middle and high capacity,the company occupies over 35 % of the market.
LDaily: What are the prospects for the development of the Ukrainian thermal power market?
O. Zbanko: The prospects for the development are actually very high. The market is extremely interesting and dynamic. Special attention should be paid to the possible potential for developing the eastern regions. Once the war in Donbass ends, a question on rebuilding the region will be raised. It will be applying to heating systems as well. Besides that, our country gradually moves away from Soviet times, so many heating systems and boilers are of old design, and they require modernization. From this point of view, and taking into account the size of our country, the potential itself is enormous. However, all this bumps into funding or rather its absence (except European donors), as well as into political and economic situations, which have been very unstable lately.
LDaily: Viessmann products are of premium class. However, the Ukrainian market for such products is probably small. Where else is it cost-effective to install your equipment?
O. Zbanko: Each boiler has its cost. One of the trends for today is apartment heating, especially in houses of the economy class. Talking into account the cost per one square meter, developers often decide on more cheap equipment. If the ultimate customer decides himself, in this case, we can talk about the selection criteria. Our equipment is more expensive, but at the same time, it is more efficient, reliable and high-quality. Viessmann offers the most reliable and energy efficient equipment which has a longer period of operation and guarantees the lowest operational costs. For instance, a solar collector Vitosol is designed for being used for over 25 years without losing its operational efficiency; and its optical efficiency is 82%. Heat pumps Vitocal have the highest efficiency СОР ratio. They are designed for being used for over 15 years. Herewith, what is important, they need minimal servicing, which is mainly only in control of operating system parameters.
LDaily: What are the key trends for heating systems?
O. Zbanko: During the last three years, the market has not changed much. Small volatility of nearly 5% decrease/increase is observed. If we take a look at 2018, there was a visible growth of the market in the western region, while in the eastern regions, there was a clear fall. Within the next three years, I think, the tendency will continue and the market will be relatively stable with only a slight increase of 5-7%.
LDaily: What is your competitive advantage?
O. Zbanko: Based on everything mentioned above, it is not the price, obviously (smiles). Our advantages are quality, longevity, reliable equipment, as well as the service we provide. We give the greatest guarantee for our products in the Ukrainian market. Sometimes, there are even problems with sales, because it happens that boilers operate during 10-12 years and don’t break, so people don’t need to invest in new equipment. For example, Germany already has a significant potential in modernization, however, until the state does not implement new standards of using such equipment at the legislative level, the population won’t replace Viessmann boilers “voluntarily”.
In Ukraine, in such situation, we offer our customers modernization of equipment for more efficient and modern; moreover, we give special terms of purchase. Time does not stand still and the technique is also developing. For example, a gas boiler Vitodens 200-W with 35kW power has the Lambda Pro Control system which guarantees burning of natural gas with the highest efficiency – boiler’s controller automatically adjusts to the gas quality in this moment of time, and range of its power modulation is 1:20. Due to this, a quantity of burners on/off significantly reduces, and clocking in boiler’s operation turns off completely. An aggregate always supplies as much heat as it is needed; without any overheating and excessive energy consumption. Herewith, the guarantee for a boiler is 5 years, and for boiler’s heat-exchange unit – 10 years.
An important advantage is also the ability of dispatching and remote control of system working based on Viessmann’s equipment. An owner can simply manage their equipment with a smartphone according to their wishes. Due to remote access, a service organization is able to diagnose parameters of the system working and provide recommendations on optimizing its work and reducing usage costs.
LDaily: How do you overcome the sales slowdown and income fall?
O. Zbanko: First of all, we are a dynamically developing company. Many are currently telling about modernization and we control these processes as well. We have perfectly adjusted the service, an excellent team works to do this, as well as a range of partners support us all over Ukraine. This means that our customers can receive a detailed consultation and technical support 24/7 and 365 days a year. If there is premium equipment, there have to be a premium service. Our service partners are well prepared and equipped; they have everything for repair and diagnostics. This is one of our main advantages. Undoubtedly, one more advantage is that we are trying to move forward with the times, we are not waiting until changes get to us but use them to become stronger. Thus, we search for new sales channels, bring new products to the market, invest in new technologies, and quickly change sales models, adapting them to the nowadays reality that enables us to increase a net profit of the company and the margin from year to year.
LDaily: I saw the Viessmann Academy in your office. Tell us more about it, please.
O. Zbanko: The Academy is the keystone of the Viessmann company, it is closely connected to the same service. In our Academy, we give classes not only about our equipment service, but also about products for our partners, employees, and new employees who have just joined the company. Any new employee starts their activity from the Viessmann Academy. There are various training courses; they can last from 2-3 days to six months. The main task of our Academy is to train our employees and partners to assemble equipment in a professional manner, understand it and consult our customers. Moreover, our Academy conducts webinars in this educational institution. We develop new processes of digitalizing starting from bonus programs and ending with a portal where, due to remote access through certain systems, we can control any heat aggregate in Ukraine.
LDaily: What are the modern heating systems?
O. Zbanko: Viessmann always offers the all-in-one service based on its equipment, not just a separate boiler or a heat pump. This allows an owner to get the maximum comfort in the house at minimal costs. The controller of heat pumps Vitotronic of gas boilers Vitodens 200 provide the work of a heating system only in weather dependent mode, taking into account the outside temperature. This gives many opportunities for individual settings: day/night timing programs, business days/weekends, vacation etc. All this can be controlled remotely via a smartphone or a tablet.
What is important, this controller is extremely simple and user-friendly. It has many features which allow adjusting the economical work of the whole system; herewith it is simple and intuitive to set up.
The regulator of heat pumps Vitocal controls not only a heat pump itself, a boiler or a heating system but the whole system. This allows managing two additional heat sources in the system: e.g. a gas boiler or an electric boiler.
It gives an opportunity to optimally adjust the system working according to the current energy tariffs on energy resources and, as a result, get the most economic effect.
LDaily: What heating systems do already exist in Europe but are absent in Ukraine?
O. Zbanko: Many things are present in Ukraine but are not as widespread as they are in Europe. Still, there is Viessmann in Ukraine and we are trying to promote these technologies. For example, I can tell about the Vitofrical system – this system works on a basis of an absorber which resembles solar panels, an accumulator and a heat pump. This system can both heat and cool the house at any time of a year. The system is quite popular in Europe but is almost unknown in Ukraine, although there are already facts of installing these systems in our country.
LDaily: It is rarely installed – is that because of expensiveness?
O. Zbanko: It is a little bit more expensive than a heat pump, however, it is more reliable, and its efficiency is by 1.5 times higher. In my opinion, it is less popular because few people know about it. Only this year, the Viessmann company has started to promote it on the Ukrainian market. In Europe, these systems are often subsidized/supported by the government, and people who install them receive large refunds from the state. Maybe this is the cause of the fact that these technologies are not so widespread in Ukraine.
LDaily: How do you inform the market about this system?
O. Zbanko: We do that through different communication channels. The first is our employees who manage the market and communicate with our partners and end customers. We demonstrate the system efficiency, its pay-off period, while such parameters are calculated for each object separately. The second is our partners who have enormous experience in installing similar systems. They have their own range of customers, they communicate with them, and tell about the pros and cons of this system, its efficiency, and so on.
Moreover, we use all the possible modern electronic communication channels while promoting the system.
LDaily: What projects are you still working on?
O. Zbanko: As a dynamically developing company, Viessmann Ukraine wants to be at all times and in all places. Despite problems, Ukraine receives funding from financial institutions like the World Bank, the EBRD, so there are projects for the modernization of boiler houses of the entire cities. For example, at the beginning of this year, we have supplied boiler equipment to Kherson, where five boiler houses are going to be completely renovated at the expense of the World Bank. There were also large tenders in Kharkiv, Mykolaiv. And a tender in Ternopil is held at the moment. We always try to participate in big projects. For example, it is planned to renovate about 50 boiler houses in Kharkiv, and Viessmann with its partners will supply modern equipment and will be responsible for launching it.
LDaily: How the demand for energy efficient systems affected the company’s working results?
O. Zbanko: Definitely positively, as Viessmann is a premium brand, respectively, we offer equipment which by its nature is already energy efficient, and which protects the environment.
For example, sales of gas pumps have increased twice in comparison with the last year, both in quantitative and monetary equivalent. Sales of medium and high capacity boilers have increased by 30%. There is the increasing demand for photovoltaics systems which make you almost energy-independent since they convert solar energy to electricity one.
LDaily: Company has been already existing on the market of Ukraine for 20 years. What difficulties have you encountered?
O. Zbanko: Different periods had their difficulties. In the beginning, we faced the difficulty of forming a team and a structure of the company, finding people who will move the company ahead thanks to their personal and professional qualities. 5-6 years ago, there was a change of generation in the company, and now, there are changes at the highest level. People who have worked for the company for 40 years leave, young people come, the experience passes on. As we are working in the market of Ukraine, we face uncertainty and volatility of the market, political and economic situations in Ukraine have a strong influence. The situation in the East of Ukraine and Crimea has its impact as well. We have lost a significant part of the market. The role of the state is also not in the last place; I would call this a defect of our legal, regulatory and legislative systems. This is a challenge for the company, and we try to solve these issues as transparently and efficiently as possible. In my opinion, the last important challenge not only for Viessmann company but for other enterprises in Ukraine as well, has become the issue of labor resources. There are problems with the quality, qualification of potential personnel, and most often they simply do not exist. This is because many experts move abroad. As far as I know, more than 2 million people have moved out for work in Poland for the past one and a half year, and there are also many in Germany, Spain, and Italy. It has a significant impact on the company’s development in Ukraine.
LDaily: How do you try to keep qualified personnel in the company?
O. Zbanko: We are trying to build HR and business strategies so that people could work comfortably in the company. Moreover, we create and modify motivation programs for employees which include many bonuses – from free lunches to work conditions created in the company’s office. Salaries play not the last role. We are trying to pay higher salaries compared to the market level.
LDaily: How do you rate the investment climate in Ukraine?
O. Zbanko: For today, in my opinion, the situation in the East of the country greatly affects our market as well. Besides large financial institutions, not everyone is ready to invest in Ukraine. If we take the Viessmann company, then despite the difficulties, we do not leave the market, vice versa, we are trying to invest. However, in general, the market remains wanting. At this moment, the investment climate is not very attractive. There are many risks, but my position as a Ukrainian as follows: in our market, results can be achieved much faster than abroad, but with significantly higher risks.
LDaily: What risks do you consider the biggest for business in Ukraine? How to minimize them?
O. Zbanko: First of all, this is a defect of our legislative, legal and regulatory systems. Here, we try to actively cooperate with government agencies, be aware of all changes, and bring our entire workflow in accordance with the requirements. The second is the uncertainty of both the market in general and the market in Ukraine in particular, which is connected to the political and the economic situations. We try to develop new sales channels, change the strategy of the company in the market of Ukraine, and introduce new products. Moreover, not the last role plays our longstanding relationships with business partners. The third, a burning question is the availability of qualified personnel. We try to be flexible in the recruitment question, motivation programs and create such working conditions so people would want to come to work here and offer new ideas. We contact many Universities, invite students and graduates to continue their work in our company after the probation period.
LDaily: Do you support any social projects?
O. Zbanko: The sphere of action of Viessmann and the fact that we are a family-owned company have special features in supporting social projects. We try to give our equipment for rent free of charge to certain population categories, to kindergartens and schools. Together with our partners, we assemble equipment for free or place into service, technical support. Moreover, we organize studying classes for Technical Universities of Ukraine, particularly in Odessa and Kyiv, on a free basis. On the ground of these classes, students have the opportunity to get acquainted with advanced technologies, and thus, be aware of modern trends of heating equipment.
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