Her weapon: Crazy Cola, an aromatic fizzy concoction meant to ape the global giants. Lighter brown than a Coke or a Pepsi and with a slightly grassy taste, it has a 48 per cent share of cola sales volume in Krasnoyarsk, according to ACNielsen Russia in Moscow.

The success of Pikra illustrates how hard it is for even the world's most experienced marketers to expand in markets with poor and unstable economies. But it also is a testament to the business skills of Kuznetsova, who was beating Coca-Cola and PepsiCo at their own marketing game even before the rouble's crash.

In fact, she picked up most of hermanagement and manufacturing techniques from PepsiCo, which began bottling its drinks at her state-run plant in 1989. PepsiCo even sent her to an executive-education programme at Duke University's Fuqua School of Business. "Pepsi was my business school," she says. "They lost out because they taught me so well."

A large part of the US companies' problem stems from last summer's financial implosion, which diminished millions of Russians' savings and paychecks, making price particularly important. At a local grocery, a two-litre bottle of Coke or Pepsi costs the equivalent of 77 US cents; a 1.5-litre bottle of Crazy Cola is 39 cents. The premium is beyond the reach of most consumers.

With these problems, Coca-Cola is expected to operate in Russia at about 50 per cent of capacity this year; PepsiCo last year took a $218 million charge to restructure its Russian business. Meanwhile, Kuznetsova's sales volume has doubled since last summer. "Coke may be the world leader," she says, "but we're No.1 here."

Oneof only a few female company heads in Russia, Kuznetsova is also among the very few Soviet-era factory directors who successfully switched gears from the communist to the capitalist system. She took charge of Pikra in 1986, when it was plagued by outdated equipment and, she says, "450 low-paid employees, a third of them drunks." She privatised the plant as soon as the Soviet government would allow her to, in 1990, "so no one else would get it."

Kuznetsova then set about overhauling the plant and its management. She returned from business studies in the US with "entire notebooks" full of ideas, she says. Among them: Creating a modern marketing department and teaching salesmanship. "I spent a year fighting with my employees," she says. "They didn't know how to sell." Despite the schooling she got from PepsiCo, Kuznetsova parted abruptly with the company in 1997. The two sides failed to renew their contract in a dispute over expanding distribution of their respective products. Kuznet- sova claims PepsiCowanted her local brands to "die their own death."

PepsiCo, which declined to comment on any aspect of its activities in Krasnoyarsk, was left without a local bottler. Now the company has to bring its drinks in from other Siberian regions.

Kuznetsova's real wake-up call was Coca-Cola's sudden arrival in 1996. So eager was Coca-Cola to enter the market here in this former prisoners' outpost that it airlifted an entire bottling plant across 12 time zones.

Kuznetsova, a former regional legislator and one of Krasnoyarsk's most prominent captains of industry, had virtually controlled her local market at the time, but Coca-Cola's presence threatened all that. Fresh-faced managers began working the stores. They filled shop shelves with Coke and plastered windows with big red signs. PepsiCo did the same.

The factory director, unfazed, struck back. She ordered a cola concentrate from a German manufacturer and crafted a new drink that, she says, would "parody" Coke. Calling the concoction Crazy Cola, she drewup an ad campaign that targeted youth with photo contests, prize giveaways and hip advertising: One ad showed teens in gaudy hip-huggers drinking Crazy Cola as they danced in a disco.

Another featured two young lovers caught in a kitchen sipping Crazy Cola between smooches. Then Kuznetsova followed the lead of Coca-Cola and PepsiCo and got 20 supermarkets to agree to exclusive deals. Her associates say some of those deals remain to this day.

Kuznetsova says she rarely thinks about Coca-Cola or PepsiCo anymore. Her mind is on Pikra's newest recipe for kvas, a Russian traditional fermented drink, and Flash, a new vitamin-laced energy drink.

But the cola wars go on in Russia. Coca-Cola introduced a Russian-made, fruit-flavoured soda of its own this summer in southern Russia, aimed at consumers who can't afford the premium brands. Both Coca-Cola and PepsiCo are also cutting prices as much as 50 per cent and running promotions.

"For us, the issue is to make sure we stay highly relevant, and we're being asinnovative as we can," says Paul Pendergrass, Coca-Cola's communications director for Europe. "We want the Russian consumer to know we're going to stick by them as they work through the tough economic times."

When times get better, Coca-Cola and PepsiCo can only hope that Viktoria Pimenova, a 25-year-old graduate student here, is a representative consumer. Pimenova keeps her eye on the Western brands and hopes one day to be able to afford them again. "Crazy Cola is fun, and it's our local product," she says. "But it's a drink for people who don't have money. Coke and Pepsi taste better."

(The Asian Wall Street Journal)