─ How and when was it that you came here to Moscow?
─ It came about quite by chance towards the end of 2006. I was working in New York at Salomon Smith Barney, an investment bank, part of Citigroup. At one particular business meeting with clients, the subject of the markets in Russia, India, and China came up. Later, my boss asked me: “Do you fancy giving it a go working in Russia?” My response was: “Well, why not?” So that’s how I ended up being in Moscow. I saw the great opportunities for business that were opening up here, and I soon left the bank to put my own projects into practice.
About the nightclub “Garage”
“Garage” opened its doors in central Moscow in 1998. Following a rebranding and relaunch, it was resurrected at a new venue and in a new guise, combining several different areas. A summer terrace with snow-white sofas lends it a lounge atmosphere; the ground floor is a chill-out zone complete with karaoke and table top games. And there is, of course, the dancefloor furnished with a multiple-kilowatt sound system. “Garage” is a popular spot for Muscovites and visitors to the capital looking to unwind.
─ You were born in Australia, educated there, but left for America. Why was that?
─ It’s a long story. I was a professional yachtsman in Australia. Our team performed quite well in international competitions but, by about 1996, I had realised that you can’t exactly make a living from the prize money: I mean, yachting, it isn’t football, you know. Everybody was getting into computers then, in 1998, and the internet. I knew a thing or two about them, knew a thing or two about business, and set up a company: The Missing Link Computer Solutions. It provided offices with IT services, set up internet access. In 2000, I sold the business and left for the States. I received an MBA from Wharton School, and made a career on Wall Street. Then, I became involved in my own projects in Moscow.
I saw the great opportunities for business that were opening up here, and I soon left the bank to put my own projects into practice.
─ What projects were these?
─ I became interested in the hotel and restaurant business. I already had some kind of experience in this area: I’d happened to work in various bars and restaurants whilst still in Australia. I launched the Moscow Suites project: apartments in the centre of Moscow. Then we opened the Garage nightclub and a cocktail bar.
─ Garage was a well-known club from the end of the 90’s. Then it shut down. What was it about the brand that interested you, and how did you resurrect it?
─ Garage opened in 1998 on Pushkin Street, and was owned by Dmitry Braude, the current owner of the club Soho Rooms. In 2007, he quit the project, selling his controlling share to his business partners. Rebuilding of the venue started, so the club was closed. I had been living in Moscow for a few years by then, and had become friends with Hristo Dechev, one of the partners in Garage. He had a wealth of experience in nightclubs, and I had international experience in finance and in running businesses. We decided to become partners and to open a new version of Garage. We were looking for premises for several months. We eventually settled on a building in Brodnikov Lane. The restaurant Biblioteka was here previously. We took its co-owner on as a partner, and together we all set about redesigning and rebuilding it. We opened in September 2009.
─ How much does it cost to open a similar club in Moscow? No doubt it isn’t cheap?
─ No, it isn’t. At the start of the noughties, clubs like Diaghilev or Opera were asking for $1-2 million. Their sites were enormous: they used former industrial premises. And these days, you might need five times as much as that. With nightclubs you really have to keep in mind what needs to go into the interior design, the acoustics, the ventilation. A lot of subtle details which require a lot of money.
─ Garage is located in an extremely prestigious part of Moscow. The rent must cost a packet.
─ Yes, it’s an expensive area. But a peculiarity of Moscow is that the rents for two buildings next door to each other can be radically different.
A peculiarity of Moscow is that the rents for two buildings next door to each other can be radically different.
That wouldn’t be the case in New York, for instance. For commercial premises, hotels, and clubs, you need a space which can always take large numbers of people, so the rent in our industry generally doesn’t come cheap. It is the heftiest part of our overheads, and when choosing a building for a club, the rental costs are an important factor. Beyond that, everything depends on how you optimise the premises to get the most effective use out of them.
Igor Shulinsky, Creative Director of “The Restaurant Syndicate”:
─ Campbell is absolutely right when he says that buildings in Moscow with vastly differing rents can be found next door to each other. But finding premises in the centre of Moscow for prices which are not sky-high is extremely difficult. You only have to walk around the city and look. Campbell managed to find somewhere reasonably affordable and I think that is the key to surviving in that kind of business.
To open a normal, average class establishment in Moscow costs around 25m roubles. This sum would cover drawing up the necessary documentation, repairs, and everything else. Clubs in the traditional sense are not what is now needed in Moscow. Bars, however, are a good market: they are multiplying but there are no more than about 30 quality bars in Moscow, despite the fact that the market could accommodate around 100. Not thousands, however, as a significant proportion of Muscovites still prefer to socialise and relax at home.
The disparities in rent in Moscow is a legacy of the Soviet times. A large amount of the property in the city centre belongs to state institutions: pension funds, for example. The market is greatly distorted: that’s a result of the chaotic privatisation of the 1990s. The rent for a new build across the street costs an astronomical amount, yet you could actually get a space in a building round the corner for nothing because its owners need the exposure to attract tenants. A lot can be solved by being aware of what’s going on and being able to talk to government people. It goes without saying, that the situation is evening itself out, but there is still a long way to go before the capital’s property market becomes fully rationalised.
─ Design is a key part of the branding of restaurants and nightclubs. How did you resolve that issue?
─ We needed to preserve the recognisable features of the old Garage whilst adding something of our own, something new. In terms of space, our Garage is considerably larger than the old one. I suggested ideas to the designers, inspired by the famous clubs of New York, my partners gave their input, and the designers put it all together. Ours is not the most glamorous club in Moscow but that wasn’t the aim we set ourselves. We want people to feel at home here. Our target audience is young and dynamic people. We have a fixed programme, and, on different days of the week, slightly different types of people turn up, but everyone finds their niche according to their tastes.
Ours is not the most glamourous club in Moscow but that wasn’t the aim we set ourselves. We want people to feel at home here. Our target audience is young and dynamic people.
─ How soon did the club begin to pay for itself?
─ When we opened our Garage, only six months had passed since the closure of its previous incarnation, and people had still not been able to forget about it. But we still had to do an awful lot so that people would start talking about us and turn up in good numbers. We started to get a return on our investment after about a year and a half. Now we have another objective: making sure that Garage keeps being interesting. We are constantly having to think up something new, something unexpected. The problem overall for Moscow clubs, bars, and restaurants is that often the money spent on building work and those other things needed before it can even open ends up being far more than anticipated, by which time there isn’t enough left to go on marketing.
Oksana Kryuchkova, Director of the Market Research Department at Analytic Research Group:
─ Overall, the non-fast food restaurant segment in Moscow is still unsaturated. One can talk of only one sub-segment as being filled: that of top restaurants, which in the main, is down, unsurprisingly, to the relatively limited demand. Another segment of interest from the point of view of investment is that of bars and pubs. One of the most rapidly developing formats is that of drinking establishments of varying types. This format’s potential is far from saturated. Through the course of their research, our experts discovered that the average cost of setting up a restaurant seating 100, from scratch, located within the Garden Ring is between $400,000 and $600,000. The ultimate amount depends on the rental costs, on whether the necessary utilities are present, the establishment’s concept (which determines the cost of refurbishment and equipment), staff wages, investment in promoting the business, and so on. Opening of a similar restaurant within the Third Ring Road works out a little cheaper at $300,000 to $450,000.
You absolutely have to set aside some of the budget for marketing so that you can shout out: “We are here!” There have been clubs in Moscow which looked simply magnificent but which closed after six months because they weren’t able to attract enough people. Or there’s the other scenario where it opens with a flash and a bang, then a strong competitor emerges on the market, and the club disappears. We have been in business for five years now, and our position on the market is only getting stronger.
─ Is it better that a foreigner launches their business in Moscow with local partners?
─ Not necessarily. I have had projects without Russian partners, too. And there are pros and cons to both. Negotiations in Russia can sometimes be conducted like a battle, where the intention is to defeat the other side, to “crush” them. But in modern business, the principle of the “win-win” is important: to negotiate so that both sides benefit. In Russia, though, it is not unusual for people to act according to the principle of “winner takes all”. Maybe that’s something to do with the legacy of Soviet times.
─ Does the Soviet legacy makes itself felt in young business people too?
─ Clearly the younger the person, the more they have worked in foreign companies, the more they have learned about Western business, the less the likelihood of encountering that Soviet pattern of behaviour. But then, young people pick up a lot from their parents. So the problem will remain.
─ How well is the foreign businessman operating in Russia protected by the law?
You absolutely have to set aside some of the budget for marketing so that you can shout out: “We are here!”
─ Legislation in Russia is complex and confusing. And poorly tested due to the lack of case law. Legal issues are not always adequately publicised. The laws are not only complicated but also, at times, have a contradiction at the very heart of them: it’s not always clear which of them you are supposed to be following. Take the new laws, for example, on smoking in restaurants. It is still not clear what is forbidden, and what is permitted. Can you smoke electronic cigarettes, hookah pipes; can you smoke nicotine-free mixtures and, if so, which ones?
─ Should the foreigner be wary of local partners seizing hold of the business?
─ I know of quite a few examples of stable partnership relations between Western businessmen and Russians, but it can be otherwise. However, deceiving you purely because you happen to be a foreigner ─ that isn’t going to happen. Whoever is out to con you is not looking at your nationality or citizenship. Just don’t have anything to do with such people. It’s exactly the same as in any other country in the world.
─ How does the foreigner in Russia do business in the current difficult international situation? And how do you assess the overall prospects?
─ In the short and medium term, the situation for overseas business in Russia will not be straightforward. But working in such crisis conditions is a real challenge. I hope that Russia will once again be able to find a common language with the West, and that the general atmosphere will change for the better.
Working in such crisis conditions is a real challenge. I hope that Russia will once again be able to find a common language with the West.
─ What kind of reforms does Russia need to increase business efficiency?
─ In my opinion, it would be possible to carry out a few reforms, nothing too radical or painful, in the tax system, auditing, and the law. This would allow the business potential of Russian people to be realised, the growth of GDP to be speeded up, and would better protect the economy, even in the case of international political uncertainty, by reducing the dependence on oil and gas exports. I don’t think that it is necessary to gamble on serious macroeconomic changes, and I believe more that the business climate will improve due to consumers themselves, due to their ever-increasing demands. I very much hope that this will prove to be the case.