Metodi MADJAROV was born in the small Bulgarian town of Elhovo. He graduated from the Electrical Engineering Institute. He then worked as an engineer. After the collapse of the socialist system he reluctantly turned to business. Over his twenty years in the Russian market he has earned the reputation of being an honest and reliable businessman. For this, he has been awarded Medals of Honour and Certificates of Merit.MADJAROV's firm successfully markets in Russia products from such Bulgarian cosmetics and perfume manufacturers as Rosa Impex, Solvex Cosmetic Products, Global Cosmetics, Solido, Alen Mak, Vision Cosmetics and Fresh Up Cosmetics. The company has over 500 different brands on its books.BRK Cosmetics is rapidly developing and has a far-reaching dealership network, as well as eight representative offices in Russia and other CIS countries. It cooperates with Belarussian and Indian cosmetics manufacturers.
I Took Advantage of Socialism's Inertia
“I started doing business...out of fear,” relates Metodi MADJAROV. “At the end of 1989, Bulgaria was no longer under the control of the USSR. Economic and political reforms began, and there was, quite simply, chaos. Former giants like Pharmakhim and Bulgartabac started to break up into smaller enterprises. Competing with multinationals was difficult. We didn't have consecutive capitalism – we all had to learn to survive under new conditions. In order to look after my family, I, like many others in those days, took to engaging in “sack” business: buying here and selling there. One day, I met a certain Aleksei Sorokin from Tula on the train. He was the Deputy Director of a hosiery factory and was importing hosiery from Bulgaria. We decided to join forces and deal in Bulgarian cosmetics. Embarking on a new line of business we felt like pioneers. In October 1992, we brought our first lorry filled with creams, shampoos and toothpaste. All our goods just flew off the shelves! The risks were enormous, the ruble was plummeting, each day losing 5-10%. We were getting “wooden” rubles, and we didn't know what to do with them. So as not to drive the lorries back empty, we started to transport children's toys from Russia to Bulgaria...
Competing with multinationals was difficult. We didn't have consecutive capitalism – we all had to learn to survive under new conditions.
“I began to engage in business more seriously in 1996 when my family and I moved to Moscow. I did, of course, get swindled, but I never encountered any out-and-out racketeering or extortion because of the protection I received from the Centre of Industry of the Republic of Bulgaria, and our trade delegation, which is located in Moscow. It was possible to lease office and storage space there. The Bulgarian Embassy practically served as a “shelter” for me.“But the main thing is that I didn't need to research the market in order to sell Bulgarian cosmetics and perfumes in Russia. I took advantage of the inertia left over from socialism. At the time of the global deficit, our products were literally flying off the shelves in the USSR. And this was something which the Soviet people, now living in a democratic Russia, remembered well. Bulgarian cosmetics are natural: it was a pleasure for me to offer traditional glycerine hand creams, vitamin-based toners, fruit-based lotions, fluoride toothpaste, bath-salts and oils...
At the time of the global deficit, our products were literally flying off the shelves in the USSR. And this was something which the Soviet people, now living in a democratic Russia, remembered well.
“Our products were bought by people on middle to low incomes. Teachers, doctors, agricultural workers, students, usually. The greatest demand was for VIP'S Prestige hair-dye, Aquarelle toothpaste, and Aktiv bleaching spray.“And it was easier to operate wherever there were fewer multinational retail outlets: in Stavropol and Krasnodar regions, all the Caucasus republics, as well as Central and the Far East of Russia. It was more difficult in the north, in Murmansk or in Leningrad region.”
120 Lorries a Month
“From 1996 to 1998, I imported up to 120 lorryloads a month into Russia. Each lorry contained 20 tonnes of products, in other words, monthly I was importing 2,500 tonnes of perfumes and cosmetics. But then, gradually, demand began to fall. People were becoming more interested in more expensive cosmetics. Russia was becoming part of the trend towards globalisation. Products began to be sold more and more through large retail outlets. And for us to be granted “admission” in Russia would have been expensive - you have to pay large bonuses which we couldn't afford. In other words, the retail outlets were doing all they could to make sure that they sold products primarily from multinationals. You could see products from brands like Yves Rocher, L'Oreal, Avon, Oriflame, Mary Kay, Vichy, Nivea, Faberlic in any country. The same started to happen in Russia. And it became more difficult for Bulgarian companies to compete. If you take Colgate, for example - they make very cheap toothpaste as well as very expensive toothpaste. Such large companies are able to expand using TV adverts, price-dumping and special agreements with retail outlets.
“But for much smaller companies, which includes Bulgarian producers, their popularity can only be on a local scale. Something which we also took advantage of. We started to be squeezed out of the big cities, but then we began trading in the provinces, and found our niche there. Our products are adored by those in regional towns. For example, customers who are aware of the quality of our hair-dye go out of their way to find it in the shops. You can say the same for our toners, creams, bath products... All the more so, as Bulgarian cosmetics, in terms of choice and quality are worthy of the trademarks I have already mentioned.
We started to be squeezed out of the big cities, but then we began trading in the provinces, and found our niche there.
“The range of our products is always growing with new ones appearing. But there are difficulties with the Bulgarian producers. They have well developed sales in less developed countries. So, they do not pro-actively increase their choice of product-lines. This process is happening, but slowly, which is a big negative.“But we can turn this negative into a positive by always taking part in exhibitions, the largest of which is InterCHARM. It is the ideal place to launch a new product, to look for partners and expand the business. We occupy a central position from year to year at the exhibition, which is visited by up to 50,000 people, and where we have 120 sq. m. of stands.”
Foreigners Do Better Business in Russia than Russians
“Supplying Bulgarian cosmetics and perfumes to the Russian market, I have always borne in mind that there are two kinds of profit: operating profit and ploughed-back profit. Operating profit is what you receive from your company's activities. But, if you pay all of your taxes, the profit which is left over is not large at all. Getting rich that way is difficult. Whereas ploughed-back profit is what provides fixed assets. I wanted my company to develop, so I leased a plot of land in Shcherbinka, outer-Moscow, and started to build a three-storey building to rent out as offices. I paid back the bank loans for the construction with money from the company. The building was completed in nine months. I didn't pay any kind of bribes. I was visited twice, after a tip-off from my competitors, by law-enforcement and customs officials. But they went away again, just as they had arrived. I don't practice grey or black accountancy, only white: I pay all my taxes on time. I have nothing to hide, everything with me is transparent, I am not afraid of inspections. So, to anybody having doubts about whether to start a business in Russia or not, I can say: you can operate here honestly.
“The building which I had constructed now houses my office and storerooms. Today, you can call my company a holding company: I sell Bulgarian cosmetics and perfumes, and supply Moscow with 200 tonnes (10 lorries) of cosmetic products each month. Besides which, I import loaders and the spare parts for them. And, I let premises to various companies. The company's annual turnover is around 600m rubles (around $18.5m). And the start of it all was that first lorry which, twenty years ago, brought creams, shampoos and toothpaste to Moscow...“I would not have had such a large market in Bulgaria. And the competition would have been so much greater. I speak to my friends who have started businesses in Bulgaria, and they haven't managed to unfurl like I have. Russia does indeed offer great business opportunities. You just have to have initiative. It is noticeable that foreigners in Russia do better in business than Russians. Russians are much more apathetic. This is a visible consequence of a long socialist past when there wasn't the incentive for people to work really hard or to show any initiative. In Russia, people had it drummed into them for a long time that to be well-off was to be an enemy of the people...
I didn't pay any kind of bribes. I was visited twice, after a tip-off from my competitors, by law-enforcement and customs officials. But they went away again, just as they had arrived.
“Now, I consider Russia to be one of the countries most conducive to launching a business. Here, anyone can start and develop their trade. Foreigners shouldn't think that Russia is a crime-ridden country. The market is vastly different from what it was in the 1990's. Those who have stayed in business are those who value their reputation. Once they have given their word, they keep it. I, for example, have been working with the very same partners for 15-20 years. Most of them have become my closest friends.“What is more, the Russian authorities have a great respect for foreign citizens. If a foreigner requests something from a governor or mayor, from under the wing of their embassy, they will straight away receive a positive response. That is how it always was in my case, anyway.“And also, I feel comfortable in Russia. Our languages are similar. Bulgarian is a Old Church Slavonic language. All the services in Orthodox churches are conducted, for all intents and purposes, in my own language. I now consider Russia, where I blossomed as a professional businessman, to be my second home.