— Yes, I am of southern origin. My parents are Sicilians. Forty years ago they moved to the north, to the Friuli-Venezia Giulia region. That is where I was born, in the small town of Grado. But I have maintained close links with Sicily; until I was about 20, I spent four months a year there. And today, if I go to Italy not on business, I go to my parents in Friuli or Sicily.
— There are far more opportunities in Moscow; the competition had not yet reached European levels, the taxation system was more favourable, and investments give a much better return, he says, listing the advantages.
But how could a young university graduate get into a good position in the unknown Russian market? Giovanni decided to continue his studies – in Moscow.
— I came here in 2008 and spent a year studying Russian at Moscow State University. By that time, by the way, I already knew English and German in addition to Italian.
Then I tried to find some kind of interesting work, first in Moscow, then in Italy. In the following year, 2009, I returned to the Russian capital and spent a few more months improving my Russian. Again I tried my hand at several lines of work.
In 2010, I worked in Italy for a firm delivering spare parts and components for vending machines; I was responsible for the firm’s sales in the countries of Eastern Europe. Then I got to know the owner of the Russian company CIBA-Vending – he was one of our clients.
In 2012, I finally moved to Moscow. I happened to see this same man at an exhibition. I went up to him and reminded him of our acquaintance. The outcome was that he invited me to work in his company, which imported vending machines from Italy. I became the first Italian there.
In CIBA-Vending, Giovanni was responsible for the development of business in a specific sector: the sale of machines for making and selling coffee in offices and public catering establishments. The machines were of the latest generation – the capsule type. Capsules are very convenient for use in coffee machines, the main reasons being that all the taste qualities of the coffee are preserved for a long time, so that the drink can be made to the true “Italian” level.
— Did such machines sell well?
— For the most part, we don’t sell them, we lease them. We sign a contract with some firm, take a coffee machine to the office and install it. Free of charge.
— What do you mean by “free of charge”?
— Free of charge! The machine – they come in different sizes – remains our property, we service and repair it. And the way our business works is that the client firm undertakes to buy a specified minimum number of capsules from us every month. The minimum depends primarily on the size and power of the machine. That is, from 50 capsules a month to, say, 800 for a coffee machine in a large restaurant. The client firm itself may offer its staff free coffee from the machine or may charge for it; in the latter case, we fit the machine with special receivers for coins or banknotes.
The way our business works is that the client firm undertakes to buy a specified minimum number of capsules from us every month.
— And on average, how long does one such machine take to pay for itself?
— Not very long. In about five months, sometimes less. But it’s difficult to calculate it precisely.
— Are they popular in Russia?
— Selling from vending machines is not yet very well developed here. But “real Italian coffee” is a great brand. And now you don’t even have to go to a café or bar if you don’t want to. So we are installing new machines all the time. It should be said that the vending machine market in Russia is growing at a rate of 20% a year.
— I have even heard that this form of trade never suffers from economic crises, recessions have no effect on it.
— I would go further, and say that the vending trade runs in counter-phase to the economic crisis. MacDonald’s for example, finds the same – it is known that sales of fast food always increase in a crisis.
And this is only to be expected. People have to tighten their belts. But they still can’t get by without eating or drinking. A person may stop going to a pizzeria in the evenings, but he will dine at home.
Or take coffee. In Italy, a cup of espresso at the counter in a bar costs on average one euro. But in an office coffee machine, coffee of the same quality is only 25-30 cents. So the business has good prospects. And there are several Russian firms involved in the distribution of, for example, the products of the well-known Italian firm Lavazza, which produces different sorts of coffee, coffee machines and capsules.
— And how do you get ahead of your competitors? By dumping?
— No, dumping is the very thing you shouldn’t do, because it inevitably leads to trading yourself into a loss and eventually having to leave the market. And the market here is not yet fully assimilated; in principle, there is enough for everyone.
Coffee capsules contain a 6-9 g portion of natural ground coffee for brewing in capsule coffee machines. This enables the natural taste of the coffee to be preserved for a long time – from nine to 16 months (depending on what sort). They are made of aluminium. The patent for the capsule system was obtained at the end of the seventies, and the system spread far and wide across the market in the nineties. The capsules may be polymer, or aluminium, or of combined material.
Therefore representatives of the various firms operating in this business sector prefer to meet and somehow come to agreement on principles of operation: for example, not to let prices fall below a certain minimum, and not to take existing clients away from each other.
The winner in the competitive battle will be the one who best organises the service, the delivery of the capsules and other ingredients. Logistics is close to being the main expenditure heading in this business. You have to maintain your own large fleet of vehicles. But given the present state of road traffic in Moscow, no fleet is ever enough. Sometimes a van delivering only 50 small capsules can take two hours to reach a client through the traffic jams. It’s a lot of cost for little satisfaction.
— I know that you are leaving CIBA-Vending. What are your business plans after that?
— I won’t conceal the fact that I came to Moscow to make money. And before I came to CIBA-Vending, I tried my hand as an agent for Italian firms engaged, in particular, in exporting food products and vegetables to Russia. I think this is a line of business with very good prospects.
Sometimes a van delivering only 50 small capsules can take two hours to reach a client through the traffic jams.
And today, I am developing my cooperation – so far only as an agent – with these Italian companies. Naturally, they is no question at present of selling to the big chain stores, That requires a lot of organisation, capacity, and of course, money. But they have managed, with my help, to organise deliveries to some Moscow restaurants. I have just opened my own firm. Now I shall no longer just be an agent, I shall be an importer.
— But for that, as you just said, you need a lot of capacity – all that special equipment, warehouses – and that requires money. How much, do you think?
— Hundreds of thousands of euros.
— And where are you going to get them?
— Partners are required. Italian or Russian, it doesn’t matter. I have become convinced that I can work with Russians no worse than with my fellow countrymen.
— I should just like to add that I think property in Russia should be bought, not leased. Housing, offices, stores – they should be your property.
— Aren’t you being too categorical?
— It is not convenient to lease in Moscow. Apart from the constantly rising and unpredictable payments, a lessee is not protected in any way. Take me – I’m a bachelor, I lease a two-bedroom apartment near the Belorusskaya metro station. I pay about 1000 roubles (roughly 25 euros) per square metre every month. That’s ok, but I know that if they like, they can throw me out of this apartment at any moment.
I have become convinced that I can work with Russians no worse than with my fellow countrymen.
It’s not like that in Italy. If you’ve lived long enough in a leased apartment, you can’t just be thrown out, they’d at least have to take you to court. And there would be enough time to find somewhere else to live.
But that’s just an apartment. Just imagine if you suddenly had to vacate a whole warehouse and take everything somewhere else!
— But property in Moscow isn’t cheap.
— I know. But on the other hand, it produces income, which it wouldn’t in Italy. Anyway, I am planning to open a shop in Moscow in two or three years, selling food products from Italy. If it can be agreed with the partners, maybe we shall eventually turn it into a mini-supermarket or a chain of them.
— We wish you every success!