– In Russia, for every 100,000 people there are two coffee shops, while in New York there are 27, and in Milan – 153. And naturally the interest of Russian consumers in this form of public catering is increasing all the time. How do Russian coffee shops differ? Their format is fairly fluid. In most of the popular chains in Moscow, such as “Shocoladnitsa” and “Coffee House”, customers are offered not only the traditional coffee shop range, but also alcoholic drinks and a wine menu. And international networks such as Starbucks and Costa Coffee have also been forced to adapt their techniques for running the business to match the Russian mentality and to expand their range, while retaining the overall concept of the brand.How much does opening a coffee shop cost? In Moscow, according to various estimates, it costs from 100,000 to 200,000 USD, while in other cities the costs are 10-15% lower. Much depends on the choice of location and the availability of a professional barista. When we talk about the recoupment of regional coffee shops, you should bear in mind large cities with good infrastructure, where coffee culture has already penetrated. In cities like this the recoupment period can be 18 to 24 months. Again the location of the shop is crucially important. In general Russian coffee shop customers are white-collar workers and students, so proximity to shopping and business centers, and educational institutions is important... And some more figures. Nowadays Russians drink on average 160 cups of coffee a year: 61% of consumers prefer coffee with sugar, 24% drink coffee with sugar and milk, 11% take their coffee black, 3% – with milk, but without the sugar, and 1% – add brandy or lemon to the coffee.
It all started in Novosibirsk when I came across a truly disgusting cappuccino from a truly awful coffee machine. I put the money in the slot, pressed the button... and quickly realized that I could never drink something as bad as that. I started toward the exit, but I‘d only gone three steps when – eureka! Оh, yeah! That’s Coffee! When I got home I proposed to my wife Svetlana that we should open a coffee shop. You should have seen Svetlana‘s eyes – they were as big as saucers! She told me that this was the best idea I had ever come up with.
The First Step: Nothing Happens Without Money
Now we were faced by the question: where could we get the money? I called around some potential creditors – nothing came of it. And by nature I am an ambitious person, everything I do I want to do at once and on a large scale. When I thought of a coffee shop, I imagined that it should have a 200 square meter (2,150 sq. ft.) kitchen, with a machine for roasting beans, and of course the best coffee varieties from all over the world.
Svetlana and I drew up a business plan. On paper, everything was set down in full detail. But we still did not know what to do in practice. Then we were joined by three others who shared our dream – the Americans Christina WILLOWS and Scott RAYMOND, and a local businessman Leonid OSOKIN.
It all started in Novosibirsk when I came across a truly disgusting cappuccino from a truly awful coffee machine.
The whole team set out to search for an investor. And we went to America to do it. But still no one would help us out. Were they afraid? It wasn‘t even fear. If people had properly thought about what was being proposed, they might have been afraid. But they didn‘t even bother to think it through. The response to our proposal was always something like this: yes, yes, yes ... of course ... no! It wasn‘t fear, but just a lack of any genuine thought about the idea. It was a question that was not up for consideration.
Why was that? I think it was because here we were dealing with the public catering industry – which is one of the most sensitive areas. And for Russia times were very tough. In Novosibirsk restaurants were closing down almost as soon as they opened. Only a few were keeping their heads above water. Obviously, with this background nobody took us or our coffee shop idea seriously.
Even the Default did not Put a Stop to it
In the famous August of 1998 I was back in America. I had poured myself a good cup of coffee and was sitting watching TV, when I saw that the ruble had collapsed! It had fallen to a level almost four times lower than before. A few hours later – there‘s a call from a guy in Russia: “Chris, have you got any money? Don‘t waste it, don‘t buy anything!“ I asked: “And what about a ticket back to Russia, can I buy that?“
And so I returned. I met Eric SHOGREN – he was from America too and had opened the “New York Pizza” chain of restaurants in Siberia. I even got to work for him. In what position? Well, let‘s say executive director. Some kind of manager anyway. That is because at that time new businesses didn’t have any distinct positions. So, someone would distribute coupons, others did the negotiations or something else...
Now we were again working in the same company, and in 1999 I got my own little corner of business – a tiny bar-counter in the “New York Pizza” on 12, Lenin Street, Novosibirsk. It was the first shop with the name “Traveler‘s Coffee.“
I was a young businessman and by nature I had always been in a bit of a hurry. I immediately thought that one place was not enough. I imagined myself having a whole chain of coffee shops – not two, not ten, but something on a national scale, and then moving up to the international level too. Meanwhile Eric had a lot of problems of his own. His chain worked successfully for him and he was already making serious money, spending some on charities and working with the governor on some projects. And here I am badgering him about some kind of coffee shop... Eric and I were friends (and still are), but I soon realized it was time to go my own way. I had the equipment, I had the brand. And again the same puzzle: what to do next?
They feel like they are in a restaurant, but are only paying about one-third of restaurant prices.
The main thing is to never give up, to stubbornly hold your course. And in 2001 I got a serious investor, an Irishman, who was also an adherent of the Baha‘i Faith. He put in a lot of money, about 50,000 dollars. Another 20,000 was added by my first mother-in-law, who lives in America (yes, we were always great friends and kept up a good relation even after I moved to Russia). We already had the equipment. And now finally having the money, we opened our first independent coffee shop in Novosibirsk – near the Gagarin metro station. At first it was hard, we were spending a small fortune while the first small profit didn’t come until three or four months of business.
And today my new partner Anwar PRIEVA and I have opened 43 shops in 26 cities. As well as in Novosibirsk, we have shops in Yaroslavl, Kaluga, Moscow, St. Petersburg, Vladimir, Ivanovo, Krasnoyarsk, Irkutsk, Angarsk, Vladivostok, Baku, Tyumen, Nizhnevar-tovsk and others. And the chain continues to grow. Our annual net profit is 10-11 percent. And once there is a profit, there‘s the opportunity to develop further. This is what we are doing.
We got the crazy idea of going into franchising in 2007. We worked on the system for about a year. And then, as everyone remembers, the global financial crisis kicked in. And a lot of franchises sprang up in connection with it. Because people understood: you need a cash business. If I was engaged in construction, real estate or developing, I could have been in very serious trouble, it would have been very tight indeed. But we have actually benefited. You only had to present the business in a normal way, as something for the mass market. It shouldn‘t be too expensive. But not too cheap either. Something between a restaurant and a fast food joint. So that when people come to us they feel like they are in a restaurant, but are only paying about one-third of restaurant prices. And so there is a kind of golden mean.
A Russian, just like any other, quickly gets used to the good things in life.
What is franchising? Many people simply do not know what it means. We answer the question like this: here‘s my complete concept, take it and do business with it. And we will help you. We dictate the terms, but we also give support and help develop an understanding of our concept.
“Travelers“ Must Travel
We use the best beans from all corners of the planet. You have to widen your horizons. Of course everyone knows about Brazilian coffee. But if this is all you ever have, you will have quite a narrow conception of this remarkable drink. Today we offer 25 varieties from 25 different countries. From Ecuador, Nicaragua, Mexico, Sumatra, Java, Colombia, Kenya, Ethiopia, Yemen, Jamaica and others. As well as Brazil of course... We only take the best grade from all of these places and we taste the beans ourselves. If you tie yourself to a single country, how can it be “Traveler‘s Coffee”? “Travelers“, as the brand says, have to travel.
The Peculiarities of Russian Business
Marketing and business relations in Russia are still in their infancy, but they are developing rather quickly. Often business people are not so serious about the business itself. They are just looking to the final profit, but they overlook a lot in the initial stages. For example, the business concept, the business plan, is often poorly worked out or it is simply not developed at all, although it is crucial for how the business is going to develop. Many parts of the retail trade and the associated infrastructure are also just developing. But, undoubtedly, Russia has enormous potential, and a Russian, just like any other, quickly gets used to the good things in life. So civilized market will come here.
Another characteristic of Russian business is that a lot of it is based on personal contacts, the human factor plays a critical role. Relationships are often built directly on personal meetings and conversations, without the participation of any management companies or suchlike. In America you could work somewhere all your life, but you might never meet the owner of the business. But in Russia the owners are usually very active and quite often in full view...
Sergei Semka, Minister of Industry, Trade and Business Development in the Government of the Novosibirsk Region:
– “Traveler‘s Coffee” is for everyone, it has good coffee and warmth for its customers. I often drop in on their shops and sit down with a fragrant cup of Black Dot coffee. The customers come from various backgrounds – rich, poor, students or people of moderate means, but still they share something, some intellectual base: it is clear that coffee and coffee houses are things that attract people. There are a lot of tourists in Novosibirsk, and foreigners understand the concept of a coffee shop, they do not even need to read the menu. Most of the drinks served in “Traveler‘s Coffee” are standard all over the world, so visitors feel at home there.
Advice to Anyone, Opening a Business
It is important not to be in a hurry! Don’t try to do everything you thought of straight away. The market in Russia is quite unique, so it is best to first take a good look at it (for 12 to 18 months), learn all the intricacies of the set-up, and only then go into action. Gradually build a foundation and under no circumstances should you expect quick results. But don’t retreat, no matter how difficult it becomes. And the most important thing is to find a worthy and reliable partner in Russia, someone you can trust. That is also something that can’t be done in one day.
Of course you must also believe – in God, in yourself, and in the path you have chosen. Trust in God, but be persistent, respect your work, know your product well. What do you want to achieve? Why? What‘s your goal? Keep asking yourself these questions. Why am I doing this? Because I believe that our product is the right one. Of course there are some fears (it’s healthy to have those) – fear of the competition, fear of a crisis... But that doesn‘t change anything. It just forces you to be more prudent, to work better. And whatever the situation you should remain a decent person.