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  • bardinja bardinja Jul 20, 1999 1:15 PM Flag


    "Political risks play much more of a role there."

    The three bankers behind Chapayevsky toasted
    bread snacks, in St.
    Petersburg, began thinking of
    manufacturing for the Russian market
    during the Asian
    crisis of late 1997.

    "We were investing in
    Russian blue chips, and we realized we didn't
    anything about them," said Yuri Khomylov, a
    partner. "We wanted something that belonged to
    us, whose finances we
    controlled and which no
    crisis in the future could affect."

    From the
    outset, the approach new manufacturers take to doing
    reflects how much they differ from members of the
    older Soviet-era
    generation who still run most big
    businesses and are mostly concerned
    with how much is
    produced instead of whether it sells. But younger

    entrepreneurs want to manufacture goods that actually make
    money. And
    to win a place on the market and in
    people's minds, they have to know
    how to sell.

    "We decided what we were going to make had to be
    something edible,
    domestic, cheap and tasty," recalls
    Sergei Rudenko, another
    Chapayevsky partner. "We
    wanted to make something others hadn't."

    recipe for success was stunningly simple: make something
    loves but no one can find. Russians snack on
    sukharii, similar to Melba
    toast, the way Americans eat
    popcorn, but it is not sold in ready-to-eat
    Russians must instead buy dark rye bread, slice it thinly
    dry it on low heat in the oven.

    made the snacks for years for his family, but the
    partners had to
    find a way to mass-produce them.
    Rudenko and Khomylov, along with
    Gennadi Becker, the
    third partner, turned to the St. Petersburg

    Bread-Baking Research Institute for advice. Through trial and
    error, they
    discovered what flavors might be good to
    add (dill and garlic, yes;
    lobster, no) to the
    bread. They found a local machine-tool builder to

    construct production lines, since no machines existed to
    cut bread into
    pinkie-size strips.

    project was supposed to be secondary to their main
    investing in Russian stocks and regional debt.
    But Chapayevsky turned
    out to be their salvation.
    The three lost $500,000 in trading, but within

    days, they pooled $75,000 to buy the last of the
    equipment for their
    snack venture and to rent a room on
    an army base at the end of a
    trash-strewn St.
    Petersburg road.

    With no staff at first, they
    worked 15-hour shifts and drove around town
    the snacks to any wholesaler and bar that would have

    "The opinion we ran into at first was,
    'Harrumph, I can make that at
    home,' " Rudenko recalled.
    "But those who took the snacks and tried
    them are
    now our regular clients."

    To grow, the small
    manufacturers will eventually have to create a brand,
    just a product, said Benjamin Wilkening, an investment
    manager with
    the $300 million Millennium Fund.

    "Most are competing solely on price now because
    that's the short-term
    strategy for survival," he
    said. "If they want to be viable in the long term,

    they have to have a brand name the consumer

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