“Successful Family – Successful Russia”.

Maria Ushakova

By a turn of fate, I found myself attending a very unique forum in Moscow’s Expocenter on the 2nd of October. With the fascinating title “Successful Family – Successful Russia,” this was the first of its kind; dedicated to family businesses and organised by the Russian Chamber of Commerce with Sberbank as the main sponsor. The opening ceremony was very well planned and attended by high-level individuals, ministers and regional governors. Lovely children from family choirs sung beautifully, as well as the Tenor 21stCentury Boys Band.

What a curious event! I would like to share my sincere thoughts and impressions that this event had on me. First of all, when I received an invitation to attend this forum just a couple of days beforehand, I immediately thought: ‘What family business are they talking about? I am convinced that small to medium size businesses simply don’t exist in Russia, yet talking about family business, that is something very new’. My dad who is a successful banker with 40 years of experience in the world’s leading financial institutions always told me “Maria, you will never be able to do business in Russia, don’t even think about opening your own company, this country is full of ‘dangerous people’ (to put it mildly), and all possible business has been divided a long time ago among clans and certain diaspora, so even if your business is successful and brings in money, it will be taken away from you in a matter of seconds, and if you show resistance, you will be put in jail”. I have no reason not to believe my own father. But, let’s focus on the Forum for Family Business in Russia.

As a side note, I would like to add, that we do have a family businesses in Russia. They are omnipresent. Look at the Rottenberg’s and other oligarchs who enjoy empires, clans and simply huge businesses. I thought that these individuals will also take part in this forum, I looked for them everywhere, but, I did not see them.

I did indeed see a lot of stands with local food produce from various Russian regions, lots of sausages, meats, organic juices, cheese… but it turned out that only two stands represented agricultural family businesses were represented, one was called ‘Pelmeny Mechta’ (translated as Dream Dumplings) a company based in Kirov region. This company was started by a married couple, it’s a company that now employs 170 people and sells dumplings quite successfully in the Kirov region. Unfortunately, they are not sold in Moscow, because it’s simply difficult to get into the distribution chain into Moscow’s supermarkets. But I do have to say – they make impressively tasty dumplings.

The second family stand representing foods was staffed by a married couple from Chelyabinsk showcasing their Сhickpea Dry Mix for Vegan cutlets… quite disgustingly tasty product. They were a very nice couple who named their company. ‘Mamina Lyubov’ (Mother’s love). I spoke to them too, and they admitted to me that they are in constant ‘minus’, they are not able to make a living selling their dry mixes. Their main source of income is coffee machines that are spread across various supermarkets in their little town.

After eating a lot of sausages and drinking dogwood kompot (boiled juice) from Azerbaijan I asked the organisers to show me more stands which represent Family Businesses in Russia. I was sent upstairs to the area where there were a few souvenir stands as well as a family business stand dedicated to VALENKI (Russian traditional footwear). Very nice, this valenki company, based in Nizhny Tagil and they are doing quite well. I’m not very keen on wearing valenki this winter, as I already have great UGGs stored from England, but I did appreciate the fact that there was a family business selling valenki in Nizhny Tagil…

I talked to Robert from Azerbaijan, the manufacturer of the dogwood kompot, as I was very thirsty, and  I asked him about his business. He told me that he needs 15 million roubles to buy equipment in order to increase his juice production volume in order to be able to make some money. So, I naively asked: “why don’t you ask Sberbank for a credit”, he said that it’s impossible, as Sberbank would want a guarantee, and he has no guarantee. I asked why he doesn’t go to the local market to “his own people” to ask them to borrow him the money, and have a market stall there, as the juice is brilliant indeed. He said: “If they get into my business they would want a 40% share of the business for the rest of my life, so why shall I give it to them?” Well, Robert is determined that in a couple of years he will find the money… too bad he is already past 50 and not much time left to build a juice empire in Siberia.

To be honest, that was it – I couldn’t find any more family businesses at this forum organised by the Russian Chamber of Commerce and sponsored by Sberbank.

Here we go, the main program of the event has started, it included panel discussions happening in different allocated halls. One was called: ‘Cooperation for Effectiveness’. This was moderated by the Vice President of the Chamber of Commerce, who repeatedly said this phrase: “Very tough competition limits possibilities and makes it impossible for people to start their own businesses in Russia.” He included a historical overview into the past practices of how to implement the non-existent post-Soviet Russia experience of distribution of business between generations, to successful cases and experience sharing from European experts.

Whilst the intention of this forum may have been very good, the delivery failed… Family members of big family businesses were absent, and there was no clear road map of how the government is planning to help family business grow. The reality remains the same: Russian craftsman producing amazing artisan products and are strong candidates of being ‘family business success cases’ but they are not supported, as there is no demand for what they produce. Of course, a son of a valenki maker is a valenki maker and is a very respected person, as he possesses the knowledge of his father, the industry (trade secrets) that can only be earned with time… and experience. But, ALAS… I don’t want to buy valenki.. Why, because I am not a grandmother yet. This applies to everything in the arts and crafts world. Russians still don’t buy Russian identity products. Due to sanctions and heavy customs tariffs, craftsmen can’t really sell their crafts abroad. So, we are left with talented craftsmen who are unable to support their families and obliged to find alternative ways to make their livings. As a result, various crafts are on the verge of extinction. Restaurants and hotel business are not something that can ever bring in any revenue. There are tons of examples of Russian hotel owners preferring to open hotels in Thailand and India, not in Russia. As it’s simply not profitable to do it here.

We are left with the agricultural sector – yes! Fantastic, but, only a very small percentage of Russians go into the fields to plough or look after the cows. This is hard work in the digital world, where we are simple too lazy to wake up in the early morning, yet alone to be responsible for animals and a farm. Ask John Kopiski his take on working in an agricultural tourist cluster, he is the only person I know who successfully manages a farm and works very hard, every day, on making a living and being independent from bank loans and horrible grants. It would have been amazing if the Chamber had invited John to moderate a section of this forum, as he is, being a descendant of a successful business family in the UK, able to broadcast the right family values and keep such businesses afloat.

One of the experts who were present there made me quite uncomfortable when she was asked “what are the ideal roles for two sons in a family business?”, she answered: “Ideally one should always be responsible for GR (government relations) and continue on with the father’s connections after the business is fully delegated…” This is quite funny, don’t you think? Will our business always be governed by “the government?” Is there is no escape from this paradigm?, I thought.

I would like to finish this article on a positive note, as in Russia, we are quite depressive people, but we always hope that a magic want will be waved and it will save us all. We are left with new technology start-ups which are quite promising; as it turns out this sector of IT and general science start-ups do have a future in Russia. I lack statistics, but you can easily find a quote on the internet, if you search carefully, not on the Chamber of Commerce website.

At the forum, talkative as I am, I was having a cup of tea, when I met a lovely young man called Ilya Vorotynsev who represents the new wave successful family business in Russia from Nizhny Novgorod. He did not have a stand at the forum, he came as a visitor, holding a free lunch voucher in his hand. I asked him, how come he was there, he told me “well, I was invited to this forum by the Chamber of Commerce, they told me that Putin will attend this forum, so I accepted the invitation.” Naive as you are.

Vorotyntsev’s dynasty is well-known in Russia and world-wide scientific circles. All of them – father (Vladimir) and two sons’ (Ilya and Andrey) work in Nizhny Novgorod State Technical University. Prof. Vladimir Vorotyntsev was the CEO of a company which created a market of specialty gases for the semiconductor industry in Russia. This year his sons’ families created a R&D company “Membrane and Catalytic Technologies Ltd.” This company designed a greening process for recycling of household waste. The prototype which was presented to industrial partners has no analogy in the world of household waste pyrolysis. Also, the company is researching and developing energy saving and ecologically friendly membrane gas separation processes for post-combustion carbon dioxide capture. This process will displace the CO2 sorption/desorption by ethanolamines which is not so ecologically safe and has much bigger operation cost. The mission of the company is make scientific advances available to society and to bring green technologies to market.

Clearly there are family businesses in Russia, but not many of them were represented at this forum.