Russia Gets a Triple Dip Of `Caring Capitalism'
JUST off Lenin Street, the main drag in this quiet Russian city, it's possible to find an appetizing slice - really more a scoop - of Americana.Skip to next paragraph
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Ben & Jerry's Homemade Ice Cream factory and store, a joint venture, occupies part of a building previously known as the Young Pioneer Palace, named for former leader Yuri Andropov.
The Petrozavodsk shop boasts the same bright decor as US stores and the sweet smell of fresh-made cones permeates the air. Dance music also thumps from a "boom box." The only thing the Petro-zavodsk Ben & Jerry's doesn't have are some of the funkier flavors. Yet, despite the lack of varieties - such as Cherry Garcia, honoring Jerry Garcia of the Greatful Dead - the Russian operation is "Truckin'."
"We didn't expect that success would come so fast," says Sergei Lukin, one of the joint-venture partners. "In spite of inflation, we still have many people who come here and stand in line."
Ben & Jerry's representatives are also pleased with the performance of the Russian venture, comprising three outlets in the Karelian Autonomous Republic bordering Finland. According to David Morris, director of Ben & Jerry's Petrozavodsk operation, "there's a two-part bottom line.... One is to stay profitable. The other isn't necessarily measured in dollars and cents, but depends on how much good you can do."
Vermont-based Ben & Jerry's has always been partly driven by what employees call "the social mission." Since they began making ice cream in 1978, Ben Cohen and Jerry Greenfield have created a corporate culture termed "Caring Capitalism." Philanthropic activities are guided by the Ben & Jerry's Foundation, which distributes 7.5 percent of profits.
Ben & Jerry's Petrozavodsk presence "fits nicely into the social mission part" of company strategy, says Jeff Furman, a board member. The main idea behind the Russian venture was to promote world peace and understanding, Mr. Furman says.
To that end, employee exchanges between the Russian outlets and US stores are planned for this summer. Ben & Jerry's also hopes to set up a foundation in Russia soon. The company plans to donate to charity 10 percent of the 7 million rubles ($10,600) in profit that the Russian operation earned in the first year, Mr. Morris says. As in the US, the employees will help select the charities.
The store also tries to set an example. Most Russian businessmen have only a basic grasp of capitalism, Furman explains. Ben & Jerry's hopes to show that it's also possible to prosper by producing something for the com-munity. "Being a model business is part of the goal," he says.
THE road to Russia was a bumpy one. The idea to open a store in Russia gained momentum about five years ago, when cold war tensions were starting to ease. The company first explored opening in Georgia or in Moscow. But the bureaucracy in both places scared them off. "We feared in Moscow we'd be swallowed alive by the bureaucracy," Morris says.
The company eventually settled in Petrozavodsk due mainly to the sister-state relationship between Vermont and Karelia. But obtaining permission from Soviet authorities to start operations and renovating the facility also took time, Morris says. The first Ben & Jerry's store opened in Petrozavodsk in July 1992. Another local outlet followed, along with one in Kondopoga, 100 miles north.
All three stores sell ice cream for rubles. Ben & Jerry's also tries to cover some of its hard currency costs by selling pints at stores that cater to foreigners in Moscow and St. Petersburg.
A priority has always been keeping costs down for Russian customers, Morris says. The company has been successful, as the price of a two-scoop cone has risen from only 25 rubles (about 4 cents) to the still-affordable level of 75 rubles. Prices at other American ventures, such as McDonald's in Moscow, have tripled or quadrupled in the last year, as Russia's annual inflation rate is more than 2,000 percent.
"When everyone can't afford [the ice cream], then you start making enemies," he says. Speaking of inflation, he says "It's a war. Unfortunately, we're fighting a losing action right now." A big price increase is inevitable this month because the price of cream is expected to double March 10.