The owner of a chain of healthy products “Coswell”: “we Have no crisis at all”

“We noticed the effect of sanctions last fall”

— Reduced purchasing power — are people ready to pay extra for natural products?

— We have no crisis at all. [In our stores], and the traffic is growing, and the number of stores is increasing. Therefore, we do not fully understand what the crisis. We gathered all the trends that exist, that people really started thinking about what products should be manufactured in Russia, and in the crisis they began to think about health. Perhaps he had come to a generation that thinks about healthy eating, about what we need are products that you can not spend a lot of time on “Auchan”, because the time really expensive.

Another trend — in the current situation, businesses need to have credits. Said we were crazy, “SKOLKOVO” said, “Whom we invited [meeting with students], suckers some. We then read them the day that the main thing is funding, liquidity, credits”. I came in and I said, “Guys, the most important rule to remember: no loans.” Need to do without [external] funding — find ways not to buy anything and all to rent.

Another trend that I recently experienced and which helps us greatly, fewer imported products, and our manufacturers will up the sales, they became easier. A large role was played by the change in the rate of [currency] and not the embargo. In my opinion, if the embargo cancel now, nothing will change. No one will buy yoghurt Valio at exorbitant price. Will you be in selected stores, but we do not exactly feel.

Another trend that we picked up, is the development of medium business. For me it was a surprise that for 2015 has changed dramatically in the credit portfolio of the banks: if [borrowers] there were many companies from retail and resale, now their share has fallen, but doubled the amount of loans to the industrial enterprises. This weakened those with whom we compete for customers, and strengthened those who have we buy [the products].

<p>Andrey Krivenko</p>
Photo: Yuriy Chichkov for RBC. Stylist: Anna Panova (Tape production), assistant Ilya Chebanenko. Thank KitchenAid brand stores, Riotclothing.ru and Massimo Dutti

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Andrey Krivenko

— You can say that you have benefited from everything that is happening in the market? When an embargo was imposed, you see an influx of buyers?

— No, not saw. We have always had Russian producers, visited us, those who bought Russian. Care Valio first raised the sales of “Buttermilk” and “little House in the village”. They are in a different weight category. Are brands on TV. They essentially shared the market.

— And the cheese?

— Cheese Yes. Cheese for a very long time to develop and a long time to produce. Here we observed the effect of sanctions last fall one day he looked and saw that we have a group of cheese ahead of the sales in money, the cheese, although two years ago the cheese was only fifth to sixth category. For us it was a big surprise. Now we are proud of our cheese and when we are right to be ashamed. Cheese has become easier.

I think that by now smart manufacturers think that, if you cancel the sanctions and will go to imported products, in fact, they will be able to trade at higher prices. So Russian manufacturers will benefit. If we talk about the substitution, indeed, many of our producers became easier to supply products and regional and Federal networks.

— Who are you competing with for customers?

— The competition is very conditional. In any case, we have to compete with large Federal networks: they open a lot of shops, people go there. Of course, if every house was opened Lenta, O’key, Pyaterochka and Dixy, it would be more difficult. But they are currently not open. We were just very very lucky.

— How many shops have you had two years ago, how many now?

— The number of “Izbenok” is hardly growing: two years ago it was 280, now 300. Every month we open and close 15-20 “Izbenok”, but the total number is completely stable. “Kusurlu” two years ago was 11, is now 130.

— How much is the opening of “Coswell”?

— We are about 4 million rubles This is with a Deposit [for rent] and without cash balances. The first stores we opened in 10 million We became great experts in the selection of manufacturers, equipment, construction.

For example, the Fund before the crisis were twice as expensive: we foolishly bought an American branded vehicles, and they are still twice more expensive. In the end, we buy in two times cheaper than Russian. And so about. The opening “Izbenki” and remained at the level of 150-200 thousand rubles.

— Do you have a plan for discovery?

— As such, no. I compare with sports. You walked up to the bar: first good rises, the fifth [repeat] you already know, will be able to raise another five or not. Five more raised, and think, and then will go or not. We went over and while we have good. Still don’t understand what is the saturation, because there are no competitors.

But let’s imagine that each “Pyaterochka” and “Dixie” will open the divisions fresh dairy products, — all, at this stage of our development will end immediately. We now have [range consists of] 700-800 positions. If at least 400 of these items appear in “Dixie” or “roundabout” — people will go there.

I think your business is difficult to scale geographically is to go to other regions, to build a network there.

— Yes. And we continue and even are not going anywhere, there are no such plans. It is really very difficult. Now we carry [their products] to Obninsk is a maximum. Even Dubna, where we have a shop, we are very far away. We understand that our project is Moscow and the Moscow region. I think the development area will require a year or two.

— Have you property to rent?

And purposefully. There will never be any purchases.

— This is the principled position?

— Of course. In fact, the business of our not even able. We are able to capitalize on rent — we earn rent.

— Are you serious? You are not able to earn on a purchase?

— It must be credited. The business involves lending.

Is also a crucial issue?

Of course.

Two formats

Moscow shops of networks “Izbenka” and “Coswell” run LLC “Meadow Yes” and LLC “Coswell” respectively: the sole owner of the company is Andrey Krivenko. At an operational level, businesses are “Izbenki” and “Coswell”, according to the representative networks that are not separated.

Revenue “field meadows Yes” in 2014, according to SPARK, was 3.59 bn, with a net profit of 446 million rubles. “Coswell” contributed revenue in the amount of 1.33 billion rubles and net loss — 41 million rubles. Krivenko financial results to discuss refused.

Area “Izbenki” — 15-20 sq. m, assortment — 70 titles, mostly dairy products. “Coswell” shopping area 60-120 sq. m, 700-800 items, meat, fish, vegetables, fruits, juices, breads, sweets, tea and coffee making facilities, recently appeared household cleaning products and cosmetics.

The number of “Izbenok” is hardly growing: two years ago it was 280, now 300, says Krivenko. “Kusurlu” two years ago was 11, is now 130.

“I’m taking photos in the “Auchan” — so I was kicked out of the hall”

— How many stores you open in a month?

— In the fall I want to try 40 a month. Now open every working day one store. Hardly, but given. All tired.

— Why?

— Unusual. Before that, it was twice a week, and now five. People no longer becomes necessary to optimize the work, to find better ways. The work head.

— How do you staff this motivate?

— Our principle is like this: people are starting to get more bonuses. That is, instead of having to take on another employee and to pay the salary, we reverse the approach: old people, new is not added, but they start to get bonuses.

But in this scheme, the employees at some point there comes a limit.

— Mental work has no limits. Prohibition to take a new person there. But our philosophy is that next year knowledge worker needs to make about 30% more than in the previous year, so he got the same salary. The whole world lives.

— Plus 30% of the work each year is recorded formally KPI?

— No, we are not KPI, and promises. It’s like KPI — result, which the employee should achieve. But the main difference is that KPI’s need to the chief, the leader, and we promise each employee must give to the person for whom he performs a specific task.

— How? On December 31 he writes: “I promise next year…”

— Yes. For example, the accounting Department writes that its main promise — on time to make payments. Who needs payments on time? The main Department is the Department of development, which need money for new stores and paying rent, and managing quality in time to pay the manufacturer. To evaluate accounting, we’re at the end of the year we asked the development Department and engineers, as accounting this year coped with the payments. “Poorly managed?” “The guys worked well — will be no bonuses”. So they are trying to work, that promise was fulfilled.

— Do not collect employees ‘ hymns to sing, do not adopt the corporate culture?

— Yes you that, on the contrary. We do an optional visit to, I to such things very bad attitude. All attempts to introduce corporate culture is from the evil one. We don’t even have mandatory meetings. Don’t come to the meeting — don’t worry, you will lose actually. Like school: didn’t come to the lecture — you will not get knowledge, then will be worse than the exams. We have a technologist who basically decided not to go to the General meeting. And does not walk.

<p>Andrey Krivenko</p>
Photo: Yuriy Chichkov for RBC. Stylist: Anna Panova (Tape production), assistant Ilya Chebanenko. Thank KitchenAid brand stores, Riotclothing.ru and Massimo Dutti

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Andrey Krivenko

In those stores that operate for more than a year, the revenues in 2015 increased or decreased?

— Increased on average by 40%. And so they become small, and this is a big problem: all of our previously launched small stores now in a catastrophic situation, where people literally in the store can’t log in, queue out on the street.

— If you are saying that you average check has remained the same, so 40% is the increase in traffic?

— Yes. That is 40% of the goods was more to come. Accordingly, 40% more lined up on the shelves, 40% more buyers. If you take the stores that were two years ago, there is no such growth — they own 40% already done. In these stores the increase last year was 20%. In “Hut” not so: she usually goes for a maximum of two months and further [persisted] life.

— You are in the wrong shops?

— I go for wine. Either in “the ABC of taste”, or — like me — a wine boutique “Auchan”. They are, however, the only store opened throughout the country in the “Europark”. In other stores we go to Europe. During the strategy sessions are specifically found in the shops. We went around, discussed, photographed. I’m taking photos in the “Auchan” — so I was kicked out of the hall. We went to “Bills” — studied vegetable assortment. Our marketers are generally constantly [are] other stores, because there are things that we would like to do the same, but we have not obtained. For example, good vegetables in the bill, cooking meat in the “Meat”.

For the last year or two people changed a set of products that they regularly buy?

— We [cart] has not changed. In sales the share of non-dairy range, but we are purposefully working on it.

“They’re trying to price for us to establish your marketing”

— How many suppliers?

— 200. The goal this year is to grow to 300. Manufacturers we raise: previously, each product had to put at least two manufacturers, now we are increasing to four. There are many examples. Milk, for example, are already doing four or five manufacturers, sour cream seven. The stores are “assigned” on a geographical basis.

— You require from suppliers exclusive to your stores?

On the contrary, as we prohibit exclusive to work [with us]. Otherwise, the provider starts to depend in any [disputed] the situation is crying: “You ruin our business”. That is, if they did something bad, we, therefore, are not able to refuse them. This non-competitive situation. And, by the way, one of the reasons why we will never have our own production. The perfect competitive situation is when [the turnover with us, the manufacturer have] 20% of the proceeds, the remaining 80%, we oblige him somewhere else to sell.

— This requirement is documented formally?

— No, we do not prescribe. It’s more our [internal] action — we simply cease to develop relationships with manufacturers, remain unchanged and do not give any growth.

But your suppliers also begin to work with your competitors and some of their network build.

— So what? We only for. Why we should stretch? Yet there was not one point that somehow suffered from the “mission” (a network of natural products, created one of the first suppliers “Izbenki” — “HOE-Milk”. — RBC), we don’t even feel it.

— How often do you sever relationships with suppliers?

For example, recently broke with three. Two reasons. The first and most important is the poor quality of products: it and complaints of customers, and bad tests in the laboratory, and factory audits to quality management system. If any of this appears — we break off the relationship quickly.

The second is when the manufacturer starts to increase the prices for us. Until recently trying to negotiate, but there have been examples where if we did not refused to cooperate fully, we reduced the volume of purchases in three or four times. Just so we work on each product with two to three producers so in the case of unjustified price increases we could pass the manufacturer.

— You have a large rotation of suppliers?

— No. The rotation is small, and in recent times the suppliers to us are hard to get — the threshold prices are already quite low. We it is pointless to make new producers at higher prices than current. I always say: it’s better to pay for our present, than to take new ones. Because all manufacturers beat their Breasts, what they cool, some good products. But once we go, I start the complaints of customers, and they say: “we sold five years, no complaints. Yes they are our competitors.” We have producers with such a short conversation. When they say that they are cutting competitors and that the competitors write reviews on the site — never anything similar was not confirmed. We are all very interested in finding manufacturers. Even Sberbank has attracted. We are a major corporate client, and they have created a program of funding for our producers under the turnover with us at normal rates.

You take bonuses?

— It’s all prohibited. More precisely, we believe that it is unfair. We buy from manufacturers only private labels (products under its own brand network. — RBC), so for us the purchase price is production cost plus a normal earnings of production.

The main problem of the enterprises — they are trying to price for us to establish your commercial Department, marketing, accounting and everything else. Although actually we almost do not interact with: we provide loading of production, but it is not loading commercial services. When the accountant brings the calculation in which the entire structure of the office scattered in all products, including our, and then says, “we work with you unprofitable,” we say: “you Guys what? Let them go and think”.

And big turns the difference between your incoming price and other networks?

In different ways, depending on the manufacturer. Roughly speaking, the milk that we have on the shelf is worth 49 rubles., from the same manufacturer of our other networks is RUR 70. While a member of another network, the price can be about our 49 rubles. But we have undertaken outsourcing their commercial Department. We say to the manufacturer: “You will be on the shelf alone, we have no other milk 3.2% fat, the buyer came and only sees your package. He came to Metro — your package is one of the 20”. Logically, for us and the price should be less than for Metro.

Us to compare the size of mark-UPS with other networks is incorrect as most of the networks on the cooled range works through distributors, and we take the logistics of such goods for themselves. But, according to our calculations, mark – “Magnet” throughout the range — 50%, and we have come to 55-56%, but we have 70% of the goods are perishable.

“So we never worried about Parking”

— What kind of revenue you get per square meter? The leader on this indicator is “ABC taste” — before the crisis it was $25 thousand But “ABC” is the supermarkets, as you to size and assortment, rather “shop at home”.

— Revenue per square meter we have one and a half times more than “ABC”. We never argued that we “shop at home”: 80% of our buyers are those who came out of the subway and to whom on the way to buy fresh produce for today or tomorrow. So we never worried about Parking. Our average buyer comes to see us three times a week, buy it is not very large — the average check of about 500 rubles tough and for two years has not changed.

And how in two years you raised the price?

— Milk, for example, fell, kefir, too. The main range rose. For example, two years ago for meat margin was 50%, now 30%. When we opened “Unusually”, we beef cost 1000 rubles, and now cheaper. We reduce the margin by optimizing the whole structure of our costs.

— In your stores a very small range in most networks on the same area of goods several times more. Why?

— This is a principled position, and it’s not that we invented. I really like the German chain Aldi is the German market leader in an area of over 1000 square metres they have 600 items. We already have more. We now have the average store area of 100 square meters, and 600 of goods is for the eyes. For us the current range is the maximum.

Each person consumes a basket of about 50-60 of goods, the idea is that retail buyers should be enough. A small number of SKUs (items in the range. — RBC) allows you to work more effectively with the producer to choose the best goods, truly them to monitor and track. When the retailer range of 10 thousand [SKU], the retailer does not even understand what he’s selling. And we understand every position. And each of our position is important.

— Before your loyalty program provided for the accumulation of bonuses — a percent of your purchases. Now you offer a discount on one product according to customer’s choice. You have reviewed the program because of the crisis?

— It just stopped working. No matter how long we interviewed people, it was found that very few people can say clearly, for which they received bonuses. A year and a half ago we cancelled the percentage of purchases — nothing has changed. So we’re actually just spending money, and all. Then we launched the campaign “favorite product” [with 20-percent discount on one product according to customer’s choice], and saw that her people are six times more. The man thought that on Saturday there will be a barbecue, have selected their favorite product, on Saturday I bought with 20% discount. Such a program, in our view, it became clear to people.

— How much it costs?

— At some point we saw that we have a decent cost associated with the loyalty program. We had either 1-2% to raise prices, or to cancel an old program. We realized that it is more efficient to cancel the program that people do not fully understand, but save the pictures. A new program serving approximately 90% of buyers. The task is to make it all fit in 2.5% of revenue.

— You once said that companies do not need an IT Director, because you write code. Is this true?

— Yes. But now less and less. Actually with us on outsourcing the company operates, which we gave to almost all functions. With the help of IT we decided many issues of efficiency. This is a rather global projects, so I’m working on it myself.

One of the last big projects we have implemented in our operating system mobile phone. We have banned the office staff to be in stores. Now we have in every store all the photos are flocking to a single system. It allows you to monitor all refunds, write-offs, some nuances in quality — everything goes through the phone. If the store something was broken, no need to explain — took a photo, we are immediately in the center of the saw. In the warehouse using scanners phones control the entire delivery of the product. Drivers monitor unloading. Such a large range we locked.

— How much it cost you?

It all cost a penny. For example, the us phones “the Megaphone” has sold for RUB 1, software is all at 1C. About ten times cheaper than the cost at which they write mobile applications. This is a common system 1C, not only runs on your computer and on your mobile phone. The entire project is several million rubles. Save millions a month.

— Who is making all of this up?

— I come up with. Together. We understand that the state cannot build up, it immediately affects the cost. We have such technologies to implement, because [otherwise] we’ll never be able to meet the 55% mark.

“I want to be General”

While studying at the Institute Andrey Krivenko founded a small construction company. “At some point I realized that he had become a foreman and that I’m not interested”, — says the businessman. Then he quit and went to work for a wage analyst in IT.

Then moved to Finance and in 2005 was the chief financial officer of the company “Agama” — the manufacturer of fish and seafood. She has worked with most Federal networks, and Krivenko good grasp of what works with the largest retailers. “The main problem is that everyone who sells goods to Federal networks, are forced to think about how to gratify the network, but not the buyer. About the buyer at all no one thinks he’s in the chain is,” he said.

In December 2008 Krivenko resigned: it was a conflict and ambitious dismissal, he recalls. “For many years I was the first person after the owners. Wanted to grow up and just said that I am not interested to be a financial Director, I want to be General. I said, no, you don’t fit in,” says Krivenko.

After the dismissal, he said, he “sat all day, read books and waited”. But in early 2009 a summary in the post of Director General nobody was interested. He had two children, a mortgage with monthly payment in 100 thousand roubles and 1 million roubles in savings.

Krivenko began to look for the problem, on which you can earn. And found that in large networks there is almost no fresh dairy products with a short shelf life. Took the wife’s car and hired a technologist together they began to travel to the Moscow region in search of suppliers that produce products without the use of milk powder, milk fat substitutes and chemistry.

The first person able to negotiate, was a small producer “HOE-Milk” from the Kaluga region. Of the six items of goods and was the first range “Izbenki”, which opened in Moscow on Troitsky market in Strogino. The room is rented, the first opening in 2009 at a cost of 50 thousand rbl. a year “Izbenok” in Moscow was already 15.

The detailed story of the business “Izbenki” and “Kusurlu” read in the April magazine RBC.