IE 11 is not supported. For an optimal experience visit our site on another browser.

Becoming a ‘Russia guy’

A Minnesotan makes a fortune bringing Pepsi and pizza to Siberia. By Gary A. Seidman in Novosibirsk, Russia.
/ Source:

Given the news from Russia about the gloom and despair and the seething poverty, the thought of grabbing a slice of pizza here strikes a rather novel chord. It’s true that spending 25 rubles — about a $1 — for a slice and a Pepsi can be a luxury. But it’s not so absurd that it would deter an enterprising American with an adventurous streak and a fast-food mentality from opening a pizza restaurant here — or even a chain of them.

Pizza - in the anything but humble opinion of Eric Shogren - is a growth industry in Russia. It’s relatively cheap, it’s fast and it has that exotic feel of America, which is much in vogue right now.

Shogren, a big, burly, 33-year-old Minnesotan, who breaks a sweat even in the Siberian autumn, dreamed up his fast food idea after a typically naïve start to his Russian business experience. Now, his pizza restaurants are a goldmine and he’s living the “American dream,” albeit in Siberia.

“I’m the right kind of person, in the right country at the right time. But this is not the kind of place where I think the average guy should come and try and open up shop,” Shogren said. “Life here is just a contact sport,” and that’s precisely the appeal for people like Eric Shogren.

The hockey puck plan
Shogren tells the story of his first day here when he bought a hockey puck for a couple of kopeks and the sound of a cash register started ringing in his head. He thought that he had hit the jackpot; that he would fill a cargo container with the penny-a-piece pucks, ship them to his native Minnesota, and make a killing selling them for $1 each.

But like so much in Russia - and especially during that hesitant lurch towards a free market in 1992 - inefficiency and bureaucracy and frustration put an end to his fantasy. The store that sold the pucks only had a few dozen; the store manager didn’t know, or care, where they came from; and when the state-subsidized factory that produced them was tracked down, it wouldn’t sell them to Shogren.

“You go through this American thing. You say: ‘How can this be possible?,’” Shogren said. The pucks, he now explains, were produced at a time when the concept of commercial consumption hadn’t yet taken hold in Russia; and at a price that had no relevance outside of the old Soviet centrally controlled economy.

Seven years later, Shogren sits atop a small empire of restaurants 2,000 miles southeast of Moscow in Novosibirsk a wiser man.

Shogren now runs five New York Pizza restaurants, a jazz bar called New York Times, and a bakery that produces a ton-and-a-half of dough a day. He employs 250 people and he entertains ambitious dreams. “We’re not just a piece of pizza, we’re a piece of America,” he said.

Living an American dream... in Siberia
The not so long, but plenty winding road to Russia began for Shogren when he hooked up with a Novosibirsk businessman in Minneapolis in 1991. Eventually, they began importing American cars - Fords primarily - into Russia. The businessman provided the money, and Shogren, then 25, did the footwork and paperwork. “Russians wanted luxury cars. If you had the money, you wanted the big car,” he said.

So the two began importing Ford Explorers, Lincoln Town Cars, Crown Victorias, even a few limousines into Russia. The money they made was quickly invested into the grocery business, and in 1993 they opened the first supermarket near Novosibirsk. “It was like a museum, everyone made a trip there,” remembered Boris Mamlin, who has lived in the city for 10 years.

But the grocery business proved daunting. Shipments came from Minneapolis-based SuperValu and took three months to arrive, causing cash flow problems, which were particularly debilitating in the intensely inflationary environment. What’s more, the cargoes of food moving along the TransSiberian railway were exposed to extended periods of sub-zero temperatures; cans would burst, oils would emulsify, a container of mayonnaise would separate and spoil. A half-year later, with Shogren now living permanently in Novosibirsk and the partners squabbling over money, the business came apart.

‘Are you a Russia guy?’
By 1995, Shogren - a prep-school educated, college drop-out - was ready for round two. He began building his first New York Pizza restaurant during the run-up to Russia’s 1996 presidential election, even as friends were warning that if Boris Yeltsin wasn’t elected, Russian democracy and its fledgling free market would whither. But Shogren, who admits that his biggest kick is mixing it up with the neo-aparatchiks, nouveau-extortionists and quasi-entrepreneurs who now run Russia - was not deterred.

In August 1996, the first of his McDonald’s-style pizza restaurants opened, adorned with American movie and music posters, a non-stop pop beat, family-style booths, video games and a uniquely non-Russian no-smoking policy. It was an instant sensation, Shogren said. So popular that at least a half dozen copycats - DeNapoli Pizza, Venezia Pizza, Mario’s and Milan Pizza - have popped up around town

By the summer of 1997, Shogren said his most successful restaurant, which was open around the clock, was making $5,000-to-$6,000 a day and he was busy expanding. And then, in August 1998, came “the crisis” - the devaluation of the ruble that sent the Russian currency plummeting and made the luxury of grabbing a slice at New York Pizza out of reach for many Russians.

'You have to get creative'
The devaluation and its many ripples required speedy action - cost cutting and product switching to keep overhead down and lure customers back. Shogren said he immediately swapped more expensive imported products like ice cream and cheese for cheaper Russian-made alternatives. He cut staff, reduced the use of cell phones and curtailed expansion plans. Instead of converting rubles into hard currency, he used them to invest in supplies. “The economics became much more harsh,” he said.

Today, Shogren is the quintessential “Russia guy.”

Twenty-minutes from downtown Novosibirsk, he is building a massive house. Workers toil around the clock in an effort to beat the Siberian winter. They live on the premises in a make-shift room littered with spent cigarettes and discarded tin cans. A contractor has arrived from Minnesota to supervise the final leg of the project. And Shogren, who minutes before was showing off the charitable work he has thrown himself into - helping to bring shipments of food to orphanages and villages in remote areas of Siberia - talks about trying to buy out, or shove out, a neighbor who began construction of a nearby house but ran out of money.

“You have to have a certain stomach for a place like this,” he said. “You have to be able to make tough decisions under pressure, to do certain things. And sometimes it’s rough stuff.”