Russia

1998.

Harlequin was contemplating extending its already quite successful business in Russia. Some research had been done and I and our Polish MD, Barbara, who spoke fluent Russian were asked to visit the Bertelsmann (Random House) facility in Yaroslavl, a town about 300 k’s northwest of Moscow.

            We left Moscow before 6am, i.e. before breakfast. The road for the first 100 k’s was very good- I understood that this was for easy access to the dachas of the Russian elite. After that the road deteriorated markedly. The little villages we passed through appeared to have no facilities at all., no shops, nothing, and the people we saw looked grey faced and haggard. I asked Barbara to ask the driver if there was anywhere we could have a cup of coffee and a bun, or was I just dreaming. The reply, ‘you are just dreaming- forget it.’

             Despite this, just as we approached Yaroslavl the driver stopped the car and pointed to what appeared to be a little café on the side of the road. Notably he didn’t move from the vehicle. Our entry into the dirty little place generated a sudden rise in tension. We were reluctantly served two cups of coffee and a couple of stale buns, which cost virtually nothing. We were happy to get out of the place, it was clear the local population wanted nothing to do with comparatively well-dressed westerners.

            Moscow looked like a thriving, busty city. Yaroslavl looked down at heel with numbers of again grey-faced people in the streets.

            We arrived at our destination and the driver pointed at an opening where one had to almost climb through a small door. On the other side was a man holding a large fearsome looking revolver, which he pointed at us. He yelled ‘passport’. We hurried back to the car to fetch the offending objects. We were then directed down what looked like a Dickensian passage where the floor had been hollowed out with the steps of what must have been millions of people over the years. I really wondered what on earth we were going to find. After climbing three flights of stairs, the situation was transformed as we suddenly entered what looked like a part of West Germany. There was a clean toilet and we were then directed through a large office with a couple of hundred well-dressed busy looking Russian women entering orders into computer terminals.

            There were five German men in the boardroom, all formally dressed wearing suits (which is what Germans did then and still do). We had a very clear and civilised presentation. They were desperately in need of additional business, which we could have provided. Later we were given a tour of their excellent distribution centre. They each apparently spent three weeks in Yaroslavl, followed by a week in Gutersloh, Germany, Bertelsmann’s  HQ.

We returned to Moscow feeling positive about the whole venture.

            During our stay in Moscow I had fully briefed a consultant, Boris. who was obviously an ex-KGB agent. I mentioned to Boris that I didn’t see how our potential distributors could invoice books for less than they would have cost to print.  Six weeks later I received a very professional report from Boris, telling us that the 29 of the 30 distributors we had identified had ‘criminal connections.’ It seemed that their main business was probably the distribution of illegal drugs. Book distribution was merely a front.

            If we had invested further in the business in Russia. we would have ‘lost our boots’, I expect. Weeks after the visit the Russian currency collapsed making the situation even more untenable.

Homework. Always do your homework.