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A Russian Businessman’s Road From Siberia to Success

Dejected and in search of work, he opened a vodka distillery in the late 1990s, but his timing was terrible. Russia was hit by a financial crisis in 1998, and the country defaulted on its debt, sending the economy into a tailspin. The price of vodka nose-dived. Mr. Trubnikov couldn’t cover his debts and the distillery soon went under.

The next year, in desperation, he sold his car, a Soviet-era Volga sedan, for about $ 5,000, and used the proceeds to buy a defunct dish-soap factory outside Moscow, setting out to make shampoo.

“I wanted to make something that shows the value of Russia,” Mr. Trubnikov said.

He initially sold products under the brand the Recipes of Grandmother Agafia, named after a Siberian healer, Agafia Lykova. Sales of the products — based on herbs found in Siberia — remain brisk inside Russia. But abroad, Mr. Trubnikov said, they were hampered by a lack of recognition by consumers who also found the name a mouthful.

Still, he wanted to infuse the company with the good characteristics of Siberia. Despite being from Moscow, he was convinced consumers would associate the remote region with snow, isolation and cleanliness, and not the dark clouds hanging over political leaders in the Russian capital.

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Shampoos and conditioners on sale in the flagship store of Natura Siberica in Moscow. The company operates 70 of its own brand stores in Russia and six other countries, while its products sell in more than 40 nations. Credit James Hill for The New York Times

He eventually settled on the brand name, Natura Siberica, in 2008.

The company has now moved from its original dish-soap factory to a larger facility outside Moscow and runs six organically certified herb farms as well as a herd of yak in Siberia. It also has a factory in Estonia and presses to extract herbal essences in Scotland and Romania.

Mr. Trubnikov’s sprawling executive suite on the third floor of the building is a veritable temple to cosmetics and beauty products. Sunlight filters through and around thousands of bottles of shampoo, soap, gel, lotion and conditioner made by companies around the world, all stacked on floor-to-ceiling shelves.

He largely ignores the contents of the products, and instead studies the bottles and labels for marketing ideas, all with the eventual goal of entering the American market. If Natura Siberica were successful, it would become one of the first major Russian consumer brands to do so.

“I like this idea because it is difficult,” Mr. Trubnikov said, “and I like difficult projects.”

In its early years, the company concentrated on its domestic market.

The logic was simple. Women in Russia spend about 30 percent of their income on beauty products, according to the Perfumery and Cosmetics Association of Russia, far more than in higher-income countries.

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Natura Siberica uses plants from Siberia as a base for its products, aiming to evoke visions of stark and unspoiled natural terrain. Credit James Hill for The New York Times

“In Europe, if you overdo it, you could get a condescending look,” said Anna Dycheva-Smirnova, the association’s deputy chairwoman, referring to the amount of makeup used. “In Russia, if you are not made up, you could get a condescending look.”

“No matter how snowy it is and how slippery,” she added “women will wear heels and a fur coat.”

Though overshadowed by Russia’s wars, sanctions and political intrigue, fast-footed consumer companies have popped up to cater to the country’s middle class.

This year, investors oversubscribed Russia’s first public offering since the onset of the Ukraine conflict in 2014, raising $ 355 million for Detsky Mir, which operates a collection of toy stores.

Over all, about 260 domestic companies have sprung up to make and market soaps, lotions and shampoos in Russia, according to the cosmetics association. The sector now accounts for about 40 percent of the country’s $ 16 billion in annual cosmetics sales.

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Natura Siberica’s main store in central Moscow. In Europe, the company is going for a high-end consumer. Credit James Hill for The New York Times

For Russia’s creaking economy, aggravated by a prolonged slump in oil prices from their highs, there is hope that such nonpetroleum enterprises could help kick-start a broader revival. The country relies on oil and gas sales for 60 percent of all exports, and revenue from crude sales in particular was down 17 percent in 2016.

The future, economists say, lies in unleashing Russia’s entrepreneurs.

Natura Siberica has largely stood out by putting a different spin on cosmetics, helping the company distinguish itself from the pack both at home and abroad. Its focus on Siberia and Siberian shamanic practices, as well as peculiar ingredients like pine nuts, cloudberries and yak butter, are aimed at evoking visions of stark and unspoiled natural terrain.

“At first, I was skeptical, because we think Italian or French cosmetics are best,” said Viktoria Y. Vedenskaya, a real estate agent picking up a bottle of Sakhalin Island Thistle body lotion in a Moscow store. “But these berries and flowers are unique.”

“It’s virgin nature out there,” she added. “You can travel for a week, and see nobody.”

Natura Siberica’s big break internationally came at a 2008 cosmetics exhibition in Japan, when a Japanese retailer signed a deal to carry the brand.

Since then, the company has been expanding, both within Russia and overseas. It now operates 70 of its own brand stores in Russia and six other countries, while its products sell in more than 40 nations.

In Europe, it is going for a high-end consumer, with shampoo selling for about 8 euros, or about $ 8.70. Some branded stores offer luxurious touches, like presses that make fresh pine nut oil for customers while they wait. Over all, sales in 2016 were about 14 billion rubles, or $ 248 million.

“A Russian woman can have a lot of problems. She might have to work in a factory,” Mr. Trubnikov said. “But in our stores, she should feel like a queen, feel desired, and feel like a woman.”

Source: NYT > World

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