Jewish businessman Ilya Yakubson figures he can cream Starbucks or
any of the coffee ventures springing up in Russia.
Yakubson, who ran
113 discount stores and casinos before quitting unexpectedly and selling out to his partners, opened
his first Santa Bean this summer in his native
Oryol.
Situated in a downtown pedestrian
mall on a site formerly occupied by one of Yakubson's gambling halls, it was the central Russian city’s first coffeehouse.
Yakubson since has opened two more Santa Beans in Oryol.
"I was tired of the boring food
retail business,” Yakubson, 35, says of his career change. “In the region’s coffee market I am a pioneer.
For me this is about self-actualization rather than money.”
Western-style coffee consumption,
unheard of in Russia until the mid-1990s, has become increasingly fashionable in the larger cities, where three major chains
compete fiercely for business.
In Moscow and St. Petersburg,
the dark brown logo of Kofe-House, the creamy logo of Chokoladnitsa and the coal black logo of Coffee Bean are even more prevalent
than the golden arches of McDonald's. In both cities there is hardly a street without a coffee shop.
That was not true in Oryol. Before
Yakubson opened Santa Bean, those few who dared to order coffee to go in the local canteens were looked upon as odd. Drinking
coffee outdoors was considered bad manners, though drinking beer on the run was not.
Yakubson, who wants to expand
quickly, says he ended up with enough cash after the sale of his convenience stores and casinos to fund 15 coffee shops in
several regional capitals. The first outlet cost him $250,000.
The only Starbucks outlet in
Russia opened this August in a mega-mart in the Moscow suburb Khmiki.
Yakubson entered Russia’s
business world several yeas ago as part owner of the Pallada chain of budget food stores and the Niagara gambling houses in
Oryol, a sleepy regional capital of 370,000 residents 225 miles south of Moscow.
Once known as Russia’s
“literature capital,” the home of famous writers including Tolstoy and Turgenev, Oryol today is part of the so-called
"Red Belt," an impoverished region of central Russia where the old Communist Party bosses still hold power and fly red flags
over Town Hall alongside the official Russian tri-color.
Little has changed in Oryol since
Soviet times -- perhaps even since Tolstoy's.
Yakubson is confident he can
compete with the big boys. His prices are lower: A mug of Santa Bean coffee costs 35 rubles, or $1.40, while a Starbucks’
Vento cup in Russia goes for 135 rubles, or $5.50. That's steep for the average Oryol resident: a hundredth of his monthly
wage.
Santa Bean is turning a profit,
its finance director says.
“In spite of such a low
per-cup price tag, the daily net profit of one Santa Bean outlet amounts to $1,000,” Julia Shtelter says.
Yakubson plans to open five more
outlets by the end of the year in Oryol, Kursk and Belgorod, central Russian cities where he once had his discount stores.
A glance at Santa Bean's
logo makes it clear whom Yakubson sees as his main competitor, if not his inspiration. Its green-and-white circle logo and
typeface is quite reminiscent of the Starbucks Mermaid logo. For that, Yaubson could face legal trouble.
Starbucks’ global communications
manager, Carol Pusik, told Moscow’s Vedomosti business daily that “the company may consider filing a lawsuit”
against Santa Bean for misleading customers with its logo.
Yakubson doesn’t deny that
he and his wife, Natalia, learned a lot from the Seattle giant, but they are not afraid of being sued by Starbucks for trademark
infringement.
“Well, it’s true,
we kind of imitate Starbucks, and I even employ a former Starbucks barista,” Yakubson acknowledges.
He adds, however, that it was
his son who invented the Santa Bean name and logo.
"At the end of the day, our chain
in Russia is larger than that of Starbucks -- we’ve got three outlets in the country while they have only one,”
says Yakubson, who recently expedited a shipment of humanitarian aid from the Oryol Jewish Community Center to Rostov-on-Don.
Although there is enough room
for new coffeehouses in Russia -- Jerry Ruditser, head of the Coffee Bean chain, estimates the country’s taste for coffee
could top $1 billion a year -- the smaller towns cannot provide enough business to attract a world-scale player.
“It is not too hard to
compete with Starbucks in the Russian provinces,” Ruditser says. “Russians are not accustomed to the take-out
format. Local chains, like that in Oryol, simply pave the way for the giants to come later.”