Chocolate CEO - Russia's Only Gourmet Chocolate Producer Makes Forays into International Markets

Andrey Korkunov has managed to avoid the traps fallen into by so many other top Russian businessmen. He is now the CEO of A. Korkunov, Russia's first and so far only producer of a wide range of top-quality chocolates. Adjunct Professor of Entrepreneurship Stanislav Shekshnia presents Korkunov as a Russian business pioneer who has shown uncommon patience and foresight in realising that sustainable success would require a sophisticated, Western-style business model, as well as other lessons to be garnered from similar industries in developed markets.

by Stanislav Shekshnia
Last Updated: 23 Jul 2013

Many of today's top Russian entrepreneurs honed their business instincts early in life. Some were canny enough to see that, even under the Soviet system, there were windows of opportunity - typically in the "parallel economy" of the vast black market.

Andrey Korkunov was one such enterprising youngster. Ambitious from an early age, he supplemented his meagre odd job income by dealing in illicit cigarettes and jeans bought off tourists. His relative wealth brought a burgeoning taste for the finer things in life, gourmet foods among them. He is now the CEO of A. Korkunov, Russia's first and so far only producer of a wide range of top-quality chocolates.

Adjunct Professor of Entrepreneurship Stanislav Shekshnia presents Korkunov as a Russian business pioneer who, unlike so many of his peers, had the patience and foresight to realise that sustainable success would require a sophisticated, Western-style business model, as well as other lessons to be garnered from similar industries in developed markets. Launching his career as a jeans-maker in the early 90s, he soon diversified into trading anything from televisions to construction materials and, eventually, chocolates.

Some of Korkunov's hair-raising (and often darkly funny) experiences epitomise the Wild West atmosphere of easy money Russia in the early 90s. As Prof. Shekshnia puts it, at the time, "the nascent Russian capitalism had a scary appearance with no regulatory framework and almost no rules, hence the high level of criminalization and fraud". (Remarkably, Korkunov claims he never really had to face this negative element, mainly by using large and reputable banks for all of his financing.)

By 1997, he was looking for new opportunities that did not involve dealing in weapons, drugs or tobacco. Chocolate sounded like a viable niche market with potential high profitability, since it was still dominated by small, generally poor-quality producers. The major Western multinationals, while becoming established, were concentrating on snacks and lower-end offerings. Korkunov had already formed good ties with Italian importers, and saw his chance.

The author illustrates Korkunov's gradual success in establishing himself as both a major domestic player and a more minor presence on the European market. Examples of his savvy in understanding his environments include:

· Coming up with a "smart price positioning strategy" for his launch of a premium line.

· Keeping a low personal profile: the high-flying entrepreneurs of the early 90s had often deluded their customers; businessmen as a class were not overly popular.

· Forming a core team with people he had worked with for years, and trusted.

· Doing extensive research of market leaders in Western Europe. This lead him to realise that certain expectations would have to be lowered in the more "snobbish" markets, such as France and Italy. (North Americans, however, were far more open to new offerings.)

· Joining the ranks of more perceptive top Russian executives in seeing that changing focus from "cash profits" to "long-term value creation" models was a sounder strategy.

· Keeping the organisational structure lean and the workload high - quite unusual for Russian companies of any size.

· Hiring more for attitude than for any specific skills. (In fact, Korkunov deliberately avoided recruiting staff with Russian food industry experience.)

Korkunov also combines an unusual blend of cheerfulness and infectious dynamism in some departments with tight and autocratic focus in other areas. He bemoans the fact that, in his opinion, the average Russian worker remains at heart lazy and prone to corruption, while managers trust no one except themselves. His example also offers a highly unusual case of a self-made Russian entrepreneur, with growing recognition in the West, who avoids taking concepts like organisational development or process formulisation too much to heart. The case concludes with Korkunov accessing his options as to how best to make the next organisational changes for assuring greater Western market penetration and various types of domestic expansion.

INSEAD 2004

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