Russian Companies Are Strong and True

Ideology is the main competitive advantage of domestic companies in the world market, if it has been properly worded and put across to employees, claims Andrey Rogachev, founder of the legendary Pyaterochka supermarket chain

Pyaterochka, which entered the market in 1998, was the first domestic retail food chain to reach the billion-dollar mark in sales. In 2006, it merged with the Perekrestok supermarket chain, and it is now a member of the X5Retail Group. According to this year’s figures, the total turnover of the group was $3.485 billion, the largest share – $1.973 billion – being accounted for by Pyaterochka.

Andrey Rogachev’s list of credits includes other multibillion-dollar projects, including the Karusel hypermarket chain, founded in 2004, as well as the LEK and Makromir development companies, operating in St. Petersburg.

In consenting to an interview with Expert, Rogachev strictly defined the framework of the conversation: “Today, the main factor in a company’s competitiveness is its ideology. I would like to talk about this, and not about myself and my own achievements.”

Expert Magazine: What do you mean by the term “ideology”? It’s a rather vague notion.

Andrey Rogachev: To put it briefly and simply, an ideology is a system of principles and standards of conduct that a company and its employees use when they do business on the market. It is possible to choose a milder word, one often used in business literature: culture. But I prefer the term “ideology”; it suggests something more motivating and aggressive, which must be carried out.

EM: Why do you consider ideology to be the most important competitive quality today?

AR: Over the last hundred and fifty years, and especially in the last twenty years, all the basic business elements have been polished to perfection. You can buy literally everything in the market in ready-to-use form: business strategies; software; people, through head-hunting agencies; technologies, in the form of patents or workers; founts of know-how and knowledge; even a whole “ready-to-operate” business. Or you can outsource everything. In such a situation, only ideology – as a system of standards and principles of conduct that actually unites people in corporations in order to achieve specific goals – can play the role of the main competitive advantage.

EM: When you first got into business, did you understand what ideology is?

AR: Instinctively, yes. Even though I was a prisoner to a certain type of dogma that textbooks, books, and journalists were preaching to businessmen.

EM: How did you go from an intuitive perception of ideology as the backbone of a company to a rational understanding of its importance?

AR: By trial and error. After eighteen years in business, you can probably understand the essence of what is happening. Why does Coca Cola occupy the carbonated beverage market more effectively than Russian companies? Because its ideology is stronger. Not the quality of the product or the size of the advertisement budget. The company began to develop rapidly after they came up with the principle that anywhere in the world Coca Cola had to be within hand’s reach. This is an ideological precept. Or another example: when it all started, in Russia there were a huge number of companies selling home electronics. Who remembers them now? But Eldorado has survived and is flourishing – its ideology turned out to be stronger.

EM: But how can you be sure that it is all a matter of ideology?

AR: Because in the beginning everyone had the same conditions. Take a look at the components of business: everyone has equal access to them and to the resources, which are usually referred to as the main factors in a company’s rate of growth or its domination of a market. Everyone is in the same environment. But some have grown rapidly, and others have grown more slowly. Compare, for example, Pyaterochka and the Kopeyka chain in Moscow. Pyaterochka started up later, with the same format and in a much more difficult region: St. Petersburg. It is poorer than Moscow and has less potential for growth, less money, and fewer opportunities for financial support from donors. And we see the results, which you can compare. (According to the figures for 2006, Kopeyka’s turnover was $980 million. – Expert)

A Love Song for Economy Class

EM: What is the Pyaterochka ideology?

AR: To strive not for rapid growth