INTERVIEW: Londongrad rocked by spy scandal

INTERVIEW: Londongrad rocked by spy scandal
Londongrad has been rocked by the Skripal spy poisoning scandal. / Wiki Commons
By Ben Aris in Moscow March 22, 2018

bnePeople Russia Andrei Yakunin CEO VIYMAndrei Yakunin, son of the former boss of Russian Railways (RZD), is successful fund manager, he studied for an MBA in London and then signed up to a scheme run by the British government to attract highly skilled workers that gave him a residence permit.

“Investors are based in the UK and in 2007-2008 everything that was happening in finance was happening in London,” says Yakunin. “It's where the money is.”

The current spy scandal has affected expat Russians and those living and working in London are trying to be stoical about the current fracas.

“There are a lot of professionals living in London and people in these occupations are hoping there will be no drastic impact. If you compete on the international market then you are sought after in Hong Kong, New York, Moscow and London. You apply your skills and knowledge in these geographies and can move. But I hope that it doesn't come to that,” says Yakunin.

Fast growth companies for a fund

Yakunin raised $400mn for his VIY Management (VIYM) several years ago and has been making a number of investments into the mid-tier fast growing companies -- mostly, but not exclusively, in Russia. Most recently the fund has been investing into hotels and recently opened a Hard Rock Hotel in Davos Switzerland.

“The Hard Rock in Davos is exciting as it is a disruptive business in a saturated market,” says Yakunin sipping tea in a Moscow café.

The hotel was opened in time for the recent Davos conference and used by China’s state TV as their broadcast centre. And the fund is planning to open a Hard Rock Café in St Petersburg as well under a franchise deal.

“We wanted to develop a Grand Hotel there but the changes in the heritage laws meant that the Hard Rock format was more appealing. It targets the guests in the hotel but it has to appeal to the local population as well,” says Yakunin.

St Petersburg doesn't have a Hard Rock yet but as Russia’s de facto cultural capital has a very rich rock history legacy with many of the Soviet Unions rock legends such as Mashina Vremeni, Leningrad and DDT hailing from the northern capital. At the same time the Hard Rock parent company is pushing an expansion in Europe.

VIYM has also invested into specialist chocolate maker French Kiss that makes hand made chocolates targeting the Russian audience. One of the legacies of the Soviet Union is Russians were brought up on dark chocolate (Russians don't add vegetable oil to their chocolate which makes it black) and never full embraced the brown variety from the west.

“French Kiss appeals to Russian tastes and competes with the Swiss versions. The company latest line is specialist limited edition chocolates for special occasions and holidays that have become sought after. Sales are up by a third y/y,” says Yakunin.

The fund has also invested in private health care provider Family Doctor, a private medical clinic that have been growing in popularity amongst Russia’s burgeoning middle class who are looking for improved quality of services.

The big change coming here is that the government recently relaxed the regulations making telemedicine possible – effectively permitting issuing of prescriptions by email that promises to transform the sector.

“The change in legislation has turned the business inside out and will transform who can provide medical services. Moreover they are also talking about allowing private medical providers access to state regulated medical provision,” Yakunin says.

Under the Russian constitution the state is obliged to cover all Russians medical costs and the government maintains a list of drugs and services that it is willing to pay for. However, this business remains under the auspices of the publically owned medical institutions despite making up the bulk of spending on medicine. If it is opened the private sector that could transform the sector and significantly broaden the customer base for Russia’s young private medical sector.

“It will be like the development of supermarkets in Russia. 15 years ago X5 supermarkets were only in Moscow and targeting the well off. But today they cover the entire country and cater to everyone. It could be the same with medical services,” according to Yakunin.

Syktyvkar Tissue Group (STG) is a leading maker of toilet paper and is probably the most best indicator of Russia’s transformation to a market economy as one of the very first products a family will trade up to when its income rises is better quality toilet paper.

“The big achievement last year was STG was voted into the top three most environmental friendly companies in Russia – not so easy for a company that is in the paper and pulp industry. And that has made a huge difference to sales as Russian consumer really cares about the environment,” says Yakunin.

The company has expanded its production facility in Rostov on Don bring in new jobs to the region and also taken an entrepreneurial approach to its business by producing tissue and other paper products to industrial clients in addition to its own retail orientated toilet paper production.