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. Last Updated: 07/27/2016

Behind The Chocolate Curtain

On a windy spring day last month, a crowd gathered on the lawn outside a modern plant in Stupino, a small town 120 kilometers south of Moscow that does not appear on most maps because until a few years ago it was a secret center for making fighter plane parts.

At the appointed hour, Forrest Mars Jr., the gray-haired president of Mars Inc., the grand old man of chocolate-bar and pet food makers, stood up to the microphone to pronounce the latest addition to his empire officially open.

"One of our five principles at Mars is mutuality: the sharing of tasks and the benefits that follow." said Mars, in rhetoric reminiscent of a U.S. management motivational manual. "What has been achieved here is an outstanding example of mutuality in practice, and a beacon for others to follow."

The select audience of guests and Mars plant workers shivered, waiting for their reward of Mars ice-cream and chocolate bars at the end of the speeches.

In a climactic flourish, Mars invoked the name of his grandfather, Frank Mars, who invented the Mars bar in 1911 in the kitchen of his house in Tacoma, Washington.

"If anyone had told Frank Mars that 85 years and trillions of chocolate bars later his descendant would be opening yet another factory, and this time in the town of Stupino in Russia, he would have been incredulous."

Stupino's amateur brass band struck up a spirited version of "The Star-Spangled Banner" as the U.S. flag was solemnly raised, but the musicians struggled slowly through the new Russian national anthem. They were clearly more used to the Soviet tune and only got going for the last few bars.

In a flurry of pageantry, the Mars corporate flag flew in the air between the American stars and stripes and the Russian tricolor. An Orthodox priest blessed a commemorative plaque, then sprinkled some holy water on Forrest Mars and Stupino's mayor, Pavel Chelpan. As the crowd dispersed, one Russian employee remarked, "They could have spared a bit more effort for the Russian anthem."

The opening ceremony, for all its sentimentality, was an unusual chance for a glimpse inside Mars' Stupino plant, the biggest foreign manufacturing plant in Russia to date. The company is secretive in the extreme. Forrest Mars himself almost never gives interviews. He would not speak to journalists or be photographed at the opening. Only seven hand-picked news outlets, including The Moscow Times, were allowed into the Stupino complex.

The secrecy comes about partly because, despite an international turnover of $11 billion from its chocolate bars, pet food and other foodstuffs, Mars is still a family business. Two Mars brothers -- Forrest and John -- hold an undisclosed majority stake.

The public opening of the plant, with its unwonted publicity, is an indication of the importance of the Stupino project and of Russian market for the Mars empire.

For Mars, Russia is a major and unique market.

The company's penetration of the Russian market is without parallel. Mars has even worked its way into the Russian language. In the mouths of Russia's nationalists, snickerizatsiya became a synonym for the pernicious effects of Western consumerism on traditional Russian culture.

Although the company is tight-lipped about overall sales volumes and market share, Mars' two main chocolate brands -- Mars and Snickers bars -- now head the list of the best-selling confectionery in Russia, and the brand-names are already well established.

A survey by Gallup Media Russia last November found that, among 6,250 respondents, 71 percent named Mars' ubiquitous Snickers as their favorite chocolate brand. The classic Mars bar, invented 85 years in Tacoma, is Russia's second favorite bar. Mars' Bounty came in No. 3.

Andrei Fedotov, director of the Russian Public Relations Group, a marketing consultancy, puts down Mars' success to well-timed marketing. "They started their advertising campaign in 1993, and consistent advertising by their competitors began only a year or two after," he said. "Even today, their advertising dwarfs all efforts by any competitor," he said.

According to RPRG figures, Mars last year spent $28.2 million on advertising here, compared with about $5 million by Cadbury Schweppes of Britain.

At a cost of $120 million, the new factory marks a crucial new stage in the Mars strategy for taking over Russia and has been a priority for Forrest Mars himself.

Mars has personally traveled to Russia three times this year alone to keep an eye on the business and the new plant. As head of the Council for Foreign Investment, which is co-chaired by Prime Minister Viktor Chernomyrdin, he was able to negotiate a favorable tax environment for Mars and other companies that may follow in its footsteps.

The company recently became the first beneficiary of a 1995 presidential decree that grants a 50 percent exemption on import duties to foreign companies that have invested over $100 million in the Russian economy. Import duties on chocolate bars and other Mars food are fairly high, making this a major break.

This will be crucial since, even though the Stupino plant has been operating for 10 months, Mars will continue to import to meet demand.

Stupino is also a test case for large scale manufacturing in Russia, both for Mars, which says it is planning other factories in Siberia and the Far East and for other foreign investors.

Mars' competition in the chocolate business is not far behind. Nuts, the flagship candy bar of Nestle -- the world's biggest food group -- is also popular in Russia, as is Picnic, from Cadbury Schweppes. Cadbury plans later this year to open a plant in the Novgorod region capable of producing 40,000 tons of confections a year. Nestle and another major Swiss chocolate maker, Kraft Jacob Suchard, a subsidiary of Philip Morris, have already bought into local candy production companies.

Mars' spokesman Alexander Shalnyev admits the Russian chocolate market is at a delicate stage. He said Mars sales were going much faster two to three years ago when Mars was still a novelty. In particular, he said, more competition is coming from domestic chocolate makers. Despite the slowdown, the company is pretty satisfied with the current situation, Shalnyev said.

Not surprisingly, given the high stakes, Mars is setting out to make Stupino a model plant in the worldwide Mars mold. The result is one of the few cultural fusions to date of Western management and Russian workers.

The office section of the building, equipped with expensive computers, is built on an open plan, a shock in Russia where it is still unusual for management to share office space with the rank and file.

House policy dictates that Mars' 1,000 employees, as well as anyone else involved in the company's business from suppliers to construction workers, should be called "associates" to emphasize their role in the business: Mars cultivates a family spirit.

But the factory also has the stringent discipline rules universal to the chocolate and pet food empire.

One rule that was not changed even for the launch of "a truly amazing achievement" -- the first Russian Mars factory, capable of producing up to 75,000 tons of confectionery a year -- was the company ban on alcohol.

"I know a Russian tradition that suggests that we should give a champagne toast on such an occasion. Unfortunately even my excitement and happiness do not allow me to break a long-standing tradition of Mars," said Forrest Mars. "Please wait until four in the afternoon when we will move our ceremony to where our Mars rules no longer apply."

An employee who disobeys the rule and is found consuming or in possession of alcohol, even just beer, will be fired immediately, said Shalnyev.

All Mars workers at Stupino wear the traditional white uniform with their name embroidered on the left breast pocket. Clipped to their shirts are the small white electronic cards they use to clock in and out when they come to or leave work.

The rule applies to all Mars employees, and Forrest Mars clocks in his card every morning. There are fines for coming in late.

The factory floor itself is a modern and highly computerized production facility that employs a minimum of manual labor.

Walls and floors are kept spotless, and visitors, as well as workers, have to take off all jewelry and watches before entering the production line to avoid contaminating the endless stream of chocolate.

In return for hard work, the company rewards its employees with a range of social benefits, said Shalnyev. Workers are entitled to free comprehensive medical and life insurance, and the company runs a loans scheme. A lunch at the plant's heavily-subsidized canteen costs 5,000 rubles ($1), and wages are at least 20 percent higher than the average wage paid to a specialist of a similar profession in the region, Shalnyev said.

Lyudmila Boryetskaya, a medical worker at the factory, said she liked the "friendly" atmosphere at the plant and had found it easy to adapt to the new climate after she left her previous job as a doctor at one of the local machine-building plants. "The discipline [rules] here are all right, I don't think they are too strict," she said.

"From the very start we saw it was an excellent opportunity," said Ella Sviridova, 30, of the plant's service and finance department. "I worked for six years at a Russian enterprise, and I never enjoyed my former job like I enjoy what I'm doing here. We see that our efforts are really needed and rewarded here, everyone has prospects for growth within the company." Of course, she added that one of the main reasons she left her previous job was for a higher wage.

For Russians who miss the relaxed pace of collective labor at Soviet plants, it is not easy to adapt.

Immediate dismissal is the rule for workers who violate standards of personal hygiene, violate security rules, clock in for a buddy using their special ID card, go absent for more than three hours or come to work drunk.

Two Mars employees who sat at a table in the plant, savoring the free ice-cream, were overheard complaining.

"If we get fired, we'll definitely find something. After this, we can work anywhere. Hard labor camp is nothing compared to our [discipline]," one worker said.

In fact, the plant is a huge cultural experiment for the whole town of Stupino, which still has the feel of the privileged, closed military town that it was in Soviet times, when it churned out parts for jet fighters and helicopters. Drivers slow down when they see a school sign, people smile as they walk along the sidewalks with their white-painted curbstones.

In the old days, foreigners and outsiders were barred, and the town was not marked on any Soviet maps because of its strategic importance. It became officially "open" in 1991, but remains faithful to the hush-hush Soviet past. Questions by a stranger often produce a suspicious look.

But Mars is moving its national office from Moscow to Stupino, even paying its city-slicker staff bonuses to move to this sleepy town 120 kilometers away from the Kremlin.

Already in a town with a population of some 80,000 people and 80 percent of its employment still bound to the cash-strapped military-industrial complex, the presence of a big foreign company has made a difference.

As part of its move, the company has built scores of houses, with half of the new flats rented out to factory employees, and half available to other locals.

Many of the components for the factory came from local defense plants, and last year Mars paid 20 billion rubles ($4.3 million) in local taxes, or 14 percent of all payments into the local budget, said Pavel Chelpan, the town's mayor. Mars also pays an undisclosed amount for leasing 40 hectares of land.

Good public relations are high on the Mars agenda.

It gave a local hospital X-ray equipment and an ambulance, and the fire brigade received two Russian-made fire engines.

But the growing number of affluent Mars workers -- dubbed by locals as Martians or Snickers -- in a town where a job at one of the defense plants pays on average only some 600,000 rubles ($120) a month, often three to four months late, could provoke social problems that seemed far off just a few years ago.

While local authorities "have not yet felt a rise in crime," they were "getting ready," for it, Chelpan said."People really go there because of money, they pay more than a million [rubles a month] at Snickers," said Tanya, a street vendor of Mars ice-cream and pet food in Stupino.

She herself would not be able to join the factory's staff because "it's not so easy to get into Snickers: they have interviews and tests, and I don't speak any English."

Many of the top professionals in Stupino, demoralized by the growing wage arrears at the decaying defense plants, have been lured to Mars by the better pay and working conditions.

"Here [at Stupino plant] they've got some of our best specialists, mainly young. Mars thinks they've never had such highly qualified personnel before," Chelpan said. "We've lost these people for some of our key enterprises."

Some Stupino professionals, however, refused the temptation.

Albina Ryabchun, a teacher of English at school No. 2 at Stupino, said she would not leave her job even if she had an offer, even though she earns only 500,000 rubles a month.

"All of this is so uncertain," she said of the Mars plant. "Today they're here, tomorrow they're gone, but we have to live here." She said only two English language teachers from the town's schools have left to work for Mars.

Yelena, another English language teacher at the school, said she was interviewed for a secretarial job, but finally declined the offer. "I don't really like working for foreigners," she said.

But these teachers said they liked the festivities and fireworks that Mars organized in Stupino to celebrate the opening of the chocolate plant, and were grateful to the company for sponsoring the town's hockey and football teams.

"But you understand, Soviet chocolate has always been the best," Ryabchun said.

For Stupino, which was converted entirely to military production during World War II and played its role in Russia's arms race against the West, it still seems hard to shrug off the glorious past.

"In a way we're lucky [to have a deal with Mars]. But psychologically it hurts," said Chelpan. "Russia probably doesn't need this type of product so desperately."

-- Sergey Rybak from Kapital contributed to this report.