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. Last Updated: 07/27/2016

Crisis Can't Stop Companies Coming




The scene on Kutuzovsky Prospekt at the opening of the new Fendi boutique was like a flashback to the days before the crisis.


The Italian fashion house on Thursday night treated guests clad in haute couture to champagne, caviar and a fashion show featuring a $100,000 sable coat.


"I think this boutique will do very well in Moscow," said Guido Formilli, one of Fendi's directors. "We are optimistic about the Russian market. We think it will improve."


Despite the crisis, a number of new business ventures have been launched in Moscow since Aug. 17 when Russia's latest bout of economic troubles started.


Only this week in Moscow, a Russian soft drink bottler officially opened a plant, a new music magazine hit the newsstands, and Fendi opened its new boutique. MTV-Russia, a local version of the ubiquitous music television program, was to start broadcasting Friday night.


Some may say that these companies had already invested their money before the crisis and were beyond the point of no return when it hit. However, the companies themselves insist that now is the time to cash in on competitors' weakness. Or else, they just hope things will improve in the long term.


Fendi's theory seems to be that the New Russian elite, who are its main customers, will not be affected by the crisis. "The crisis destroys the middle class but never harms the rich," explained Andrei Nikolayev, a trade analyst at the Italian Embassy.


Russian bottler KLP started producing Irn-Bru, a Scottish soft drink, in July under license. Yet a chilly wind blew through the grounds of their factory in northern Moscow during the official opening ceremony which went ahead despite the crisis Friday.


The company is retailing one bottle of Irn Bru for the ruble-equivalent of about 60 cents as opposed to the pre-crisis target of $1.30.


But KLP President Sergei Konov put on a brave face at the opening. "We faced the choice of closing down before we opened or take a chance and follow through f and we decided to follow through," he said. "Of course, we are losing money now, but we can afford it, for us, our presence in the market is far more important than making a profit. We can't cut production, because if we leave the market for a month we'll have to start from scratch."


Some see a setback, others see a challenge. "Turmoil in the marketplace also gives opportunities. ? It's easier as some of the competitors are having difficulties with their own trading," said Robin Barr, president of A.G. Barr of Scotland, which licensed KLP to produce Irn-Bru.


Alexander Talmatsky, general producer of Mediastar, which on Friday launched Muzykalny Magazin, or Music Store, a showbiz and entertainment monthly, gave no rational explanation for his decision to press ahead despite the crisis.


"Everybody in show business is crazy. Crazy people get things done today, and tomorrow everything is O.K.," he said. "We are going to get the project going during the crisis when there's vacuum, now is the right time to do this."


Boris Zosimov, CEO of MTV-Russia, which is set to broadcast 21 hours a day as of Friday night, insisted it made sense to launch the $30 million project in the midst of economic turmoil.


"I'm not crazy, I'm quite pragmatic, and I care about my work," he said. "But people will always need bread and circuses."


Besides, the company never counted on making a profit in the first few years anyway, he said.


"If the situation is not going to change in three years, I'll say that our project is a failure, but who in his right mind can expect such a country as Russia to stay at the bottom for three years?"


Bernd Runge, president of Conde Nast in Russia, which launched the Russian edition of Vogue magazine in August just as the crisis hit, also took the long-term view.


He said that advertising and newsstand sales were adequate for now and he expected an upturn. The December circulation could rise as high as 200,000 copies from the current 150,000, he said.


"I'm very optimistic that things will calm down again," he said. "With a project like this you think in terms of years, not weeks."