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. Last Updated: 07/27/2016

Money Is No Medicine for Drugstore Baron

MT36.6's concept is for the drugstore chain to be associated with health and beauty.
A good reputation is a huge business asset and honesty is a rational policy, said Artyom Bektemirov, head of the Western-style drugstore chain 36.6.

Furthermore, the question of how to earn money is as important as why.

When he was 25, Bektemirov recalled, he met a man who told him a story about wealthy people who lived to 60 or 70 and made hundreds of millions of dollars but in the end became disillusioned and trusted nobody and were not trusted themselves.

"I thought to myself: What is the end result of my activities? A bunch of dollar signs?" Bektemirov said. "Or is it something else? It affected my way of thinking drastically."

Bektemirov said his philosophy includes taking responsibility for his actions, adding that business is like nature, and natural selection weeds out those who are not committed.

Bektemirov and his partner, Sergei Krivosheyev, started in business by selling computers, but in 1991 they decided to import and sell aspirin and ordered their first shipment. Bektemirov, a student at the time, had done research into pharmaceutical suppliers.

The pair found their startup capital quite simply. They walked into a bank, where an employee whom they had already met gave them a $100,000 loan at 100 percent interest for three months, Bektemirov said.

"When that first truckload of aspirin arrived, we rented a hospital basement and unloaded the truck with our own hands," Bektemirov said. "There was nothing else to do; we had spent all the money on aspirin and customs.

"When you start dragging those boxes around, that's when your value system starts falling together," he said.

Bektemirov and Krivosheyev, however, discovered that the aspirin could not simply be imported, Bektemirov said. To get the documents, they had to figure out who issued them and how the market worked -- and that's how they made connections.

Bektemirov and Krivosheyev earned $350,000 selling the aspirin, with which they repaid the bank and started a company. They continued to buy and sell medicine, eventually purchasing a $1.5 million factory in Voronezh, the country's largest plastic-bandage producer.

Later, Bektemirov and Krivosheyev acquired the Belgorod Vitamin Factory, where they changed the management system. "We had some elementary understanding of what needed to be done and some popular literature," Bektemirov said.

But soon they decided to set a more concrete plan for the development of their medicine company, which they named Vremya. Arkady Gibov, a friend of Bektemirov who worked for McKinsey & Co., suggested they turn to the consultancy for help.

"When working with [consultants], you have to exploit their services to the maximum and fight for what you need," Bektemirov said. "That's an important factor. If you don't set that as your goal, then they become an unnecessary and expensive resource."

McKinsey was hired, and one of the first projects the firm helped launch was the restructuring of the Belgorod factory, a giant enterprise with 6,000 employees.

"The worst thing about Russian business is gigantism," Bektemirov said. "You want to take a bite but can't fit it in your mouth."

Bektemirov and Krivosheyev took the most profitable part of the plant -- the drug-production unit -- and sold the organic-synthesis branch, Bektemirov said.They then got rid of the plant's construction unit, song and dance ensemble, collective farm plots and hotels.

36.6 was McKinsey's idea.

The idea behind the chain was to dismantle the concept of Soviet pharmacies, where customers are separated from pharmacists by a glass divider to protect the pharmacists from diseases the customers may be carrying.

The new concept calls for drugstores to be associated with health and beauty, Bektemirov said. In Soviet pharmacies, the ration of drugs to beauty products is 90/10, but in 36.6 it is 50/50 and falling.

McKinsey forecast that the pharmaceutical retail market would develop quickly and that large players would step onto the playing field. The market is now worth between $3 billion and $3.5 billion per year, according to various estimates.

36.6 was registered on Aug. 17, 1998 -- the day of the financial crisis -- but the consequences were not catastrophic, Bektemirov said, although the business did lose $20 million in turnover.

He said that the crisis was helpful in some ways. It "restructured things, people came back down to earth."

McKinsey wrote a business plan for 36.6, advising the company on how to become a modern retailer.

Bektemirov heads 36.6, while Krivosheyev serves as chairman of the board of directors and lobbyist. The company has two subsidiaries: Veofram and Apteki 36.6. Veofram is made up of the holding's three factories.

Apteki 36.6 is made up of 43 drugstores. The group's sales reached $60 million in the first half of the year, and pretax profit was $7.8 million.

What goes on behind the scenes is as important to 36.6's success as the stores themselves, Bektemirov said.

"A person comes into the pharmacy and sees everything around. But there is also an infrastructure that he is not interested in -- such as logistics, finances, product assortment, planning, marketing and merchandising," he said.

"All this has to be ideally construed. You can't make a mistake because a customer either likes it or doesn't."