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Bringing New York pizza to Siberia
An American entrepreneur finds success selling slices 2,000 miles east of Moscow.
December 2, 2005: 12:55 PM EST
By Christopher S. Stewart, Fortune Small Business contributing writer
Eric Shogren, Siberian pizza mogul.
Eric Shogren, Siberian pizza mogul.
New York Pizza, Siberia's fastest-growing fast-food chain.
New York Pizza, Siberia's fastest-growing fast-food chain.

NEW YORK (FORTUNE Small Business) - Eric Shogren storms the food counter at MyMy, a cafeteria in downtown Moscow, reaches over the loaded trays of two tiny Russian women in line and starts criticizing the food.

"Can you believe this?" he barks, stabbing an accusatory finger at the desiccated chicken and lamb entrées that sit baking under a heat lamp. "It's slop! Tasteless mediocrity!"

For the past decade Shogren, a hyperkinetic 39-year-old Minnesotan, has been striving to educate the Slavic palate in one of the last places on earth you'd expect to find an American entrepreneur: Novosibirsk, the capital of Siberia and Russia's third-largest city, nearly 2,000 miles east of Moscow.

Shogren is the founder of New York Pizza, Siberia's fastest-growing fast-food chain. His little empire includes 14 New York Pizza joints, 13 other restaurants, a bakery that churns out three tons of bread and cake a day, an 1,100-seat cinema that was the first in town to play Hollywood hits, and a nightclub called the New York Times.

And Novosibirsk is eating it up. Last year New York Pizza raked in $15 million, quite a jump from the $150,000 and change that Shogren started with in 1995. This year he has plans to launch at least ten more restaurants in Novosibirsk and other cities nearby, solidifying his niche as Siberia's most ambitious restaurateur.

His biggest gamble yet is a 3,200-cow dairy operation, the largest modern farm in Russia, which is suffering a serious dairy shortage. Shogren broke ground on the project in October 2004 and hopes to start selling milk in spring 2006. If that bet pays off, he will be swimming (or sledding) in cash.

'Give me the ball, and I make it happen'

Shogren estimates that his various ventures could generate around $25 million in annual revenues by 2006. "I'm like Michael Jordan," he says expansively. "Give me the ball, and I make it happen."

The Shogren express may yet be derailed, however. Homegrown imitators are popping up. Western restaurant chains are eyeing his market with interest. And Shogren's success could spark resentment in Novosibirsk, a gritty post-Soviet city where brash American entrepreneurs tend to stand out.

"We have this joke in Novosibirsk," says Edward Shornik, a Russian friend of Shogren's who runs the local YMCA. "A fairy comes down the chimney of a poor family and gives them one wish, and they wish to have their neighbors' cows dead. Success creates jealousy."

In Russia, businessmen like Shogren are often described as "little oligarchs." Shogren tools around town in a Ford Excursion with tinted windows and sometimes employs armed bodyguards. He lives in a gated mini-mansion that boasts 50-foot vaulted ceilings and an outdoor skating rink.

Shogren moved to Russia in 1994, and within a year, had raised $150,000 from American investors to build the first pizza parlor ever seen in downtown Novosibirsk.

Part Hard Rock Café, part McDonald's, New York Pizza featured airy booths, American pop music on the stereo, and framed photographs of Woody Allen, Muhammad Ali, and the Rolling Stones on the walls. The ruble equivalent of $3 bought two slices of pizza and a Coke, 24 hours a day. And unlike every other eatery in town, smoking and alcohol were banned.

By 1997 the restaurant was pulling in more than $5,000 a day. An emboldened Shogren raised $1 million from investors to open four additional locations, which also took off.

Then came the Russian economic crisis of 1998. When the ruble lost more than half its value, Shogren could no longer afford to import popular Western products such as Heinz ketchup and European cheeses.

Struggling to adjust, Shogren cut back on staff and substituted local products for imports. But with the economy in free fall, many Russians stopped eating out. Shogren was forced to shutter two locations.

Determined to achieve self-sufficiency, he opened a wood shop to build furniture for the restaurants and a bakery to supply them with bread and pastries. By 2001, Shogren sensed the beginnings of a revival. With what little money he had left, he opened six new restaurants and the New York Times jazz club.

In 2002 he launched a family-style restaurant chain called Kuzina (Russian for "cousin"). He also gave the city an Asian restaurant (which he later shut down) and a diner that introduced Russian palates to greasy eggs and hash browns.

Shogren's brother Mike, a Harvard MBA, came onboard as president of his company. In 2003 revenue hit $8 million, and then it nearly doubled again the next year, to $15 million.

Now, cows

Ten U.S. investors have already joined the $20 million dairy farm project, including Ambassador Collins and a prominent Wisconsin dairy farmer named John Vereze. "Eric's a miracle worker," says Hal Lieberman, another investor in the project. "I sure wouldn't live [in Novosibirsk]. But he does. And what he's pulling off is amazing."

To improve production, Shogren is introducing open-air barns, better milking technology, and healthier Dutch cows. By late 2006 Shogren hopes to be running the largest modern dairy farm in Russia.

"Russia is wide open right now," announces Shogren, standing at the door of the Georgian restaurant. "The country is ready to make a jump to the future."

As Shogren heads out to the street into the below-freezing weather, the host asks whether he has forgotten his coat. "No coat," he shouts over his shoulder. The host watches Shogren with a What's-this-guy-thinking? look screwed on his face. Shogren has been getting that look ever since he moved to Russia.

"People thought this whole thing was improbable at the beginning," he says, "and now look at us."

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