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Siberian Slice
An American entrepreneur finds success east of the Urals.
By Christopher S. Stewart


MOSCOW (FSB Magazine) - Eric Shogren storms the food counter at MyMy, a cafeteria in downtown Moscow. He's a big train wreck of a man: wild hair, half-tucked red polo shirt, blue blazer straining to contain his burly chest. Shogren 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 entrees that sit baking under a heat lamp. "And look at the potatoes--and the cake!" the American businessman bellows. "It's slop! Tasteless mediocrity!"

The women in line seem astounded, as if some green alien had just abseiled from a trapdoor in the ceiling, ready for a snack. But Shogren, a hyperkinetic 39-year-old Minnesotan, isn't eating at MyMy today. He has just stopped in to stir things up a little and to illustrate his contention that Russia doesn't offer much in the way of first-rate fast food.

For the past decade Shogren has been striving to educate the Slavic palate nearly 2,000 miles east of here, 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. Shogren is the founder of New York Pizza (www.nypizza.ru), 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, Russia's largest modern farm. 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.

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."

Finally, Shogren has yet to master the art of delegation. "To grow a lot more, Eric has to find a way to multiply himself," says James Collins, a former U.S. ambassador to Russia who has invested in Shogren's dairy project. "He needs to create not just managers out of his workers, but people with the same entrepreneurial spirit. If Eric can't solve that problem, he will be limited by the number of hours he can be in one place at one time in a day."

Novosibirsk is the midway point on the Trans-Siberian Railway's 6,000-mile slog from Moscow to Vladivostok. Surrounded by endless expanses of steppe and taiga, it is a city of 1.7 million people, most of whom live in drab concrete apartment blocks. The city was founded in 1893 to house railway workers building a bridge over the river Ob. After the Bolshevik revolution it became a major center of heavy industry and scientific research. Today a biomedical research center outside Novosibirsk harbors one of the world's two acknowledged vials of smallpox (the other resides at the Centers for Disease Control in Atlanta). But outposts of glossy consumer culture are beginning to pop up among the dreary Soviet-era shops: movie theaters, bowling alleys, and a water park. In the clearest sign yet that Novosibirsk is being assimilated into the global economy, Ikea recently bought land for a big-box home store.

In Russia, businessmen like Shogren are often described as "little oligarchs." While Shogren is one of the wealthier men in town, he's not in the same league as the jailed Mikhail Khodorkovsky, the exiled Boris Berezovsky, and other Russian moguls who amassed vast wealth during the capitalist gold rush of the early 1990s, when well-connected insiders were able to buy up valuable state enterprises at fire-sale prices. But Shogren does have similar tastes and accouterments. He 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.

"There's sort of a cult of Eric in Siberia," Shogren declares later at a fancy Georgian restaurant around the corner from MyMy. "People tend to know me." His friend Shornik hasn't heard of the Eric cult. But he does say that Shogren "found himself in Russia. He married a smart, cute Russian girl and started one of the biggest businesses around."

In 1991, Shogren was running several small businesses in Minneapolis, including a sports-art dealership and a video production facility. At 25, he was bored and ready for a new challenge. He met a Russian businessman with ties to Novosibirsk, and the two of them started exporting cars to Russia. The Russian partner fronted the cash. Shogren handled all the bureaucratic legwork of shipping the cars, most of them Ford Explorers, Lincoln Town Cars, and Crown Victorias.

The business hit big. A year and a half later Shogren and his partner launched the first modern supermarket in Novosibirsk, a city where people were used to buying their food from decrepit government shops that offered little choice. Shogren stocked the shelves with shiny Western food brands that he brought in via the Trans-Siberian Railway. "People came just to look around," he says.

In 1994, Shogren moved to Russia for good. The country had only recently opened its doors to foreign investment. Markets lacked critical legal and financial infrastructure, the ruble was volatile, and local banks were reluctant to lend money. Investments were cloaked in secrecy. Local gangsters and corrupt politicians had their fingers in every conceivable pie.

Shogren spoke little Russian when he came to Siberia and is not entirely fluent in the language today. But he did have connections to the land. He has Russian ancestors on his mother's side. The long, dark winters were a lot like the winters in Minnesota. Plus, being a hockey player, he was accustomed to bare-fisted competition. "Business here is a contact sport," he says, taking a chomp on a chicken kabob.

Yet the supermarket flopped, partly because of currency inflation and partly because transportation of the goods was glacially slow. Foodstuffs exploded or spoiled en route. That was enough to spook the Russian partner, who left Shogren to fend for himself.

Those were dicey times in Russia. It was 1995, and President Boris Yeltsin was up for reelection the following year. The election was widely seen as a referendum on whether Russia should stick with its capitalist experiment or revert to a socialist economy. Many assumed that in the event of a Yeltsin defeat, the new government would swallow up all private enterprises for little or no compensation.

It might have been easier to wait out the election or even head home to Minnesota. Instead, Shogren raised $150,000 from American investors and built the first pizza parlor ever seen in downtown Novosibirsk.

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

After Yeltsin's reelection, New York Pizza took off. 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. By year-end the little oligarch had scored his first million in profits.

Then came the Russian economic crisis of 1998. Russia defaulted on some of its sovereign debt. The local stock market plunged, and 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. Like his Russian money, his dreams of success were dissolving by the day. "It was a bad, bad time," he recalls.

It took more than two years for Shogren to climb out of the hole. 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. German hard-rockers the Scorpions jammed at Shogren's club when they passed through Novosibirsk. Suddenly Shogren was back in the game.

Last October Shogren broke ground on a three-barn, 3,200-cow dairy farm. Ten U.S. investors have already joined the $20 million 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."

In Soviet times, Russian agriculture was dominated by inefficient collective farms. In the past ten years Russia's dairy-cow population has fallen from 40 million to around 12 million, creating a serious dairy shortage. It doesn't help that Russian cows are shorter lived and less productive than their Western counterparts. Shogren is introducing open-air barns, better milking technology, and healthier Dutch cows. He's also going to double the existing local production levels of milk and increase its shelf life to 20 days from four. 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."

Eric Shogren storms the food counter at MyMy, a cafeteria in downtown Moscow. He's a big train wreck of a man: wild hair, half-tucked red polo shirt, blue blazer straining to contain his burly chest. Shogren 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. "And look at the potatoes--and the cake!" the American businessman bellows. "It's slop! Tasteless mediocrity!"

The women in line seem astounded, as if some green alien had just abseiled from a trapdoor in the ceiling, ready for a snack. But Shogren, a hyperkinetic 39-year-old Minnesotan, isn't eating at MyMy today. He has just stopped in to stir things up a little and to illustrate his contention that Russia doesn't offer much in the way of first-rate fast food.

For the past decade Shogren has been striving to educate the Slavic palate nearly 2,000 miles east of here, 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. 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, Russia's largest modern farm. 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.

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."

Finally, Shogren has yet to master the art of delegation. "To grow a lot more, Eric has to find a way to multiply himself," says James Collins, a former U.S. ambassador to Russia who has invested in Shogren's dairy project. "He needs to create not just managers out of his workers, but people with the same entrepreneurial spirit. If Eric can't solve that problem, he will be limited by the number of hours he can be in one place at one time in a day."

Novosibirsk is the midway point on the Trans-Siberian Railway's 6,000-mile slog from Moscow to Vladivostok. Surrounded by endless expanses of steppe and taiga, it is a city of 1.7 million people, most of whom live in drab concrete apartment blocks. The city was founded in 1893 to house railway workers building a bridge over the river Ob. After the Bolshevik revolution it became a major center of heavy industry and scientific research. Today a biomedical research center outside Novosibirsk harbors one of the world's two acknowledged vials of smallpox (the other resides at the Centers for Disease Control in Atlanta). But outposts of glossy consumer culture are beginning to pop up among the dreary Soviet-era shops: movie theaters, bowling alleys, and a water park. In the clearest sign yet that Novosibirsk is being assimilated into the global economy, Ikea recently bought land for a big-box home store.

In Russia, businessmen like Shogren are often described as "little oligarchs." While Shogren is one of the wealthier men in town, he's not in the same league as the jailed Mikhail Khodorkovsky, the exiled Boris Berezovsky, and other Russian moguls who amassed vast wealth during the capitalist gold rush of the early 1990s, when well-connected insiders were able to buy up valuable state enterprises at fire-sale prices. But Shogren does have similar tastes and accouterments. He 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.

"There's sort of a cult of Eric in Siberia," Shogren declares later at a fancy Georgian restaurant around the corner from MyMy. "People tend to know me." His friend Shornik hasn't heard of the Eric cult. But he does say that Shogren "found himself in Russia. He married a smart, cute Russian girl and started one of the biggest businesses around."

In 1991, Shogren was running several small businesses in Minneapolis, including a sports-art dealership and a video production facility. At 25, he was bored and ready for a new challenge. He met a Russian businessman with ties to Novosibirsk, and the two of them started exporting cars to Russia. The Russian partner fronted the cash. Shogren handled all the bureaucratic legwork of shipping the cars, most of them Ford Explorers, Lincoln Town Cars, and Crown Victorias.

The business hit big. A year and a half later Shogren and his partner launched the first modern supermarket in Novosibirsk, a city where people were used to buying their food from decrepit government shops that offered little choice. Shogren stocked the shelves with shiny Western food brands that he brought in via the Trans-Siberian Railway. "People came just to look around," he says.

In 1994, Shogren moved to Russia for good. The country had only recently opened its doors to foreign investment. Markets lacked critical legal and financial infrastructure, the ruble was volatile, and local banks were reluctant to lend money. Investments were cloaked in secrecy. Local gangsters and corrupt politicians had their fingers in every conceivable pie.

Shogren spoke little Russian when he came to Siberia and is not entirely fluent in the language today. But he did have connections to the land. He has Russian ancestors on his mother's side. The long, dark winters were a lot like the winters in Minnesota. Plus, being a hockey player, he was accustomed to bare-fisted competition. "Business here is a contact sport," he says, taking a chomp on a chicken kabob.

Yet the supermarket flopped, partly because of currency inflation and partly because transportation of the goods was glacially slow. Foodstuffs exploded or spoiled en route. That was enough to spook the Russian partner, who left Shogren to fend for himself.

Those were dicey times in Russia. It was 1995, and President Boris Yeltsin was up for reelection the following year. The election was widely seen as a referendum on whether Russia should stick with its capitalist experiment or revert to a socialist economy. Many assumed that in the event of a Yeltsin defeat, the new government would swallow up all private enterprises for little or no compensation.

It might have been easier to wait out the election or even head home to Minnesota. Instead, Shogren raised $150,000 from American investors and built the first pizza parlor ever seen in downtown Novosibirsk.

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

After Yeltsin's reelection, New York Pizza took off. 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. By year-end the little oligarch had scored his first million in profits.

Then came the Russian economic crisis of 1998. Russia defaulted on some of its sovereign debt. The local stock market plunged, and 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. Like his Russian money, his dreams of success were dissolving by the day. "It was a bad, bad time," he recalls.

It took more than two years for Shogren to climb out of the hole. 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. German hard-rockers the Scorpions jammed at Shogren's club when they passed through Novosibirsk. Suddenly Shogren was back in the game.

Last October Shogren broke ground on a three-barn, 3,200-cow dairy farm. Ten U.S. investors have already joined the $20 million 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."

In Soviet times, Russian agriculture was dominated by inefficient collective farms. In the past ten years Russia's dairy-cow population has fallen from 40 million to around 12 million, creating a serious dairy shortage. It doesn't help that Russian cows are shorter lived and less productive than their Western counterparts. Shogren is introducing open-air barns, better milking technology, and healthier Dutch cows. He's also going to double the existing local production levels of milk and increase its shelf life to 20 days from four. 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." Top of page

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.