Organic food, fresh produce, healthy eating. To many minds, these are part of a quintessentially Western craze, compatible only with gleaming Californian open-plan kitchens and European whole food stores. Vkusvill begs to differ. It has been offering nutritious food to Russia's conscious consumers for 12 years, and with no small degree of success.
It started when Andrei Krivenko noticed how difficult it was to get fresh milk and dairy products in Moscow. Most shops only offered UHT milk, with a long shelf life and a vanishingly small microbe count. Using a billion rubles of his own savings (equivalent to $30,000 at the time), Krivenko started a stall in Moscow’s unglamorous Strogino market selling fresh dairy products. Now, that same idea – fresh and healthy produce – is the basis of a foodtech company with 1,300 stores in 64 Russian cities offering not only dairy, but Vkusvill-branded produce from across the range of foodstuffs. In an exclusive interview with bne IntelliNews, Yury Alasheev of Vkusvill’s board of directors discussed why Vkusvill resonates with Russians and how the company coped with such rapid growth.
Just a week ago, at a meeting of the company’s top leaders, Vkusvill re-affirmed its core commitment: making fresh, natural products convenient and affordable for everyone. “We believe that that’s a total disruption to the market,” said Alasheev.
The figures corroborate this assertion. “We’re the fastest-growing FMCG brand in Russia,” Alasheev pointed out. “And that’s not calculated on a low base – we’re also the largest FMCG brand in Russia. There’s a lot of demand for what we offer.”
That offering can be summarised as conscious consumption. Vkusvill’s model consists of selecting a range of products which are organic, fresh, and free from additives or harmful products. That means that it doesn’t sell sugary carbonated sodas, vodka or double-pasteurised milk. It vets the products on the shelves to ensure that they are conducive to a healthy diet, so that shoppers can be confident that whatever they buy will be good for them.
Already in the top three retailers in Russia’s capital, Vkusvill soon expects to be selling more than European giants, with an estimated top-line growth of over 40% this year. This popularity has put paid to the myth that healthy eating is the preserve of a Western clique of super-mums. With Russian life expectancy at a record high (73 years), market researcher GfK says that 58% of Russians now take health factors into account when they shop. “We believe that more and more people will opt for fresher and healthier choices and conscious consumption,” Alasheev said. “And that includes fewer food miles and a better internal culture in the company,” he added.
These last points led to the question of ESG. When asked about ESG initiatives, Alasheev seemed slightly puzzled. “We aren’t just doing some initiatives, our whole essence is ESG… First of all, we don’t sell bad products. This is our whole appeal – we propose products which are socially responsible. If you shop with us, you won’t be able to buy cigarettes, you won’t be able to buy vodka, or even popular sweet beverages. We consciously lose sales: if we offered cigarettes in our convenience stores, we would be getting more, but we refuse to do that,” he explained.
“The other thing we do is to work predominantly with local small and medium enterprises,” Alasheev said. “So among our suppliers you won’t see globally available huge multinational companies. It’s predominantly smaller, local businesses. By doing that, we support the territories we’re operating in. Also, it gives us the ability to have low food miles. Since we sell fresh products, we’re offering things which are mostly produced nearby.”
“But on top of that, we are the largest battery collector in the country, and we have recyclable packaging and all that stuff,” Alasheev added almost cursorily. “I see these as more standard programmes – we run them, and we are even leading in the country in some of these areas, but to me we are much more than that – starting from our assortment, our supply, and how we work with people inside the company.”
But even at this stage in its development, with a clearly articulated mission and 20,000 staff, Vkusvill is still confronted with new challenges as it grows. "If you ask anyone, I think, they'll tell you that the largest thing in the last year has been the move online," said Alasheev categorically. "As consumers turn to online formats, it's now a growing market, with triple-digit numbers. The biggest challenge at the moment is how to address that. We have a new set of competitors coming into the foodtech and retail market, and these new competitors are used to working in markets where they can afford to work on narrow margins - coming from the technology side, for example," Alasheev said.
Indeed, the appearance of e-grocery companies backed by tech company Yandex and banking giant Sberbank demonstrates what a diverse range of players are throwing their hats into the ring, hoping to secure a slice of the very lucrative grocery delivery market.
Alasheev clearly has no illusions about how competitive this process will be, but he seems upbeat about it, confident that Vkusvill has the edge. As recently as 2020, Vkusvill had close to zero e-commerce presence. Now, it is the leading player in Moscow for online groceries. Just like its growth from a single dairy stall to a chain of stores, Alasheev puts this explosive increase in trade down to innovation, experimentation, and simply good ideas. "We were one of the first in Russia to deliver for free with no minimal limit," he points out. In addition to its 100 dark stores, Vkusvill also dispatches deliveries from its normal stores, meaning it can reach a greater range of houses in a much faster time.
One intriguing dimension of the shift to e-groceries is that online customers simply buy more, so the stakes are higher for retailers. "The average purchase is almost three times larger," Alasheev confirmed. "For some reason, when people shop offline, it's ok to drop in at several shops. But online, where you would have thought that it's easier to just close the application, open a new one, and make another order, that's not the case. Online, people are less inclined to make several orders. Because of that, they tend to buy more when they go online."
Vkusvill’s success – even through two waves of incredibly rapid expansion – is built on a very unusual philosophy. The company espouses a management system called ‘Beyond Taylor’, which involves dispensing with the traditional layers of corporate hierarchy in favour of a much leaner system which puts people first: "Businesses are mostly oriented on eliminating the human factor, considering it as a kind of problem for the business," Alasheev lamented. "And the instruments for that are things like KPIs, job descriptions, control of performance. We don't have any of that stuff."
The idea behind favouring independent teams over departments is that it gives each individual more freedom and more scope for creativity and experimentation. "If you take a store, that's a self-managed team - they don't really have a boss, they operate on their own. And that's what people need, basically... When you have a goal without anyone telling you what to do, and you achieve that goal, it's very good motivation, and a source of enthusiasm and joy. That's why we see that people can spend thousands of hours on computer games without being paid for it. We're trying to re-create that in the work environment. If, rather than being told what to do, you play the game yourself and then simply discuss what you achieved, both the game and the discussion of what you achieved become fun."
A workplace where everyone is an associate, without dress codes, fines, bosses, or budgets sounds rather utopian. But does Vkusvill have any evidence that this model is more effective than the traditional management structure? Alasheev shrugged. "This model allowed us to build the largest food brand in Russia. This model allowed us to build a company from scratch, profitable from day one. It was paid completely with our own money. We have no bank debt, and we always raise money in the company. So that's evidence in itself."
Another virtue of the Beyond Taylor management system is the agility it brings. As a foodtech brand working with huge data sets, quick responses to subtle market changes are of the essence for Vkusvill. When the company had to scale up its online offering in response to the pandemic, for example, it managed to bring its share of online sales from zero to thirty percent in just a year. Alasheev attributes this feat of logistics to a nimble, people-oriented model. "It's not bureaucracy, but humanocracy. We didn't need to re-write the job descriptions, to re-arrange our departments or re-negotiate a new set of KPIs. We could jump straight into the task."
Reports have been circulating that Vkusvill is mulling an IPO, but Alasheev insists that the company is considering a much broader range of mechanisms to fuel future growth. "For our 12.5 years of existence, we've managed to finance our growth on our own, without tapping any financial markets. But since right now competition in e-grocery is more fierce, we are considering some of the financial markets - equity, financial, strategic investment. We're open to all options."