Man of Business
Although he has encountered some difficult challenges along the way, Vasil Sopromadze says that his every business undertaking is successful. While the list of endeavours he has taken part in over the years are vast and wide-ranging, he says that the Fresco supermarket chain – has been the most challenging of all. The success of this business, like every other business he operates, has been the direct result of his tireless work ethic and a universal formula that he employs that is surprisingly a lot simpler than you might expect…
What were your first steps as a businessman?
What is business? It’s work. Who is a businessman? A man of business. I started doing business at the age of 21 when I put on work boots and began working as a construction foreman at one of the sites in St. Petersburg. I was born in Georgia, but at 16 I moved to St. Petersburg, Russia. Later, I lived in London, France, Italy and Israel. I have gone through all the subsequent stages. I was a construction foreman, site manager, senior site manager, senior engineer and director general of the union. I did not start off as a foreman because I had no other option. In 1985, I graduated from the Leningrad Engineering-Economic Academy with honours and did an internship at the Dimitrov Institute of Public Economy in Varna, Bulgaria. Trust me, all doors were open for me and people used to convince me that I should accept offers for a higher position, but I stood firm on my decision. I wanted to start from the lowest position of an engineer and go through all the steps. I wanted to test myself and see what I could or couldn’t do. In a short span of time, my career path advanced from the position of a construction foreman to director general. Although during the Soviet Union this was easily achievable. At 25, I was the youngest non-partisan director general completely in charge of the restoration work being undertaken in St. Petersburg, which at the time was called Leningrad. There were approximately 2,000 people working at the union.
When did you start your business activities?
When Gorbachev was elected as General Secretary of the Soviet Union, the concept of a ‘business’ did not exist yet, but one could launch a cooperative or a joint venture and even have business partners abroad.
I have always had ambitions and frankly speaking, I love ambitious people. I believe that if a person does not want to do something for oneself, they will not be any good for others either
In 1989, I started a joint Italian-Soviet venture called ‘Itus’. Since neither I, nor my Italian partner had any starting capital, we asked wood processing plants in Russia to give us wood waste. My request was met with a lot of enthusiasm since for them it was just trash that they wanted to discard. For me it was starting capital. We used this wood waste to make the so-called wood cassettes that were attached to metal rods. Our company was the first to build wooden houses with our new product in Naples, Italy. We built two types of houses called Gorbi and Raisa. We built a total of 16 such houses. However, my first true business and the turning point in my business career was opening a private medical clinic. The fact alone that the clinic was ranked No. 2 in the Soviet Union where world-renowned ophthalmologist Fyodorov’s Eye Clinic was ranked No.2 was unprecedented in itself.
It was quite a challenge to open a medical clinic, since private business was a new thing and the state was reluctant to let the private sector into spheres such as healthcare. The final decision was made in Moscow. The ministry of finance granted me permission and we managed to open our clinic even though we did not have the right strings to pull.
As a rule, I never had friends in the government and neither do I plan to have them in the future. You know why? Governments come and go, but the business remains. As for the clinic itself, it specialized mainly in urology and gynecology. I reached an agreement with the administration of the Russian Military Medical Academy to use some of the semi-classified inventions in general medical practice at our clinic. The group of drugs I am talking about is called peptides. When taken in combination with other drugs, they significantly increase their effectiveness. Apart from the medical personnel and the medications, the concept of this clinic was unique and innovative.
What prompted you to take an interest in so many unrelated spheres of business throughout your career?
The efficiency of any business is determined by profit and revenue. How can you make money? The question can be answered by a simple formula. Even if I hadn’t read about this formula, I would have eventually come up with it myself: Give people what they want and they will pay for it – you see how simple this is? The same applies in the sphere of tourism services. My partners and I equipped two cruise ships that transported tourists to the Island of Valaam. We ensured maximum comfort, organized concerts and improved the quality of food. In other words, we improved the quality of service and created a comfortable environment that enabled us to operate in a non-stop mode.
The formula that is truly unique has been my motivator and main creed throughout my work. My business story covers many sectors, including real estate, development, construction, car dealerships, restaurants, retail, and so on. However, such diversity does not necessarily mean that I am a genius. I have always been surrounded with a wonderful team of people and we have achieved some amazing results together. The main criteria that I use for selecting team members are professionalism and dedication to work. It is important to create good working conditions, offer financial incentives and give your team members creative freedom based on the goals of the company.
The general rule for business success that anyone can apply if they want to achieve success is also very simple: love the people you work with and be considerate towards them. Besides, it is very important to follow the rules, demand only what you rightfully deserve, and never rely on friendly relations. This rule is particularly relevant in Georgia. There are many other rules for business success, but the most important thing is to never give up, don’t let the challenges scare you and fight every day to achieve your goal.
Did you ever have to make compromises in business?
I would never make compromises for the sake of making money. Nevertheless, I believe that it is acceptable to make compromises if they do not come into conflict with your conscience and independence as a businessman.
Would you agree that even the simplest approach requires proper management? What is the secret of your management?
As I mentioned before, the formula to make money is simple. However, you cannot imagine how hard it is to put this into practice. It is extremely difficult to create an organization that is aimed at meeting the demands of people. Besides tireless work, it leads to sleepless nights and lots of stress. As a result of these challenges, I have four stents in my heart.You can never cross the ocean unless youhave the courage to lose sight of the shore. It is always like that: You succeed when you want it and not when you can. It is easy to stay busy, but the real challenge is to achieve results. Despite the fact that I am always actively involved, I never run my businesses directly. I used to supervise the management, which later ran the business. I think that those who think that the most important thing is to have money, are very wrong. There is no leader without a team and there is no team without a leader. This entire relationship rests on mutual trust. That is why the trust factor is key to efficient management.
What is your goal as a businessman?
I would not be entirely honest if I told you that when I start a business I don’t want to be first. Obviously, I want to be a leader, but I also want to see the fruits of our work. In other words, the revenue that will allow me and every member of my team fulfil their dreams, the dreams of ordinary people. My goal has always been to ensure the well-being of my employees and myself. At the same time, we fully realize the fact that in order to achieve happiness and financial well-being for ourselves, we need to make sure that our customers are satisfied and happy as well.
The real boss for me and my teammates are the people – our customers. If one day they decide to fire us, they can do it in no time. How? They will simply discontinue using our services. For instance, they will stop shopping at the Fresco Supermarket chain and that will be the end. That is why we are focused on providing our customers with the best service possible.
Let us talk about your business activities in Georgia? What prompted your decision and why did you choose retail business?
As a matter of fact, I returned to Georgia twice – the first time I was 32 and Mr. Eduard Shevardnadze offered me the position of deputy state minister. I turned down the offer to become a member of the government, since at the time I did not share their vision and neither did I see any future for that government.
Instead, I told Mr. Shevardnadze that I could serve my country in a different role. Consequently, I opened my first Agro Consortium in Georgia called Tserovani.
In the same period, I carried out a very complex and large-scale rehabilitation project at Vartsikhe power station, which provided the country with an additional 1,500, 000 kWh of electricity. Despite the fact that Tserovani turned out to be a very successful company, I sold the company nonetheless and left the country. When I returned to Georgia six years ago, I had no intention of staying and starting a business here. On the contrary, my plan was to sell all the existing assets I had and leave in a few days. However, I was impressed by the progress the country was making. As you see, instead of three days I stayed for six years and I am planning to spend the rest of my life here. If I had returned today, I would not have stayed for even one day, but at the time, I made a firm decision to stay and start a business in Georgia.
You know what my acquaintances used to tell me? Vaso, they will take away everything. And my reply was: why would anyone take it away, everything I do is legal. I have been struggling all my life to hold on to what I have so no one takes it ever. I would never take anything that does not belong to me, but neither will I give up something that is rightfully mine. I was never disturbed during Saakashvili’s administration or now. Maybe that’s because they know I will have an adequate response.
To make a long story short, when I decided to stay in Georgia, I began contemplating which business to pick for investment.
Retail chains were quite new at the time. I became interested in this field, but since it was an entirely new domain for me, I decided to seek advice from my friend – the owner of the successful retail chain called Lenta. I wanted to know what the starting point of this business was. Oleg explained everything in very simple terms: ‘Vaso, find a building and put two doors there. At one door you will have a line of people wanting to sell products in your store, while at the other door you will have a line of customers wanting to buy these products.’ The main thing was that I could put my own pricing margin on the products and that was all. That is how the story of Fresco started.
How did you manage to develop Fresco?
Despite the fact that from today’s perspective it’s not necessary for retail chains to own the building they operate in, I still couldn’t do otherwise. We build our stores on the land that we owned.
Let me tell you something, I have operated many different businesses, but this is the most complex of them all. Even now when I think about it, despite the fact that only two people dared to build in the so-called ‘Golden Triangle’ area in St Petersburg – Peter the Great and myself – still it was easier than running a retail business in Georgia. There are billions of details that need to be considered. For instance, yesterday my management team and I finished work at 01:30 a.m. You know what? As I mentioned earlier, it just crossed my mind that probably the key to my success is the fact that when I do something, I treat it as a top priority and direct all my resources towards it.
Did you gain a competitive advantage through this kind of hard work?
The competitiveness of any business is determined by its management. Of course there are lots of other details as well. At Fresco, the price indicated on the product always coincides with the price at the cash register. Do you want to know how we achieve that? When a product is out of stock, to avoid any confusion with the pricing, our employees never replace it with another product. What do you think causes confusion with prices? Despite the fact that Fresco offers over 18, 000 different products, everyone working at the store knows exactly where, what and how much is placed on the counter. This can only be achieved by using thoroughly designed and quite expensive software, which we managed to put into operation.
Another chief competitive advantage is the fact that Fresco owns all the buildings and land that it operates on, therefore we do not pay rent. At the moment, we have a total of eight stores and the combined space of our stores is 35,000 square meters. This, of course, affects our prices, which in itself is the main component of our competitive advantage.
Competition is essential, it helps you stay alert. If you lose vigilance you may miss something that may hurt your business later. Maintaining a competitive edge requires a lot of financial resources. However, results always exceed expectations. The success of any business lies in healthy competition along with proper state regulations.
You are probably aware of the situation on the retail market and know that many players have been left behind. I tell myself and my employees every day that the same could happen to us any day. That is why we need to keep our feet on the ground.
What are your plans for the future in general, not only in regard with Fresco?
Let’s start with Fresco. My future plans envisage increasing our imports and introducing products with 100% European standards, opening new stores and also equipping each store with modern software, because you can’t ensure efficient product supply without the proper technical support.
Naturally, I have other plans as well that have nothing to do with the development of retail supermarket chains. As I was starting a business in Georgia, retail was the most attractive industry. However, things have changed now. Fields that are profitable and worth investing in are hotels, hydropower, agriculture and processing enterprises.
Is it fair to say that you have returned to Georgia for good and your main business activities are concentrated here?
What really surprises me is when people ask questions like –are we supposed to eat asphalt or fountains? If it hadn’t been for all of these, including police patrol cars and many other progressive changes made some six years ago, I would not have stayed here for even a day. Those are the things that attract investors. If it hadn’t been for all this progress, I would never dare to start this huge retail chain. I would never risk hiring 1,000 people. Our company has paid about ₾60 million in taxes into the Georgian state budget. Does this sound like a small amount of money to you? I was attracted by the country in the state that it was in at the time and decided to stay. Eventually, what is good for Fresco, is also good for the country. As for the people that are running Georgia, their main concern must be to ensure fair and appropriate regulations that contribute to a healthy business environment and promote the development of business in the country.
Can you answer one question – is it fair that our main competitor enjoys a VAT exemption? Of course it is not fair. When I encounter such injustice, I ask myself whether it is worth doing business here anymore. One of the underlying principles that ensure the development of business in any country is stable taxes. Over the past two years, the Georgian Revenue Service has repeatedly changed the interest rates for the loans issued by the founder to the founded company, and eventually it came up with an absurd regulation that requires businessmen to seek information as to which international credit organization is willing to give a loan to a country like Georgia. Based on that information, they determine the interest rate for the credit they have issued to their own companies. That sounds a lot like we are heading towards corruption? Why? Because the laws are there to indicate precisely what the interest rates for loans are. Otherwise everything will be based on perception. For instance, I think that 8-9% is acceptable and another businessman might think that 5-6% is better, and what does the revenue service think? We will only find out when they conduct an inspection.
Despite the aforementioned problems, I intend to continue developing my business in Georgia. At the same time, I’m developing some new businesses in England and France. As for my businesses in Russia, for the past ten years I have not created anything new there. I am just developing the old ones.
You mentioned that you admire ambitious people and that this is one of the keys to success. How broad are your ambitions and what is Vasil Sopromadze’s greatest ambition of all?
Happy people and a happy country built on democratic principles, free business, non-corrupt state institutions, government social responsibility with Fresco and Vasil Sopromadze being part of it, but under no circumstances involved in politics. There is so much more to be done in the field of business that I pray to God for strength to do it. It is not mandatory for all successful people to go into politics. Let us all do our thing and one day we will wake up in a country that we will be proud to live in.