This article mentions the holograms, directly, George.
Unfortunately, people like Dovgan hoarded and sold a
few before being ousted. Looks like HGRM has to guard
against this kind of stuff, too.
#468, Tuesday, May 25, 1999
NEWS AND BUSINESS
Dovgan Leaves Dovgan Behind, Powers On
By Kirill Koriukin
STAFF WRITER
Photo by Yevgeny Stetsko
MOSCOW - His face is still staring proudly from
millions of bottles of vodka in stores across Russia,
but Vladimir Dovgan, the great Russian
success-failure-success-failure story of the late
1990s is finally out. Or is he?
He no longer holds any shares in the company he
founded, and its new owners want nothing to do
with him.
But Dovgan refuses to give up, rushing headlong into new ventures and politics, never
turning to look at the smoking ruins of grand projects he left behind.
Dovgan's own take on losing his company? "I distanced myself from the company on
my own initiative with a single aim - so that my political activity does not damage
Dovgan Holding," he said Thursday in an online chat.
Dovgan tried to conquer the market in 1996, putting his name and face first on vodka
and then on just about anything from ketchup to glue, ostensibly offering a guarantee
of quality.
The strategy, viewed by some analysts as a pyramid scheme, soon failed as the
producers of the goods, chronically underpaid by the company, cut off supplies.
However, emerging from under an avalanche of lawsuits filed by disgruntled
manufacturers, Dovgan last summer struck a deal with the MFK Renaissance financial
group, declaring he was ready for a new "great leap."
Back then, Dovgan assured the public that he had reached agreement with all of his
creditors and was ready to move ahead.
"We sat down, calculated the losses and assumed responsibility to work all these
things out by joint efforts," Dovgan told The St. Petersburg Times in October.
"All producers and wholesalers who worked with us in 1997, they all work with us
now," he said at the time.
In June, Dovgan jointly with MFK Renaissance formed a new company, Dovgan
Holding, in which MFK Renaissance initially controlled a 50 percent stake through its
investment vehicle Sputnik. The rest of the shares were split evenly between Dovgan
and his partner company.
But now MFK Renaissance says it wants nothing to do with the entrepreneur, who left
his previous companies ridden with debt.
Pressure on the businessman to leave the company mounted gradually after the deal
was made, but he remained chairman of its board until February. At the same time, he
started his own political movement, the Russian Dovgan Party, and went on television
to proclaim the party's goals - a market economy, promotion of domestic goods and
social benefits.
Here was where MFK Renaissance drew the line.
"We have always held that you have to be either in business or in politics, the two
cannot be mixed," Igor Akhmerov, vice president of the financial group, said at a news
conference last week.
Dovgan chose politics and left, although it was only last month that he agreed to give
up his 25 percent stake in Dovgan Holding.
No formal compensation was paid for the stake, Akhmerov said.
MFK Renaissance also obtained the remaining 25 percent of Dovgan Holding shares
and now fully controls the company, he said.
When Dovgan on Thursday gave his side of the story - his desire to separate his
political activity from Dovgan Holding - he did it in an online conference as a member
not of his own party but of Boris Nemtsov's Young Russia, whose political council he
joined a week ago.
In between party talk, Dovgan, 34, boasted of his recent textile venture DVV, which he
said was going strong and would soon enter the European market, and of his business
school at the Economics and Finance Institute of the Moscow State Economics,
Statistics and Information Science University.
"There are difficulties with financing the business school, but I'm actively engaging in
this project, because this is one of the most important tasks for me," he said. "Our
second-year students are now actively developing DVV and have time to study and
score good grades. I am proud of our boys and will never give up on this project."
Dovgan's former company did pay scholarships to 100 students throughout their first
year, said Vladimir Lednev, the institute's director. However, the financing dried up after
the company started having problems and those students who stayed through this year
have their tuition paid for by the state and they pay for the dormitory with whatever
money they can make themselves, he said.
"He can certainly be proud of them," Lednev said. "They were left on their own, but
they swam, not sank."
The institute has had no ties to the entrepreneur for quite a while, he added.
Asked last Thursday by The St. Petersburg Times if allegations about his debts were
true, the entrepreneur said, "Dov gan doesn't have any debts, but there were companies
that worked with the Dovgan trademark, and they had debts."
MFK Renaissance said it was not going to pay the debts run up by Dovgan's former
partners to the producers of the goods he marketed.
"We are sorry that certain entrepreneurs have incurred losses, but owning the
trademark does not make us responsible for the debt," Akh me rov said.
He added that the total liability is difficult to calculate because there are too many
creditors, some of which are difficult to identify, but that by some estimates the debt
runs at tens of millions of dollars.
Although it has ousted Dovgan, MFK Renaissance, which invested $15 million in
Dovgan Holding, will keep the brand name that it bought from Dovgan and hopes to
rebuild ties with some of the producers, Akhmerov said.
Despite Dovgan's glaring failure, MFK Renaissance said market research showed the
name is still highly popular.
However, Vladimir Dovgan's face now gracing the labels will be replaced by midsummer
with that of a bearded man who initially appeared on them in 1996. Akhmerov described
him as a "Russian merchant who eats and drinks heartily."
"We want people to think in terms of what is Dovgan rather than who is Dovgan," said
Vladimir Grebenchikov, director general of Dovgan Trading House, which the holding
runs.
The so-called "passport of quality," a hologram that used to be on Dovgan products as
a guarantee of authenticity, will also be replaced with a new logo.
Dovgan, who is not allowed to use his own name for alcohol and food brands, said
during the online conference, however, that he will use his name for commercial
purposes and that he was looking to market products such as beverages, macaroni and
cream.
Dovgan Holding will focus on producing vodka and goods "logically compatible" with
it.
Grebenchikov put last year's monthly vodka sales at 2.5 million bottles.
In the short term, Dovgan Holding will produce soft drinks such as kvas and frozen
foods like pelmeni and meat patties, and is considering marketing tea, coffee and
ketchup further down the road.
Products like laundry powder, or glue, which also appeared under the Dovgan brand in
the past, are out, Akhmerov said.
Dovgan Holding has a lot of cleaning up to do, Akhmerov said. Dovgan sold old
packaging and labels to a host of companies before leaving the company, and they keep
using them. MFK Renaissance has won several legal suits against these companies and
will continue the battle, but is not going to demand that everybody stop using the
Dovgan name immediately.
"We don't want to go and tell them, you've been had, you have to drop the name right
now," he said. |
