15 February 2019
Der Spiegel: These Russians want to raid Germany—with pizza!
This is a translation in English of an article about Dodo Pizza written by Benjamin Bidder and published in Germany on January 28th, 2019 by one of the country’s most established magazines: Der Spiegel. Though this piece doesn’t necessarily represent our point of view, we share it as it is, without any alterations.
What unites an ex-investment banker from Merrill Lynch, top Russian programmers formerly employed by Intel, and a marketing expert from Poland? They’ve put their heads together in a start-up office on the outskirts of downtown Moscow and are now making pizza. A lot of pizza.
Dodo Pizza’s start-up team works in a brick building on the site of a former Soviet steam boiler factory: 130 employees, including young marketing and financial experts, and above all—somewhat unfamiliar to a fast-food chain—more than 70 programmers.
From Moscow, the company is breaking through to new markets. When the speakers in the offices crackle again, all employees know: Alyona from reception will announce the opening of another Dodo pizzeria. The loudspeakers crackle frequently: since 2012, the number of units has increased from eight to 442; more than a hundred have opened in the past 12 months.
Between Saxony and California Dreaming
If the new unit is overseas, Alyona plays a song from that country before the announcement. Sometimes it is a Romanian song (six pizza shops), sometimes Belarusian (ten). In February, Dodo plans to start operating in Los Angeles. Alyona considers playing “California Dreaming.”
Russia is the most important market for Dodo Pizza, but now there are branches in eleven other countries: China, Kazakhstan, and Estonia, as well as some springboards to the West: a single site in Brighton, UK, and three in the USA.
Entering the German market is also imminent: the German chain Uno Pizza (14 branches in Saxony and Saxony-Anhalt so far) slips as a franchise partner under the Dodo roof, and according to owners Thomas and Michael Kochmann, 25 more restaurants will be opened within five years. That means that the Moscow office is going to hear a German song from the speakers at least once before the end of 2019. “Maybe Rammstein,” says company founder Fyodor Ovchinnikov. Rammstein is Russia’s best-known German band, ahead of Modern Talking.
At the heart of the company is IT: all new branches are connected to the Dodo IS production system. The program converts all the orders into the next production steps within seconds. Then iPad screens in the kitchens light up with the right recipes and instructions for the pizza bakers, whether in Siberia or Tennessee. When the pizza is ready in time, fanfare sounds throughout the kitchen. If the baking takes too long, a deliveryman-monster on the screen devours the pizza. The Dodo IS program makes production and consumption control easy and intuitive, almost like a computer game. That’s the idea.
Add to this an almost disturbingly radical tendency towards transparency. Online cameras installed in all restaurant kitchens broadcast around the clock. Customers can be convinced of the cleanness. Dodo Pizza makes the sales of every single pizza shop public on the Internet as an incentive to competitors. The company immediately publishes presentations of new projects and ideas on YouTube for competition from international chains such as Papa John’s and Domino to see. It should inspire teams to implement new things faster.
A new generation of Russian entrepreneurs?
A previous bankruptcy was a great incentive for Dodo, a company with 200 million sales in more than 400 units. Ovchinnikov studied archeology in Syktyvkar, a provincial town in Russia’s north, about 1000 kilometers north of Moscow. He set up a bookstore chain there but slipped into bankruptcy during the financial crisis.
How did he get from books to pizza? He dreamed of a global chain in an industry where he could apply Russia’s IT strength. “Pizza is perfect; it’s a mass market for a product that has already been launched all over the world and is largely standardized. Whether in India, Brazil, or the USA, everyone likes pizza,” says Ovchinnikov. However, the high investment in the production system would only pay off “if we play a global role.”
So far, Dodo has invested a billion rubles in the development of its web platform alone, which translates to 15 million euros. The project almost failed because of these sums. Ovchinnikov turned to banks and venture capitalists, “but nobody believes that a Russian company can succeed anywhere in the world unless it exports oil or arms.”
In addition, Russian investors traditionally consider short-term prospects. They expect companies to pay off the investments within two or three years—because they are constantly afraid that conditions in Russia will change. “Nobody here believes in long-term projects,” says Ovchinnikov.
At least none of the professional financiers. Therefore, Ovchinnikov launched a crowdfunding campaign through his blog. He found private investors who had raised $5,000 to $200,000 for startup funding. Many of the new franchisees who open Dodo pizzerias in Russia are coming from this blog community.
“Founding one's own company is one of the few functioning forms of upward mobility for many young people in Russia today,” says Ovchinnikov. “It’s a career opportunity that proves that something is working in Russia apart from state-owned industrial conglomerates and secret services. We live a kind of ‘Russian dream,’” says Ovchinnikov, implying the “American dream.”
In the sight of old stagers
When Fyodor Ovchinnikov is asked why he gave his pizza chain the name Dodo, he tells of Alice in Wonderland that he liked to read in his childhood. “We are just as naive as the bird Dodo in the book: we trust our customers, suppliers, and partners,” he says.
Naivety can cost a lot in Russia. The rise of the company has apparently also stirred greed in Moscow security authorities, in circles that sometimes use methods of mafia that they are supposed to fight. A pack of drugs was planted in a Dodo pizzeria on the outskirts of the Russian capital. However, not only the franchise owner of the local restaurant was called to court, but also the founder, Fyodor Ovchinnikov.
His chain is only a front for a lively drug trade—that was the accusation. Then the officials inquired about business details: who registered which subsidiary, how Dodo Pizza was organized. Ovchinnikov understood that someone wants to take the company away or at least get a share in it—a common problem in Russia.
Dodo Pizza has made this case public. Ovchinnikov gave interviews. He says transparency is also the best defense. He was asked whether he would settle abroad for the sake of safety. He understands that “there is a level of rottenness in our country, but there are also many right people. What message will I send to investors, entrepreneurs, and anyone who believes that it is possible to build an honest business? I was born here, I'm not leaving.”
It wouldn’t be possible to easily take the company away from him. “This is not an oil well, but a rather complex structure,” he says. For the past few months, he has not received new letters from the authorities. Are the problems over? Ovchinnikov hopes that they are.
“But in Russia,” he says, “you can never be sure.”