News that Asian economic flu may have mutated into a Russian strain was a reminder that Russia is a scary place for business, particularly for the few Utah businesses that have dared venture into the market.
The events of the past week, including the devaluation of the Russian ruble and the apparent instability of Boris Yeltsin's government, have been watched closely in an unlikely spot - Salem, Utah County. At Neways International, officials have been keeping a careful watch on the news.Neways is a multilevel marketing firm that markets personal care and nutritional supplement products. The firm entered the Russian market four years ago and recently bought a Volgograd foodstuffs factory for packaging and distribution. Neways CEO Tom Mower said he hopes to add shampoo, toothpaste and household cleaners to the factory's products.
"I am concerned. I don't know what this is going to do to us. We thought we could double our business this year, but we are not sure now . . . I do know we are going to stay," said Mower.
The company has signed on 130,000 distributors and has planned on $40 million to $50 million in sales in Russia. It's one of the company's largest markets. Top-selling items are mouthwash and toothpaste.
"We are very concerned about what is going on in Russia. Our biggest concern is the Russian people. We have a great love for the Russian market and the people. (The problems) could change the way we do business," said Jules Lambert, director of Neways Russia operations.
Mower said the Neways network marketing has given new hope to people who had lost jobs during hard times. He said he loves the Russian people and it would be a difficult moral decision to pull out, leaving many unemployed.
According to Rusty Butler, director of the Russia-Utah Institute at Utah Valley State College, Americans may be getting a somewhat distorted view of just how Russians perceive their economic troubles. He returned from a visit to Moscow on Thursday. While Americans see Russians queued up in front of banks on TV news, he said he saw few lines and most Russians he met were bearing the crisis with stoicism.
"Ordinary Russians are taking this pretty much in stride. There have been turbulent times before," Butler said.
For at least one Utah company, International Armoring, Russia's economic and political turbulence is good for business. The Ogden firm has had steady growth in sales of bullet-resistant vehicles in Russia.
"There are two sides to the (problems). There have been economic problems. There has been a tremendous increase in crime. It is out of control. That has meant increases in demand for our product," said CEO Mark Burton.
Burton said his firm has sold many retrofitted sport utility vehicles to wealthy Russians and government officials. Increases in the number of economically motivated kidnappings and other kinds of crime have helped boost sales. The firm builds armor into the passenger compartment of vehicles and replaces glass with heavy plastic. Burton said he will sign a deal soon with a Russian partner. Russia follows Mexico and Brazil in armored vehicle sales from the Ogden firm.
Donald Brown, director of Asia and Russia marketing for Evans & Sutherland, a Salt Lake firm that designs computer simulation equipment, recently returned from Russia and said he's not ready to let the economic bad times dissuade him from pursuing partnerships there. In early August, he and other company officials met with a number of Russian aerospace and aviation-related firms and organizations.
Some firms, once funded entirely by state contracts, are looking for private sector tie-ins, especially with foreign companies. Of interest to Brown is a cadre of highly trained Russian engineers and scientists.
"In the long-term view, we will be active in Russia," said Kenneth Donoghue, public relations manager for Evans & Sutherland.
Most firms find the idea of entering Russia forbidding. The Utah Department of Economic Development spends little time encouraging businesses to forge links there. In fact, the state's advice sounds more like a warning.
"It is a tough and difficult place to do business, and has been for the past several years. There's nothing to ensure a quality business environment. There is not a sound banking system . . . There is no good infrastructure. There is no legal system so you know what the rules of the game are," said Dan Mabey, head of state international business development.