Mr. Demin shakes hands like a snapping turtle bites a carrot. Then he pulls you close and says, with a mixture of sincerity and urgency, how glad he is to meet you. This one-two punch of a first impression is the secret of success for a man who has salvaged a bastion of the Soviet food industry: the Mikoyan Meat Processing Plant.
The factory, built in 1933, was the brainchild of Anastas Mikoyan, the People’s Commissar for Food. The design was based on the slaughterhouse at the Union Stockyards in Chicago, which Mikoyan visited during a three-month tour of the United States. And that wasn’t all he brought back from America. Mikoyan saw industrial food items like hot dogs, ice cream, and hamburgers as the future of Soviet cuisine, which he eventually included as mainstays of the official Soviet cookbook, The Book of Healthy and Delicious Food.
But as happened with many formerly Soviet enterprises in the free-market era, the Mikoyan plant fell victim to opportunistic businessmen who were more interested in scrapping it for parts than producing food. Which is where Mr. Demin enters the story.
Man of the Steppes
Demin comes from humble beginnings. Raised on a collective farm in the countryside, he grew up wanting to fly fighter jets. It was an era when boys across the Soviet Union were inspired by Yury Gagarin, the charismatic Air Force pilot who became the first man in space. But Demin’s dreams were dashed while walking home from school one day. He and some friends were following the train tracks when a locomotive came up quickly from behind. While the other boys managed to get off the tracks in time, Demin’s right arm got tangled in a low hanging ladder, dragging him for a long distance before he could wrestle free. The arm was mangled to the point of needing amputated.
The next best thing to a fighter jet, he decided, was to drive a tractor. Demin piloted his first when a farm worker asked the boy to drive his tractor for a while, so the man could sneak away to visit a girlfriend in the village. The fields were so big, Demin drove seven kilometers in one direction before needing to turn the wheel. Surrounded by sky and horizon, it was almost like sitting in the cockpit of a fighter jet.
Demin went to the prestigious Moscow Agricultural Academy, and from 1977 to 1990 was deputy chairman of the State Committee on Prices, taking part in the market reforms during glasnost and perestroika. When the Iron Curtain came down, Demin started a successful food distribution company called Exima. With Russia’s own food industry flatlining, Demin found foreign suppliers to fill the dearth of food being produced in the Russian countryside. He forged business relationships in Europe, America, and Australia.
Meanwhile, the Mikoyan factory fell on hard times. Through privatization, a company consolidated shares in the factory and took over ownership, renaming it Mikomsk. But the new owners seemed more intent on scrapping the plant for parts, and prospecting on the prime real estate location, than upholding the meat-producing traditions of the Mikoyan brand. The Mikomsk company borrowed heavily just to keep the plant running, but during the economic crisis of 1998, it defaulted on $33 million it owed to its main supplier of raw material for making sausage: Exima. Denim had two choices: forfeit the money, or takeover the company.
The mayor of Moscow was a friend of Demin’s. And because of how Russian zoning worked, he needed to sign off on the deal. He had more than a few questions for Demin, the first of which was: “Are you crazy?”
Demin said that he was not.
“Are you a butcher? Do you know the meat business?”
Demin said that he was not and did not.
“Do you have money to invest in the project?”
Not exactly. But he was willing to stake Exima’s reputation on turning the plant around.
“Well, if you’re so sure of yourself…” the Mayor said.
However, seizing the factory would not be easy. It was rumored the owners had connections to the Russian mob, making Demin worry that a corporate takeover could end in violence. He hired a private security firm run by General Mikhail Zaitsev, who had been awarded the Hero of the Soviet Union, a medal equal to the Medal of Honor.
Zaitsev’s plan was to take a convoy of 30 armored cars to seize the factory by force. But Demin disapproved. Instead, he wanted Zaitzev to dress in his military uniform, with the Hero of the Soviet Union medal pinned to his chest, and go with Demin’s team of lawyers to arrange a meeting.
“Mr. Zaitsev had a quiet chat with the gangsters,” Demin recalls. “They were already bowing their heads when they entered my office. I said: ‘You guys, let’s not make a scandal. You’ll have to withdraw without shootings or a fight.”
They did, and Mr. Demin inherited a factory in shambles.
A Soviet-era “Jungle”
“When I arrived on the premises,” Demin recalls, “it was a disaster. I couldn’t step on the floors, there were rodents all over — mice and rats. There was only one workshop going, producing frankfurters. The people wore dirty coveralls. There was a strong cold wind blowing in the corridors because all the glass was broken. The factory had huge debts to the suppliers of raw material of meat. They were owing money, they were not paying. They had huge debt to the workers for their salaries. A few months had not been paying salaries. They were not paying suppliers of cattle and raw material. I was shocked. Such was the state of Mikoyan when I had it.”
His account makes it sound as if the previous owners had used Upton Sinclair’s The Jungle as a playbook for committing human rights atrocities in a meatpacking plant.
“These were poor people, because they didn’t pay salaries to workers. There were cases of beating people, even breaking leg bones. They treated people like slaves. It was like a slavery factory, they made people work for nothing. That was the state of Russia at that moment.”
Mr. Demin was short on capital for investing in the factory, but he did have a network of international contacts who he’d nurtured as a food distributor. He made deals with European equipment suppliers and got the factory running with updated equipment. He negotiated a licensing deal with Mikoyan family to return their name to the brand, which held truck with Russian citizens because Mikoyan sausages were the best meat a Soviet citizen could buy under the USSR. As for the workers, he kept whomever wanted their job. More, he promised to pay back salaries.
The plan worked. Within 60 days, Mikoyan Meat Processing Plant was again producing the famous “Doctorskaya” brand of sausage. Today, it is the fourth largest producer of sausage and meat products.
Mikoyan is a reminder that, while Russia focuses on building it’s meat industry almost from scratch, there are vestiges of the Soviet food industry that can be made great again.