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27 Sep 2023

Lukashenko's role in Kommunarka's turn-around story

Lukashenko's role in Kommunarka's turn-around story
Belarusian President Aleksandr Lukashenko visits Kommunarka, March 2016

Did you know that the Olmecs were the first to turn the cacao plant into chocolate? They also gave the cocoa tree its modern name. The history of chocolate was continued by the Mayans. Chocolate became a very valuable drink thanks to paganism. It was used in many religious rituals and traditions. Chocolate was revered and was equated with the food of the gods. Why did we start the episode with these interesting facts? It's simple. We will narrate the story of one of Belarus' most interesting enterprises: its first confectionery factory Kommunarka. Today we will tell you how the Minsk factory became an enterprise of not just republican but the Soviet Union importance. Why did the privatization of the sweet business make the lives of ordinary workers un-sweet? How did Aleksandr Lukashenko save the factory from hostile takeover and what does one of Belarus' largest confectioneries manufacture today?


When was Kommunarka founded?

Kommunarka's predecessor was a popular coffee and confectionery shop that opened in the center of Minsk in 1905. Its enterprising owner, Georgy Rachkovsky, called his small enterprise ‘Georges', French-style. What happened to the owner of Georges after the revolution is anyone's guess. In 1917, the former Georges was turned into a new factory later called the First Belarusian Confectionery Factory. In 1929, on the anniversary of the October Revolution, the company received the new name of Kommunarka.

However, the change of the name did not solve the main problems: the factory was lacking both premises and production capabilities. But it was the time of Soviet industrial achievements and bold projects. Setting up a new modern confectionery factory in Minsk was one of them. A government directive approved by Stalin scheduled the launch of the first building of the new mechanized factory on 1 May 1931. This event is now considered to be the official birthday of the factory.

“The factory has been running on these premises since 1931. The Great Patriotic War was a very difficult time for the enterprise. It was almost completely destroyed. Only the walls remained of it. People returned back to the enterprise in 1944 (once Minsk was liberated). They restored the factory brick by brick literally in a matter of months. Already in December 1944, new products hit store shelves. Thus, the confectionery factory was back in business. So great was people's determination to get their factory back on feet,” said Tatiana Parmon, the head of the primary trade union organization at Kommunarka.

Historically, Kommunarka has operated the full production cycle: from roasting cocoa beans to the production of organic sweets and chocolate. This reliance on organic ingredients and GOSTs helped the factory survive the Perestroika time, the difficult 1990s and the troubled 2000s. True, without the support of the state, the modern history of the factory would have been much more prosaic. Let's learn about it.

Kommunarka's long-timers and the unusual advice of the president

There are several family dynasties in the factory. Among them are Nikolai Komayev and his son Igor Komayev. Both are deputies of the director general.

"I was lucky to join Kommunarka back in 1986. I've been working here for decades. I was once asked: ‘Are you not tired of coming to the same place every day for decades?' I said ‘no'. Because every day there is something new: new tasks, new meetings, new communication. It's not like day to day," said Nikolai Komayev, Deputy Director General for Production.

Igor Komayev, Deputy Director General - Chief Engineer, shared his memories: "The first time I visited the factory was in 1987 when I was six. I was a little boy and my dad would take me to the place of his work. I liked everything, and then in 2004 I got a job here as part of the first job assignment program. At first I was an engineering specialist, then a mechanic in a caramel shop. The factory did not have as much equipment then as it does now."

Before becoming a top manager, Igor went through the entire professional ladder, from bottom up. His father is glad that his son was noticed and was offered a top managerial position.

Elena Khamenko, a line operator in the candy and chocolate shop, has been working at Kommunarka for four decades.

"My grandmother was very fond of making sweet treats, mainly pastry. I told her that I would also be a pastry chef. I finished school and went to study at a vocational school. They had a caramel course, and then I was offered a job at Kommunarka," she said.

The woman also shared a funny story. A few years ago, just before the pension reform, she started to think about retirement. At some point Kommunarka hosted President Aleksandr Lukashenko, and the confectioner decided to ask him what changes await people.

"He looked at me, smiled and said, 'What retirement are you talking about? You are still a young woman!' I said, 'I already have a grandson.' ‘It doesn't matter, you might go on maternity leave rather than retirement,” Elena Khamenko recalled her encounter with the president.

Kommunarka's privatization story

After the collapse of the Soviet Union, the authorities immediately began to sell off state-owned enterprises. Some of the plants and factories were corporatized under the guise of the so-called voucher privatization. Kommunarka found itself in a similar situation in the late 1990s. Someone began to buy up the shares that were initially issued to the factory workers in order to grab a ‘sweet' piece of the once-government asset.

"It was a very difficult time. It got to the point that some people came and wanted to stop the production. They could turn off electricity. I remember several such moments along these lines. The team was small, and people tried to rally together and shield the manufacturing premises,” Elena Khamenko, a line operator in the candy and chocolate shop, recalled.

Wages were also falling at that time, but people were in no hurry to leave the factory. Elena Khamenko believes that if a person loves what they do, they will fight to the last. This axiom has a living proof: a dozen more peers of Elena Khamenko work at Kommunarka. The women came to work at the facotry at the same time.

The factory workers then turned to Aleksandr Lukashenko. They asked him to help turn the company around after it found itself in dire straits as a result of corporatization. To save the factory, the head of state had to use the so-called “golden share” mechanism for the first time. It allows the government to intervene if a joint-stock venture where it holds a stake is facing financial hardship. Maybe this runs afoul of free market principles, but in that situation there was no other way out.

“Those who want to work here in earnest are not afraid of “golden”, “silver” or other shares. They know: if you work in good faith in Belarus, everything will be fine,” Aleksandr Lukashenko said back then.

The head of state made it clear right away: “wild” privatization will not pass. “The previous generation created assets so that we could live and work peacefully. And then a new owner from outside comes to impose their own rules on people who worked hard to build these enterprises. Private ownership does not protect workers' right to work and provide for themselves,” the president said.

Aleksandr Lukashenko is sure that food industry enterprises (confectionery factories, dairies, bakeries, etc) should be owned by the state, since they ensure food security of the country.

“We saw that everyone who tried to purchase Kommunarka shares only wanted to gain a foothold in our market.

Had they bought the shares, the company would have probably made some kind of caramel. They would not need a top-notch factory here. They would have made the most advanced, in-demand chocolate products in another place, at home. Therefore, I was right to stop the plundering and privatization of Kommunarka. Other confectioneries followed suit. These are successful and well-performing enterprises now, and there is no need to privatize them, at least for now,” the Belarusian leader noted.


Why the state decided to nationalize Kommunarka

Later on, the “golden share” mechanism was dropped, and the largest package of Kommunarka's shares ended up in the hands of a businessman from the United States. However, he was not particularly interested in growing the company. He chose a much easier way to make money: he launched an intermediary business that sold raw materials to Kommunarka at an inflated price, and the finished products were sold to his other companies at a discounted price. Experts call this mechanism “scissors,” as it “undercuts” the enterprise on both sides, reducing its profitability and depriving it of profits.

Kommunarka was on the verge of financial ruin. The factory was losing not only foreign markets but even the Belarusian market. The production pace decelerated. In late 2012, Aleksandr Lukashenko made a tough decision - to return the factory under state control. There were attempts to pressure the head of state not to do it by arguing that such a move could hurt the investment climate in Belarus. But the president remained steadfast. He was indeed concerned about the investment climate, but the investment appeal should not be maintained at the expense of the government and the people.

We need to clarify something here. The Belarusian president is not against private property. However, the government will not put up with a grabfest. What can be easier than getting a ready-made facility on the cheap and cashing in by squeezing out of it as much as possible? The business owner is the only one to benefit from such an approach. When the enterprise is created from scratch, and its owner cares about their business, the state will always support such private entrepreneurs.

“Your factory got on my radar probably in the first years of my presidency. A mass privatization process was taking place then. They grabbed first of all the enterprises producing food, clothes, and other staple products. I realized that if we gave away our major assets, Kommunarka (everything started from this factory) and Spartak, it would mean that our children might be left without good chocolate and sweets. Guided by purely humane motives, I began to study these processes. Today I have absolutely no regrets about the decision to nationalize these enterprises. I was guided by the interests of the state rather than private owners. These enterprises should belong to the state,” Aleksandr Lukashenko said during his visit to Spartak confectionery.

After re-registration as a public company, Kommunarka got a much-needed boost. Today it is a large modern enterprise that operates combined production systems and automated production processes. Kommunarka's annual output exceeds 27,000 tonnes of sweet products. The line-up features more than 350 items. Kommunarka sells into more than 26 countries, including Russia, China, Azerbaijan, Kazakhstan, Armenia, the USA, Canada, Germany, Israel and others.

“I witnessed the company's corporatization firsthand. It turned out to be a bad idea. A businessman is not interested in investing in production, growing a business. Meanwhile, the state thinks about the future. Now that we are facing a difficult situation, the state helps even with raw materials to prevent downtime. And the state does it despite all the difficulties,” Igor Komayev said.

The chief engineer has the same opinion: “Our equipment is on par with that of Mondelez and other factories. And even better than in many factories that I saw in Poland. A lot of manual labor is used there. There are also good ones. Yet, I think that our factory is among the best in the post-Soviet space. Not the worst in Europe in terms of equipment. Judging by European standards, we have top-notch equipment. All producers are top in their field.”

How Kommunarka is doing now

About $100 million has been invested in the factory over the past 10 years. According to Sergei Anyukhovsky, Director General of Kommunarka, member of the Council of the Republic, the factory's development on the existing territories has already been completed: it is already lacking production capacity. Therefore, a decision was taken to build another factory. It will be located in Zavodskoi district of Minsk, and cocoa beans will be processed there.

“We have already embarked on design works and launched a tender to purchase cocoa bean processing and chocolate making equipment. The second stage will include the purchase of lines to produce finished confectionery products. Our goal is to replace imports and manufacture export-oriented products,” Sergei Anyukhovsky said.

The current capacity lets Kommunarka process 3,000 tonnes of cocoa beans per year. The new facility will be able to process more than 30,000 tonnes annually. “We will increase the output almost tenfold to meet our needs and the needs of other confectioneries and Belarusian enterprises. Half of it will be exported,” the director general said.

How Kommunarka started making presidential chocolate

Thanks to the head of state, Kommunarka launched the production of sugar-free chocolate and sweets. The President bitter chocolate hit the shelves in 2017. Today it comes out in three varieties, with various cocoa content. For this chocolate brand, Kommunarka's technologists have blended the best varieties of cocoa beans - from Venezuela, Colombia, Ecuador and Cote d'Ivoire. Low-calorie sugar-free sweets are an exclusive and mandatory part of gifts from the Belarusian leader.

“I once visited Medvedev and he treated me to imported chocolate. Then I talked to the technologists at Kommunarka and instructed them to make sugar-free chocolate. I told them to do it as they saw fit! They came up with some 20 recipes! I am a difficult person to please. They devised the technology. This chocolate is sweet yet sugar-free,” Aleksandr Lukashenko said during Big Conversation with the President severla years ago.

Over time, another chocolate product was launched under the President brand. Following the president's instructions, confectioners developed milk chocolate Little Sweet Tooth.

“One chocolate bar contains one glass of milk. Chocolate sweetness has been reduced by 15%. The chocolate was praised by children from orphanages whom we invited over here. Children were first asked to draw their “Dreams” to get to our enterprise. Each drawing was special, but all of them were about a family. We reflected this theme on the packaging of our chocolate. Buying the President chocolate, you get a chance to join the Let's Help Children Together campaign. Part of the raised money is donated to a special fund to support children in orphanages and children with special needs,” Deputy Head of the Marketing and Advertisement Department Irina Matsygud said.

How Lukashenko instructed to make sweets to a Chinese recipe

Aleksandr Lukashenko has recently set another interesting task for confectioners - to launch mass production of Belarusian sweets made of milk powder. Where did this sudden idea come from? The story is interesting.

In July, during one of his working trips around the country, the Belarusian president paid attention to a product popular in China - sweets made of pressed milk powder. Belarus has enough of this raw material, and the head of state suggested organizing such production in Belarus. Officials quickly responded to Aleksandr Lukashenko's instruction and soon produced a small trial batch.

“You were instructed to produce these candies. Have you succeeded? We have a lot of skimmed milk powder. In China, they produce various kinds of confectionery, candies. No sugar, just milk powder. We can add some herbal supplements. This is good, especially for children. Nikolai brought me these candies from China and I tried them. To be honest I am not a fan of this kind of candies. But children, little kids will love them. We can manufacture them and sell internationally and most importantly domestically,” the president stressed as he met with Vice Premier Leonid Zayats to receive his report.

These candy drops are already available at the Kommunarka chain stores. Very soon school students will be treated to these healthy snacks. “In the near future we will start supplying 50g bags of milk candy drops to our school catering enterprises. These are the candies with a high content of milk powder (almost 40% of the nominal weight),” the director general said.

According to Deputy Head of the Marketing and Advertisement Department Irina Matsygud, a new generation of children in China has already been brought up on tablet candies made of milk powder. They are consumed as a snack.

The story of Kommunarka could have become a script for a feature film. A romantic beginning, a tense climax and a motivating happy ending. All this thanks to the president's decisions. Movie makers, take note!

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