Santa Bean Coffee Challenges Starbucks in Russia: The Tale of Two Jewish Entrepreneurs and One Coffee Empire

“Two Jews, three opinions,” the joke goes. Well in Russia, it might be “one country, two coffees.”

Jewish entrepreneur Ilya Yakubson is attempting to establish a coffee empire in the former Soviet republic, and running into big complaints from Starbucks global management team.

In a desire to shift directions in business, Yakubson left his career as the owner of 113 discount stores, budget food marts, and casinos to become a coffee entrepreneur as founder of Santa Beans Coffee.

While the cafe style of coffee drinking has become popular in Russia since the fall of Communism and the end of the Cold War, habits of high priced coffee consumption are limited to cosmopolitan areas. Hailing from central Russia where the trend has yet to be integrated into popular culture, Yakubson believes that he can be the first to break open the market.

Calculating the price of establishing a store at $250,000, Yakubson believes that he has the funds to build a franchise of 15 stores in regional capitals around the country. (Starbucks only has one store in Russia and Kofe-House, the major national chain, has restricted its business to the big cities.)

Yakubson opened his first store in his hometown of Oryol, population 370,000, this summer. His prices are significantly lower than Starbucks– although still very high compared to the cost of living– yet his store makes $1,000 in daily profit.

Assessing Yakubson’s goals by observing his behavior, it is apparent that he intends to create a coffee empire in Russia akin to what Starbucks has accomplished in the United States. It will be interesting to watch how he uses Starbucks techniques, finely honed, and adapts them to the relevant market.

Yakubson would do well to note the lessons of Starbucks founder, Howard Schultz (also Jewish), who faced similar challenges in popularizing Italian style coffee in the American market, which at the time was heavily based upon freeze dried instant coffees. If you are interested in learning more, Schutlz’s book, Pour Your Heart Into It, is a worthwhile read.

We can hope that hope that Yakubson, who has recently made contributions to the vulnerable Jewish communities of Oryol and Rostov-on-Don, will also follow Starbucks’ lead when it comes to business ethics and Jewish connections. Schultz has been continuously recognized for his strong business practices and good treatment of Starbucks employees, earning the company the nickname of “coffee with a conscience.”

With start-up capacities significantly buoyed by his former business success, Yakubson is a Jewish entrepreneur to watch on the international scene and in the emerging Russian coffee market.

Credit: Information in this article was sourced from JTA’s, “Russian Hopes to Urn his Stripes with his Own Brand of Java.”