Construction companies and restaurateurs seek fortune abroad

Photo: Konstantin Melnitsky

Small and medium-sized businesses are in search of new markets: entrepreneurs believe that they will not succeed in making money in Ukraine. The Russian market, which was familiar to business owners, is now closed for opening of representative offices. For this reason, the players have been actively looking for other countries for development. For example, construction companies are sizing up the market in Kazakhstan, and restaurateurs turned their attention to Spain.

Yet not all businesses will be able to make profits abroad, where the competition is much higher than in Ukraine.

Mass migration

Sellers of clothing and restaurateurs are most active in entering foreign markets. This year the Ultra Group of Companies (Baldinini, Levi’s, Pierre Cardin, Lagerfeld and Guess chains of stores) plans to open four Levi’s and Guess stores in Astana (Kazakhstan), said its CEO Andriy Makarov in a conversation with Capital. «We received the right to develop the franchise,» he stated and added that the country’s retail market is annually growing by 12 — 15%.

Makarov says the future plans for development in Kazakhstan will depend on the results of operation of the first chain stores.

Restaurateur Hennadiy Medvedev decided to develop his business in Western Europe. By the end of 2015 he intends to open a Mexican restaurant Grill do Brasil. «The concept was tried and tested in Ukraine and it will be popular in Europe,» he said.

Some players have already partially implemented their plans. For example, last summer restaurateur Dmytro Borysov opened the Crab’s Burger in Barcelona, investing close to €300,000 in it. By the end of this year, he expects to open his own establishments in London and New York.

At the end of last year, the FM Group (Murakami, Tarantino, Rukkola, Lucky Luciano) opened a restaurant in London and now is looking for another place in the city. Mafia chain of restaurants is considering the opportunity to start its own business outside the country, and it has already received some offers in Germany and the UAE, as well as restaurateur Anton Beletskiy.

Construction companies are not far behind

Many developers tend to enter foreign markets, says Director of Stockman Serhiy Ovchynnikov. «Companies compete for general contract tenders in Kazakhstan and Georgia,» he said. For example, Altis-Holding registered its offices in these countries last year. Ukrainian consultants, most of whom work in the neighboring countries — Kazakhstan, Belarus, etc. — also decided to move abroad. «This year I received orders for consultation of foreign restaurants from these countries,» acknowledges CEO of Restaurant Consulting Olha Nasonova and adds that this year she plans to work with customers from abroad more actively.

Ugly reality

Currently there is no work for developers in Ukraine, says Ovchinnikov. «Most companies try to complete the old projects and no one starts any new ones,» he explains. Yet the present situation will affect statistic data only in 2 — 5 years, this is the average amount of time needed for completion of projects in real estate industry. In 2014 Ukrainian developers fulfilled construction works to the amount of UAH 50.2 bn, which is by 21.7% less than in 2013, according to the State Statistics Service. This is due to the reduced demand in all real estate markets.

Restaurateurs have similar reasons for settling in foreign markets. As it was previously reported by Capital, in 2014 the restaurant market fell by 11% to UAH 21.4 bn for the first time in five years. Every third restaurant was closed in Ukraine.

Difficult choice

Entrance to foreign markets does not guarantee success of businesses. Nasonova says that the competition is fierce, so restaurateurs are about to face some difficulties. For example, in Barcelona alone there are approximately 4,000 restaurants, while in Kyiv there are only 1,500. «I am still not aware of any cases when establishments representing Ukrainian chains have successfully worked in foreign countries for at least a year,» she says. Among the main mistakes of their owners the expert mentions the failed concepts (Ukrainian cuisine is not popular everywhere), as well as the poor quality of food. For example, in Spain, unlike in Ukraine, restaurant-goers will not eat dishes cooked of frozen seafood.

The situation in the construction market is no better: general contractors may count on a relatively low profit margin — up to 10% of the cost of works, and they experience problems with recruitment of skilled professionals. Ovchinnikov says that the average age of Ukrainian engineers whose qualifications meet the requirements of international partners is approximately 60 years. Most of them do not want to move to other countries.

Ukrainian developers and restaurateurs have no other choice or alternatives yet. Experts make disappointing forecasts regarding the situation in the Ukrainian market in 2015. For example, according to predictions of the NBU, this year inflation will be 17 — 18%. The GDP could decline by 4.3%. «I have noticed long ago that the decrease in GDP results in decreased demand for property,» emphasizes Chairman of the Investment Trust Bank Oleksandr Podolyanko. Retailers are also getting ready to reduced demand. Makarov believes that in February and March he will be forced to close up some of his stores.