Ice Cream Sales Not So Hot in Siberia

In December, a state inspector looked over Frank’s Siberian Supreme, a tiny operation trying to make American ice cream for an isolated corner of the Russian Far East, and decided its documents were not in order.

“At first I thought it was a joke, but she was powerful enough to close us down,” said Alexei Rekounov, the company’s 24-year-old sales manager. “In this country a clerk is everything. An official is czar and king.”

The suspension that resulted was just one of many obstacles the company, started with $150,000 from an American businessman, has had in opening up small-scale ice cream production.

Even today, only a few stores sell Siberian Supreme’s tasty versions of peach, strawberry, cherry and chocolate in Magadan, a regional center 5,000 miles east of Moscow.

“In the beginning, we had problems with quality because we had no experience,” said Andranik Mirtitsyan, 25, the company’s Russian director.

Frank Edgerly, the California partner whose name adorns each carton of the ice cream, added: “We’ve had every problem you could think of. . . . There are many times I asked myself why I am trying to make ice cream.”

The factory with four workers fits in the space of a large apartment. One room holds bags of American ice cream powder, another a modern ice cream machine where filtered local water is mixed in. Freezers are in two other rooms. The office has a portrait of Lenin with a Siberian Supreme sticker on his lapel.

The grass-roots venture started when Edgerly, 32, who was involved in timber and food export businesses with Russia, traveled to Magadan to help build a church and met the young men who today staff Siberian Supreme.

“We figured we could make ice cream quite a bit cheaper than importing it pre-made,” he said.

Since then, the idea has attracted the attention of the American government-funded U.S.-Russia Investment Fund, which is finalizing a deal to buy 40% of Siberian Supreme for $300,000, company officials said.

“We’re looking at making a direct investment to help the company,” said Derek Norberg, head of the U.S.-Russia Investment Fund in the Far East. “You have a unique situation in Magadan because there is no local production. Because it’s cut off from land routes, any local production does have an advantage.”

Operating in a small market has distinct pluses. The 30-second television commercial they recently prepared costs less than $20 to air eight times a day locally. And in a city where the severe northern climate and isolation from Russian ground shipping routes limit the variety of food, ice cream becomes especially alluring.

“The colder the territory, the more people eat ice cream,” Rekounov said.

Siberian Supreme is now producing only 150 to 200 cartons a day, which brings a profit of about $1 a carton. Their encounter with Russian-style bureaucracy has left the staff a bit scarred.

In addition to fighting state bureaucrats, the firm is far behind a local importer, Amros, which has been shipping Wells’ Blue Bunny ice cream from Iowa to local stores.

“We don’t see them even as competitors, because people are already used to Blue Bunny,” said Amros sales manager Mikhail Gerasimovich. He said Amros delivers three containers with 6,000 to 8,000 individual cartons of ice cream a month to the port city first established as a gateway to Stalin’s Gulag system of prison camps in the 1930s.

Edgerly said he is soon bringing in display cases for Magadan stores and plans to pump up production significantly to expand his market share.

He added that he is undaunted by the experience of American ice cream maker Ben & Jerry’s Homemade Inc., which pulled out of Russia earlier this year after deciding their high-profile joint venture was not paying off.