For 25 years, Sergei Galitsky built from scratch the country's largest retail network, and he himself has become the benchmark for private entrepreneurship in Russia. But a year ago, he unexpectedly sold the company to a state-owned bank, declaring that “Magnit” would go on without him. While the market wondered what had happened, Galitsky kept silence, but now for the first time he agreed to tell this story to The Bell.
We meet Galitsky in his box at the Krasnodar stadium. The football club, the stadium and the children's academy are his main project in recent years. Against the background of the Krasnodar city landscape - quarters of assorted private houses with signs of building stores - the stadium, lined with Italian stone (in the city it is called the Colosseum), makes a powerful impression.
"The customer proposed to consider the sports facility as a huge theater, where performances are played full of dramatic experiences," his architect told about the project. Galitsky said that football in his understanding is first of all emotions, and only then is business. Galician is not going to engage in more big business, from which he clearly received these emotions before. He says that he always lives in the future, but he still talks about the “Magnet” in some places in the present tense.
Loader, banker and sailor: the beginning of history
By 1994, the 27-year-old Sergei Galitsky managed to be a loader and a bank employee, and then, together with his partners, took out a loan to launch his own wholesale perfume and cosmetics business. This is how Transasia appeared. It grew rapidly and in 1995 received the right for exclusive deliveries of Procter & Gamble in the south of Russia. But under the terms of working with P & G, partners needed to create a separate company that would sell only its brands. She became "Transasia", and for the sale of all other brands a new legal entity was created - "Thunder": it will later become "Magnet".
In 1997, the partners divided the business, Galitsky took the Thunder for himself, leaving Transasia for the partners. Transasia was a cash cow - there were guaranteed deliveries, exclusive, regulated margins. Thunder was a much more complex business. Sergei chose a company that had to be developed, ”says one of the company's first managers, former financial director and Magnit’s minority shareholder, Alexander Prisyazhnyuk. At first, Transasia’s business worked like this: a truck driver and a seller traveled to wholesale outlets and sold cosmetics and household chemicals to them, and the trucks were a bit of a warehouse on wheels. The first time Galitsky himself went to the points. One day his truck rolled over and, in order to save at least something, he had to pick up the scattered powder in buckets. "Thunder" worked differently: sales representatives went around points wholesalers and collected orders, and then - delivered the goods to the buyer.
The future second man in the "Magnet", retired sailor Vladimir Gordeychuk began work in the "Thunder" behind the wheel of a truck. He joined the company back in 1996, worked for a short time as a driver, then got a job as a sales representative, then as a sales manager, and three years later became an executive director. “Sergey made decisions quickly,” recalls one of the former top managers of Magnit about the beginning of his career. - I was not 25, he came to the meeting with the managers in our branch, we talked and he said: "The boy has smart eyes, let's move him." It is enough for him to exchange a few words in order to understand whether it is worth working with a person or not. ”
$ 30 billion
cost "Magnet" in 2014
got Galitsky for his 29.1% stake
employees in the company
$ 490 million
Galitsky invested in a football club and stadium
Galitsky was responsible for the ideas, Gordeychuk - for their implementation. “Vladimir is like a bull terrier in character: if he is given a task, he will not let it go until he gnaws, he does not decide. He had a mad working capacity, he could work seven days a week, even when it was not necessary, ”recalls Prisyazhnyuk. And Gordeichuk was fond of classical philosophy: “I could be at work until 11 pm, then get up at 4 am and start reading Hegel or Nietzsche, then go back to the office and at 9 to hold a meeting with discussion. I tried to systematize things from the point of view of a philosophical approach, to find some theoretical basis for business processes. ”
Army goes to Staronizneteblievskaya: how Magnit became a federal network without Moscow
By 2005, the mysterious Krasnodar retailer had become the largest in number of stores in Russia - but still remained imperceptible for Moscow and St. Petersburg, where the main competitor, Pyaterochka, was aggressively developing. "I do not care where the ruble will be earned," - said then Galician. Analysts believed that he was afraid to go to Moscow because of the high unusual competition. “I asked myself: when will Carrefour be in [the village] of Staronizhnetebliyevskaya? - explained Galitsky in 2006. “Considering that I have forty years left to live at best, never.” This answer satisfied me. ”
From a managerial point of view, "Magnet" was almost a military structure. All decisions were made "at the very top", but managers could easily come to Galitsky at any time. “The“ head ”decided everything, down to the price tag on the product in each store,” recalls Prisyazhnyuk. At the stage of rapid growth, it helped Magnit to open faster than anyone else: the company came to a new city, found a space of 300–400 square meters, hung a cheap sign, closed windows and walls with siding, and the store started to work - and no one could compare with them in terms of speed, recalls the ex-general director of Dixie and the head of the AKORT retail association Ilya Yakubson, in 2005 he was a co-owner of a regional supermarket chain in the Oryol region.
Magnit was the first to open its own distribution centers and build a truck fleet, at the expense of the volume of purchases, sought low prices from suppliers, and at the expense of logistics and personnel efficiency, saved on costs and continued to open all new stores. Staying in Krasnodar, the company built a network management information system that automatically generated orders for products to distribution centers, and at some point even autonomously controlled the work of the entire hypermarket chain. Magnet has become one of two Russian companies that have hit the top 100 most innovative companies in the world of Forbes in America (the second is Norilsk Nickel). In 2015, a team of Sberbank managers led by German Gref came to Krasnodar for advice on building a management system, one of the former managers of Magnit recalls.
"The" head "decided everything, down to the price tag that would hang on the product in each specific store."
“We created great technology,” says Galitsky. “At 10 o'clock the store closes, in two hours from all points of the country all information is reset to the central server, and then robots form auto-orders to the stores depending on climatic conditions, season, day of the week and time zone.” Further this information went to the RC, at night an order was collected for each store, and in the morning the products were already in the stores.
“If Galitsky supported a project, he was automatically given the green light inside, it helped to do without unnecessary bureaucracy and to do everything very quickly,” says the former top network manager. “Magnet was an entrepreneurial company from the start. Formation of ideas and competitive advantages - it was more for me, structuring and implementation - more for management, ”agrees Galitsky.
In the company all these years, every day something changed, he recalls in a conversation with The Bell. “It was an amazing time when you go to bed only so that the morning comes faster and you can again plunge into the atmosphere of the search,” Galitsky said. - Never in 24 years did I have breakfast at home on weekends. I do not know how my wife tolerated me: I got up in the morning, went to the office, came late at night. Such was the work - and I really liked it. "
Investors who are crazy: how “Magnet” went public and became more expensive than Carrefour
The rapid growth required credit money, and at first the provincials from Krasnodar were hard to get. “Imagine the beginning of the 2000s, you come to Moscow in a cheap suit with a South Russian accent and come to a small, seemingly bank - and there, at the head of the department, watch for $ 15,000, life is good, and he looks at you like ... remember about the pork snout and Kalashny series? - recalls Alexander Prisyazhnyuk. “There were few people who at that moment believed in us and were ready to work with us.”
With the growth of the network, bankers gave loans more and more willingly, but Galitsky did not want to take them. “I have always been uncomfortable to have a big debt: EBITDA falls slightly - and you immediately have problems with banks. If theoretically, if necessary, the shareholders could help Pyaterochka, then we had no such opportunity, we had to be very careful with the debt. We have always tried to keep covenants [debt / EBITDA] no more than 1.5, ”he explains.
Instead, "Magnet" went to the exchange. In 2006, the company held an IPO, and in 2008 and 2009 it sold additional shares on the market twice - in just three years, Magnit attracted $ 1.2 billion to the market. Investors believed in Galitsky: he could shout at them, pounding on the table , the company was the fastest growing in the market, says an employee of the fund that invested in Magnit.
This belief paid off: from 2006 to 2014, Magnit went up 15 times and cost $ 30 billion. Carrefour did not appear in Staronizhneteblievskaya, but in 2012, Magnit surpassed the world's second-largest retailer at market value, although by revenue still inferior to him almost ten times. "Investors are crazy," - then wrote Galitsky on Twitter. Analysts argued that investors behave reasonably and buy prospects, and the company, on the contrary, is underestimated: Magnit grew by 30% and opened 1,000 stores a year, profitability remained very high for retail - 10–13%, and debt load about which Galitsky so cared, - low.
“He replied:“ Guys, you want to decide - sit in that chair and control yourself. If not, we will do as I say. ”
Galitsky himself, although he regularly went to meetings with investors, called regular road shows his worst weeks in the year and time thrown out of life, says an employee of a foundation that invested in Magnit: “He didn’t like answering dumb questions from people who he thought they looked at his business very superficially. ” When Magnit was going to launch a new network of Cosmetics, investors told Galitsky that this was wrong, one of the network managers recalls. “He replied:“ Guys, you want to decide - sit in that chair and control yourself. If not, we will do as I say. ” Magnet Cosmetic has become the fastest growing division of the company and it remains to this day.
Victory and devastation: how the "Magnet" broke into first place
March 10, 2011, Galitsky burst into a meeting with Gordeychuk: “Evgenich, did you read the news? Khasis is leaving! ”- recalls one of the former managers of“ Magnit ”. The resignation of the long-term X5 Retail Group CEO Lev Khasis was a big event: Galitsky respected him and considered him a worthy opponent. After that, the main competitor of Magnit for a long time was looking for a suitable successor, and the development of X5 slowed down.
The race with Pyaterochka (and since 2005, with X5) has been the main topic of the Russian retail market since the 2000s, when it became clear that the two discounter networks are breaking off from all other Russian retailers to an inaccessible distance. “We have been chasing them for 15 years. We knew that the chase would be long, but we were too angry to get out of it, ”said Galitsky in 2014 in an interview with Ksenia Sobchak.
“What is the use of coming at full speed to the finish line, where it is written:“ there is no money ”?”
Now he says that the first place for him was not the main goal: “We have always had different strategies with Pyaterochka: we were focused on EBITDA, and they were on growth. For me it was better to be a smaller player in the market, but profitable. What is the use of coming at full speed to the finish line, where it is written: “there is no money”? ”
As long as there was a clear goal ahead - to snatch the lead, everything worked out: the whole management worked almost every day, everyone had to be in touch at any time, but that didn't bother anyone, says the former Magnit top manager.
In 2013, the goal was achieved: Magnit overtook the X5 and was able to become the largest player in the Russian retail market not only in the number of stores, but also in terms of revenue. “What happened in Pyaterochka in 2011–2012 is probably more of a question for them, but at that time we were really much better,” Galitsky recalls in a conversation with The Bell. - Take the central Russia: they had the best locations there, we have worse. And when in 2011–2012, they started having difficulties, superfluous buyers flowed to us, who should not have been with us. It was not for long - with time, Pyaterochka restored everything. ”
But the victory over the eternal rival deprived Magnet of an important stimulus.
The businessman and his team: how Galitsky tried to pass the "Magnet" to managers
By that time, the founder of Magnit had been developing the Krasnodar football club, which he created in 2008 from scratch, for several years. In 2011, the team went into the Premier League, and in 2014 for the first time hit the European competition. In just 10 years, Galitsky invested $ 400 million into the club, another $ 90 million into the Krasnodar Football Academy. In 2014, its new mega-project, the most modern stadium in Russia, was built in Krasnodar, and the businessman spent 20 billion rubles on it.
“When you're running for 15 years for someone, for a company with talented people, which has a financial resource to buy up entire networks, and when you outrun them, then there is a slight devastation”
An investment banker from a fund that sold its stake in Magnit several years ago says that he was thinking about selling when Galitsky spoke more about football at a meeting in 2014 than he did about business. In 2016, he himself admitted that Krasnodar, “unfortunately for investors,” takes a lot of time: “It’s impossible to do two things at the same time, and the business suffers from the fact that I play football.”
“When we were the first, I thought that I could trust managers more and make less decisions myself, pay more attention to football,” Galitsky now recalls. But it was not easy to develop an entrepreneurial company in all its spirit.
Galitsky himself used to always speak with skepticism about businessmen who entrust the company to managers. “If the owner leaves the company management, the hired manager will ruin it for sure, a matter of time, a year or a century, but definitely faster than you,” he wrote on Twitter in 2013. Galitsky was not going to leave the administration, but began to delegate more control, although this was obviously not easy for him.
“If the owner moves away from the management of the company, the hired manager will ruin it for sure”
Now he recalls this, as it seems, with regret. “When, as it seemed to me, managers made the wrong decisions, I said: wait, people should be allowed to learn and the right to make mistakes,” he tells The Bell. - It was necessary: you don’t know this feeling in Moscow, the energy of the capital. The mentality of a provincial person sometimes does not allow him to dream of becoming the first. ” The managers of “Magnit” didn’t have enough of it: “In order for this complex not to exist, I tried to give more positive to the management, praised it, said that they are very strong - perhaps too much.”
As Galitsky delegated authority to managers, the company's dependence on the founder’s identity became more and more obvious. The investment banker recalls: “After the“ Magnit ”somehow had a fairly significant margin decline, Galitsky at a conference call with investors said that the company should not turn away,“ everyone should be humbled himself ”.” At such moments, he began to go to meetings with suppliers himself, “obscenely expressed himself, pounded his fist on the table - and in the end, of course, he beat out more favorable conditions for the company, but it was manual control in the flesh,” says The Bell.
The second person in the "Magnet" after Galitsky was Vladimir Gordeychuk. But by the end of 2015, Magnit’s managers began to notice that Gordeichuk, who started having serious problems in the family, began to deal less and less with operational tasks. The former navigator of the sea has always paid a lot of attention to his system of work management methodology, which he based on classical philosophy. It irritated many. “He could quote Hegel or Nietzsche for hours. The managers listened to all this, wrote down, and then you come to discuss the working issue - and there is nothing in the daily logbooks except Hegel, ”recalls one of the former managers of Magnit.
"I probably should have acted harder"
In early 2016, Gordeichuk resigned from Magnit. The question of who will be engaged in the operational management of the network, has become acute. Three months after the resignation of Gordeychuk, Galitsky said that he did not like the daily routine management work, but he could not find a successor. “You can grow yourself a change, but a copy will always be worse than the original,” he said, speaking at the Skolkovo business school.
Looking for a manager for "Magnit" on the market Galitsky did not want. “Calling a manager from the outside in such an entrepreneurial company is, in my opinion, it would be like coming to a casino and giving someone your money so that someone else would play on them,” he reasons now. - We had our own subculture, we almost didn’t invite managers from the outside - that was probably a mistake. When a company grows to a certain level, only people who are predisposed to it can manage huge volumes, and they are not always from your company. ” In the end, after the departure of Gordeychuk, Galitsky actually divided the management of the "Magnet" among several managers, each of whom was responsible for his own direction. A hardware struggle began between them, several former employees and partners of Magnit tell The Bell.
“Calling an outside manager to an entrepreneurial company is like coming to a casino and giving someone money to play on someone else.”
In “Magnit” there were three management generations, says Alexander Prisyazhnyuk: the first wave - the people with whom Galitsky started the business, the second (including himself) - those who came to the company at the very end of the 90s and for the most part left until 2014, the third - those who came to the company after an IPO or grew inside. “When I came to Magnit, the company traded on pennies and for penny salaries. We did it because we had fun, we grew up with the company, we always had to invent something to survive. And in the 2010s, people came to a serious company for serious positions and salaries. And they have already fought rather for who has more influence in the company, who will put their people to where, ”he believes.
“Probably, we have become more well-fed, and somewhere the ambitions of individual managers have become more important than the result,” Galitsky tells about the internal problems of Magnit. - Each of them wanted more and more self-expression - they were really strong. And here, I probably should have acted harder. "
Pyaterochka strikes back: how Magnet and X5 are reversed again
Competition in the retail market at this point intensified: the incomes of the population ceased to grow in 2014, and the networks did not stop growing - the battle for the buyer had to be tense.
X5 in 2013 was able to find the key manager it needs - it was the former top manager of Severstal and NLMK Olga Naumova, who in 2013 headed the company's largest network, Pyaterochka. She took a large-scale restyling of stores, which took almost 5 years and cost X5 38 billion rubles. The X5 began to install automatic doors in Pyaterochka, to make windows full-length, to install expensive lighting, to enter the range of fresh products that were traditionally considered unnecessary for discounters. ““ It will never pay off, nobody needs it, ”so many people thought,” recalls Yakubson. - Savings have been in retail theme number one for 20 years. And then we suddenly realized: “Pyaterochka” took and created a new consumer experience, which began to pay for all this rebranding. ”
Investors all this at first raised questions. "Magnet" was not going to spend the same money on updating stores. “People do not consume food, they consume calories,” Galitsky repeated this phrase in various interviews, explaining that Magnet works for 80% of the population who spend no more than 10–11 thousand rubles a month on food. “The market is beginning to change gradually, and the company should start thinking about a change of strategy. But to do this at the moment when you are a winner is very difficult, ”said Aton analyst Victor Dima.
Now Galitsky pays tribute to the actions of a competitor. “Pyaterochka has become more aggressive and more precise, has reworked the stores, started doing what was right to do, for example, in Moscow,” he says to The Bell. - The last couple of years they have had higher growth rates. But, when I left, it did not upset me: our focus was always on EBITDA and the highest profitability. Probably, there are different businessmen - for some, profit is important, for others growth. Profit was important to me in order to consistently plan for the future. ”
“Pyaterochka became more aggressive and more precise, redid the shops, began to do what was right to do, for example, in Moscow”
But for investors, growth prospects were more important. In 2016, the revenue of Magnit, instead of the usual 20–30%, grew by only 12.8%, and in the summer of 2017, semi-annual reports showed an increase of 6.4% - and the funds began to get rid of securities. For half a year until the end of 2017, Magnit fell in half and cost less than 500 billion rubles.
"Gladiator must go on time": how Galitsky decided to sell "Magnet"
“Of course, this long, not one decade race affected. We were a little tired, slightly overstrained. If earlier there were no New Year holidays for us, now we began to take pauses, although even at that time we were constantly in computers, we looked like like like and all the other indicators, ”Galitsky argues. In the summer of 2017, he realized that it was time to take control back into his own hands, and returned to work seven days a week, his acquaintance says, but six months later he sold the company to VTB.
Familiar Galitsky said that the deal was agreed very quickly. “Why is VTB - they have placed a lot of“ Magnet ”. Selling such a large company is not an easy thing, and VTB is one of the few whom he trusted to make a deal with them quickly, ”says The Bell's interlocutor. The deal was prepared “on its feet” and was agreed upon unusually quickly, says an investment banker who heard about its details: this is why it was closed for quite a while.
“We see a huge potential for the development of the Russian food retail sector. We do not comment on additional details of the deal, but it was absolutely market-oriented at all stages, ”the VTB press service reported to The Bell.
“Of course, this long, not one decade race affected. We were a little tired, a little overstrained "
Galitsky does not say anything about the details of the transaction with VTB, but he tells in detail about the reasons for selling the company as sore. “When did I make a decision?” This one moment is not, not the second in which you decided to sell the company. - he says The Bell. - But here is a typical case that happened quite shortly before the deal. 7 am. I have a call from work - it is immediately clear that something has happened. I look at the phone, but I can not pick up the phone - I already realized that psychologically it is quite difficult for me. Then, of course, I take it, they confusedly explain: a tragedy happened next door to our store, we have nothing to do with it, just ask for help. It was only at the end of the sentence that I realized that we, “Magnet,” had nothing to do with it. Each time it was harder and harder to endure it. ”
Constant psychological stress, he calls one of the three main reasons that made him decide to deal. “A very big personification of the company with me. 6000 cars daily in the vast Russian roads. No matter what you do, the risks of a heavy accident are very high. You cannot control the situation 100%, it is connected with human lives and it is a burden on you every day - it is very difficult for me. I used to keep the situation under control. When a business is so personalized, each new opening of a store, a distribution center, each new machine reduces restful sleep for another minute, ”he explains.
Galitsky struggled with this - he put more and more new video monitoring systems on vehicles, cars, shops, distribution centers, but all this did not give full control over the situation: “You cannot fully answer for 300,000 of your employees. This is a very strong pressure. If you cope with it at the age of 35–40 years old, then at 50 it is already very difficult. ”
Age is another reason, says Galitsky. “If you are not completely immersed, you will not have the success that our company has achieved. Over time, I began to understand - I began to lose speed, - he says. - I occasionally communicate with my friend, chess player Vladimir Kramnik. When I asked why he was leaving chess, he said that the intensity that the young guys can withstand is already beyond 43 years old. And this is his 43. That intensity, which I had in the company, for my years was already destructive. Business is a game of intelligence, and you have to admit: what you can do at 35–40 years old, you can’t do at 50. This understanding does not come right away: you think: nothing, now you can rest on weekends, on holidays, and everything will start over. You cannot immediately accept the fact that you are no longer what you were. But at some point you have to answer yourself that with the intensity that has been the past 25 years, operational management is not for you. When you know yourself 35-year-old, you can not accept the 50-year-old. In ancient Rome, it was believed that every gladiator should die in time and with dignity. ”
"When you know yourself 35 years old, you can not accept the 50-year-old"
Galitsky was still not ready to rebuild his company from an entrepreneurial to a managerial one: “I understood that I couldn’t be able to appear every six months at meetings on the board of directors, with a smart face to consider some papers. Because I always took responsibility for what I did. ”
In addition, the more Magnit became, the more it was subject to state regulation. “This is not only in Russia, take Facebook - its leader is called to Congress, they are forced to justify themselves there, this is the lot of all big companies,” Galitsky said.
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