Sausage Maker Seared on Russian Griddle
DONALD M. ROTHBERG
Apr. 12, 1993
WASHINGTON (AP) _ Russia was just too good an opportunity to pass up for Alaska meatpacker Doug Drum. And for those who would follow him into the uncharted waters of post-Soviet capitalism, he has this advice: ''Lots of luck.''
Drum's reindeer-meat company is one of a number of U.S. businesses investing in America's former Cold War enemy. But his experience is a cautionary tale for businessmen seeking to make their fortunes in the old Soviet Union.
After a generation of hostility, Russia is the object of a U.S. effort to encourage international assistance and private investment to help Boris Yeltsin's program of political and economic reform.
Officials from the world's wealthiest industrial nations will meet this week in Tokyo to discuss an international aid package for Russia.
More and more U.S. companies are trying to get a foothold in a country that spans 11 time zones and has enormous reserves of oil, gas, timber and minerals.
There is a highly educated population in Russia. If the Russian economy ever gets rolling, the pent-up demand for consumer goods will create one of the world's great markets.
Commerce Secretary Ronald H. Brown says there is about $4 billion in U.S. private investment ''ready to go'' into Russia if ways can be found to ''increase the comfort level'' about doing business in that country.
So far, Russia has attracted only about $400 million in U.S. private investment. By contrast, U.S. companies have poured $1.5 billion into post- communist Hungary.
Drum, the operator of Indian Valley Meats in Indian, Alaska, knows reindeer. Using everything from the antlers to the tails, he markets 22 different products.
He turns the meat into hams and sausage and sells the antlers to companies that dry them and use them in medicines, vitamin pills and aphrodisiacs.
In 1987, a delegation from the Magadan region of eastern Siberia came to Alaska and saw Drum's wares.
They were impressed. After all, there are more than 2 million reindeer in Magadan. Arrangements were made. A Russian plane flew to Anchorage to pick up Drum and his equipment.
The Alaska businessman invested $57,000 in the project.
''We showed them how to make sausage, we showed them how to cut chickens, we cut reindeer, moose, horses, beef, pork, everything and merchandised it like you would here in the United States,'' he said
Drum's exhibit was flown to Moscow and shown to then-Soviet President Mikhail Gorbachev.
Drum was getting a little nervous about his $57,000. ''But they said, 'Hey, we are going to get the money, don't you worry about it.'''
He tried not to worry and besides, the potential was enormous.
Less than seven months later he had installed a plant to produce reindeer sausage.
''The thing was a huge success,'' he said. A second plant was built in Archangel and generated a million dollars in hard currency in one month.
An operation that started with one state farm with 38,000 reindeer, soon expanded to cover more than 30 state farms with 1 million deer.
Then he fell victim to the antlers and corruption.
There was a lucrative market for the antlers, which were selling for $530,000 a ton. The largest market was in Korea.
Soon, said Drum, Russian officials were starting their own sideline businesses.
''We could see them not even caring about the meat processing any more,'' he said. ''Just sell horn, get money, buy boom boxes and TVs and VCRs and sell them on the black market and make lots of money.''
The big losers were the local Indians who were doing all the work and getting little return.
''It could have been such a huge, huge success,'' said Drum. ''There's good people over there. There are so many good people over there. They destroyed it all because of a few greedy bastards.''
But he's still interested in doing business in Siberia.
''The potential is there in numerous things, but they've got to clean up the corruption.''