YACONTO companies (1988-1992)
YACONTO LLC (Russia, Moscow), is the full and the sole successor of Firm YACONTO LLP, Trade House YACONTO SE and Concern YACONTO JSC.
Since 1991, YACONTO companies and their affiliates organized their economic activity in cooperation with state-owned industrial enterprises of USSR and, consecutively, Russia, manufacturing a wide range of high-demand consumer goods. Mass production of garments, plastic products, household multi-operational woodworking machines, induction motors, electrical products and other goods. This all happened at a time when economic and political crises were raging in the country. Significantly increasing the volume of production of mass consumption and expanding its range, YACONTO companies and their affiliates very efficiently spent their earnings on: purchasing own industrial equipment of their own, in order to create modern industrial facilities; investing in scientific and technical research & development and design documentation for new promising civilian goods. The collapse of prices that began on January 1, 1992, did not cause any significant damage to YACONTO companies and their affiliates, since their working capital was mostly in-kind instead of cash. More information can be found in the Organization section or on www.yaconto.ru (in Russian).
Integrated Cooperative “Continent-Olymp” (USSR, Moscow), established in 1988 as a result of successful marketing research of consumer goods and services in Soviet Union, was the predecessor of YACONTO companies and their affiliates. Economic activities of the cooperative started without authorized capital, with the only expense of 10 rubles to open a current account in a bank. Having received a commercial loan of 100 thousand rubles at 3% interest annually in Moskvoretskaya office of Promstroybank of USSR without any red tape, “Continent-Olymp” fully returned the loan in six months. The bulk of the profits from production and business activities were not withdrawn from the revenue, which allowed the co-op to quickly build up its working capital which was being invested into research & development and trading activities. For reference, according to the official exchange rate, on the date when the co-op received the commercial loan, $1 was equal to 60 kopecks (0.6 ruble), as indicated in the reports published by the Bank of Russia.
Even a few examples below illustrate the high efficiency of production activities of the Integrated Cooperative "Continent-Olymp", and subsequently YACONTO companies. Programs and schemes they have developed under existing business conditions have been successfully used by state-owned industrial companies.
A marketing research of the medical uniform market showed enormous demand in these goods among medical institutions, including hospitals, polyclinics, health centers, wellness centers, sanatoriums, pharmacies, medical schools. Those goods were also used by food companies, marketing and catering companies, of which Moscow alone had more than 10 thousand. In 1988 the Cooperative made a proposal to one of the one of the state-owned garment factories to agree on an hourly rental of their capacity for mass production of clothing on the basis of fabric, accessories and models of Cooperative.
For several months in a row, the factory did not meet its targets as per the State-made plan, which is why 30% of its employees have applied for the dismissal; however, hoping to improve the critical situation in the enterprise, the factory management decided to agree to the experiment designed and proposed by the Cooperative. Only those employees of the factory who met the targets of the State plan on their primary job were allowed to work extra hours for the Cooperative. The Cooperative’s wages were 3-5 times higher than federal standards. Because of this, the very first month of following the Cooperative’s Program has brought astonishing results. All factory workers started regularly meeting the targets as per the State plan – moreover, it took them 5 hours per day instead of 7 to do that (five-day working week). This allowed them to manufacture the goods for the Cooperative in the 2 hours they saved and in extra hours after the working shift, which was agreed with the factory’s management and in compliance with the legislation. Every worker who wished could work a reduced workday for the Cooperative on Saturday, or even during their regular vacation.
Being a megalopolis, Moscow was the biggest customer of different products. Orders for large quantities of clothing for medical institutions of the city (of which there was more than two thousand) made by the Supply Department of the Moscow City General Directorate of Health alone, stimulated the Cooperative to organize the mass production of high quality clothing in a wide range on other factories as well. The Cooperative produced and shipped the goods swiftly and all customers paid for accurately, within 2 days with no delays. Since the uniform wears out regularly, the demand – and, therefore, orders – were regular too. The average salary of a factory worker in USSR at the time was 150 rubles (bonus included); the workers who worked extra hours for the Cooperative earned anywhere between 250 and 450 rubles on top of their regular salary. By USSR standards, this income was very high – at the time, the foreign exchange rate of 1 U.S. dollar was 0.6 ruble (60 kopecks) according to the Bank of Russia.
Social consumption funds contributed greatly to the living standards of the multinational USSR; because of them, practically entire social sphere was free (medicine, education, housing, recreation, sport, etc.). However it must be taken into account that the top priority of the USSR’s production, as evidenced by the programs of socio-economic development prepared by Gosplan of USSR, was the production of the so-called “Group A” goods (industrial, technical and defense production), while manufacturing of “Group B” products (consumer goods) was “secondary”. Therefore the following four factors: absence of entrepreneurial activity which was crucial for the development of the country’s economy; Politburo’s ban on production of alcohol (one of the key income items in the budget of USSR); extremely low prices for crude oil on the world market, as well as USSR’s unjustified economic and military help to the developing countries of the third world led to a drastic economic and social breakdown in 1980-s. This led to catastrophic consequences and collapse of the Soviet Union in 1991.
From 1970 to 1989, the Volzhsky association for automobile production (“AvtoVAZ”) produced more than 14 million cars of different brands and models. Unfortunately, “AvtoVAZ” failed to produce enough spare parts which wore out during the operation. One of such spare parts was the upper ball bearing, the deterioration of which led to extremely grave consequences – the car’s front wheels tore off, which resulted in road accidents. In 1990, after having received from “AvtoVAZ” a Conclusion of a successful test of the inner liners for the ball bearing, the Cooperative and, consecutively, YACONTO enterprises started mass production of this sought-after item, needed by millions of car owners.
Those inner liners restored operation of the upper ball joints which were in permanent operation and extended their efficiency in automobiles for another 250,000 kilometers. The items were produced on thermoplastic multi-mold machines which belonged to the Cooperative, and then to YACONTO companies. Extra high durability plastic, capable of withstanding very high temperatures for South and very low temperatures for North, was used to produce the inner liners. This plastic was used in the defense industry of USSR. The weight of one liner (which consisted of 2 parts) was just 8 grams, while the ball joint itself was 422 grams. In order to satisfy the demand of all 14 million VAZ cars in the USSR, each of which had 2 upper ball joints, 11816 tons of scarce metal was required (excluding the waste), while the production of the same number of plastic inner liners required just 224 tons of chemical raw materials.
It’s important to mention that the federal market price of one ball joint, which was in high demand, was 6 rubles, while its speculative price reached 25 rubles. The release price on an inner liner, at which the Cooperative, and then YACONTO companies sold it to federal trade companies and VAZ maintenance centers, was 1.20 rubles; a retail price for the item was set at 1.50 rubles without a permission to increase the item, since the liners remained a property of the manufacturer until sold. The prime cost of one liner was 20 kopecks (0.20 ruble), net profit – 1 ruble. Knowing the volume of produced items it’s easy to calculate the net profit for the Cooperative and YACONTO companies from this item alone. When the market was close to saturation, multiple facts of counterfeit were discovered, therefore YACONTO companies decided to stop the production. Nevertheless, the Cooperative and YACONTO companies gained very huge profit by organizing the mass production of inner liners swiftly, using “know-how” methods to protect the technology and without spending much time on a lengthy procedure of patenting.
Another example of activities of Integrated Cooperative “Continent-Olymp” and YACONTO companies was the mass production of multi-program woodworking machines for households, and in particular, creation and production of a multi-purpose 16-program woodworking machine model YACONTO DK-1, which used only one induction motor. The volume of production of woodworking machines did not even remotely satisfy the colossal demand. Marketing researches have shown that the size of USSR consumer market of woodworking machines for households was 2.7 million units, production of which has been wholly dependent on the production of domestic induction motors. The demand for “YACONTO DK-1” machines was so high that the enterprise began receiving numerous requests coming from trading enterprises, organizations, departments and agencies from all regions of the USSR and then Russia for the purchase of machine tools in large lots. Barter for high-demand goods and services was also offered frequently. Only a hundredth of those requests is published at www.yaconto.ru. On 28.05.1993, Rospatent (Russian Federal Service for Intellectual Property, Patents and Trademarks) granted to Firm YAKONTO LLP a patent №38648 for an industrial design: "Woodworking machine" (Priority of industrial design from 24.05.1991). On 25.07.1995 Rospatent granted to Firm YACONTO LLP a patent №2040388 for an invention: "Universal woodworking Machine" (Priority of invention from 26.03.1991). In order to reach maximum efficiency in the mass production of different models of woodworking machines and other civilian goods that were in high demand on the country’s consumer markets, the Cooperative and YACONTO enterprises organized their production on the federal enterprises of USSR on the basis of contracts for mutual production (activity), which were developed by the Cooperative itself and YACONTO companies on mutually beneficial conditions. Major defense enterprises were involved in the mass production of high durability parts for woodworking machines – for example, the Moscow Aviation Production Association named after P.V. Dementyev, an enterprise which produced MiG jet fighters.
Economic efficiency of the YACONTO enterprises could be seen not just in the production, but also in commercial activities, which can be proved by just a few examples below.
In early 1991, accounts payable of PA “Projector” (USSR, Moscow) to Scientific-Production Association “Kirgizelectromash” (abbreviated to SPA KEMZ, Kirghiz SSR, Frunze city, later renamed to Bishkek city) grew to an amount which exceeded the net book value of SPA KEMZ 2 times. It was, in fact, a stalemate. Both companies were state-owned and were strategically important for USSR, since they were working for the defense industry. At the same time, they were producing consumer goods and were interdependent. PA “Projector” produced “Eureka” washing machines, and the only company in USSR that produced motors for these machines was SPA KEMZ.
The YACONTO management developed and proposed a solution for the situation that would help PA “Projector” repay the debt to SPA KEMZ through YACONTO companies on conditions beneficial for all sides. In accordance with the tripartite agreement signed, at the request of YACONTO companies, SPA KEMZ shipped motors to warehouses rented by YACONTO. Then, upon requests from PO “Projector”, YACONTO shipped those motors from its warehouses to “Projector” in exchange for electric washing machines, according to the agreed equivalent of 3 motors for a washing machine. At the same time for each washing machine received like that, YACONTO companies “added” 5 motors instead of 3 to the YACONTO’s debt to SPA KEMZ. Then YACONTO companies added their own margin to the resulting value of the washing machine and sold those machines at their own fixed prices. YACONTO’s profits were spent on silumin and enameled copper wire, required for the production of motors. Those materials were transferred to SPA KEMZ as payables. In this way, all the accounts payable of PA “Projector” to SPA KEMZ were repaid, and the YACONTO company made a 20% profit of 20% from the sale of washing machines.
In USSR, induction motors for household woodworking machines were only produced in Ukraine (Kharkiv city) and Kirghizia (Frunze city). A sharp deficit of those motors was holding back a mass production of the said machines and other production on the industrial companies of USSR and then Russia. Therefore, Integrated Cooperative “Continent-Olymp”, and then YACONTO companies signed long-term contracts with SPA KEMZ for the production of high-demand induction motors at bargain prices. Materials that SPO KEMZ received from YACONTO companies, included those received as payables of PA “Projector” according to the program developed by YACONTO, were used for the production of induction motors and other items. This program also caused great economic effect for YACONTO enterprises and played an important role in the establishment of YACONTO’s own industrial complex for the mass production of induction motors models 4АМ80, 4АМАТ80 and their modifications (power of 0,75–2,2 KWt, 1000–3000 rpm, voltage 220V and 380V). This first nongovernmental complex for mass production of induction motors was established in 1992 on private investments on the territory of the “Volgodonsk plant of radio-electronic equipment” (VZRTA) in Volgodonsk city of Rostov region. More detailed information about this plant will be published in the “Salut JSC” section of this website.
Being experienced professionals in organizational and commercial activity, management of YACONTO company, without any concern, transferred large parties of consumer goods of wide range to be sold (without any advance payment) to main department stores of Moscow, including: GUM, TSU, “Detskiy mir”, “Moskovsky”, “Zenit”, “1000 melochei”, as well as companies of Moscow, Pskov, Leningrad, Nizhegorod, Sverdlovsk, Rostov regions and other regions and territories. YACONTO personally developed and signed commercial contracts which allowed collecting payment for sold products from retail and wholesale companies in a timely manner. The conditions of those contracts stimulated the sales of domestic products, including a wide range of multifunctional household woodcarving machines, washing machines, vacuum cleaners, juicers, electric irons, electric sewing machines, mini-tractors and tillers that came together with attachments for different functions, as well as other products.
USSR’s federal policy for entrepreneurial activity in 1988-1991 was aimed at supporting those cooperatives and small enterprises which were producing consumer goods and new types of goods. This allowed the Integrated Cooperative “Continent-Olymp” to gain the following net profit: 1 million rubles in 1989, 10 million rubles in 1990, 100 million rubles in 1991, and incrementally thereafter. In the said period in USSR, profits of nongovernmental companies were not subject to taxation and were fully at the disposal of the manufacturers. But at the same time, for private entrepreneurs who carried out their production activities, multiplying factors (1.5 – 3 times) for the cost of raw materials, materials, kits, equipment, commercial vehicles, etc purchased at federal enterprises, were applicable, which obviously led to a huge increase of the product cost for the consumer. For example, the price of a KAMAZ truck for the entrepreneurs was 3 times higher than for the state-owned companies.
It should be noted that the purchasing power of a ruble in 1990 was approximately U.S. $8 at the beginning of 2008. If state-owned enterprises of the USSR in 1990 had their tax on profits decreased from 65–70% to at least 50%, and were given the opportunity to determine their own economic activity, industrial policy, the range and volume of production and set prices on it, by year 2000 that would have made the country a global leader of economic and social development with a high standard of living for its citizens. A very successfully growing China, where planned economy makes extensive use of market relations, and foreign investments and loans are used for their intended purpose, is one such example.
YACONTO LLC presented merely a tiny fraction of information about production and economic activities of YACONTO enterprises for the period until 1992. But even this information is sufficient for understanding the scale of their business at the time when free entrepreneurship was taking its first steps in USSR and then in Russia. Even today the framework of YACONTO’s activities of 1990s remains actual and efficient, since relations between the manufacturer and the consumer are its cornerstone. At the same time it was taken into consideration that goods and services were in great deficit in the country, while the money supply was growing excessively, which led to rapidly growing prices. And today we need to bear in mind that during the global financial crisis and lack of money supply in Russia, the solvency of the population and enterprises decreases, which, from the formal financial point of view corresponds to the crisis of overproduction and surplus goods at the consumer market. At a time when the foreign market sharply reduced consumption of Russian goods, in order to overcome the crisis and ensure economic growth, it is advisable to refocus it on the domestic market. But it is critically important, to support the implementation of large-scale national projects, allocating budget funds earmarked for domestic manufacturers and providing long-term investment loans in rubles, including foreign partners, instead petty projects proposed by the adepts of liberal marketing, which are insignificant to the economy. That’s when foreign funds will start quickly “returning” to the Russian economy, and we will need to accept them on mutually beneficial terms.
In late 1992, Russian company YACONTO was fully capable of purchasing more than 1.5 million privatization vouchers without any difficulty, and could have used these vouchers to buy an entire sector of Russia’s economy which was sold for a pittance. However, instead they preferred spending their earned money on massive quantities of industrial equipment for mass production of civilian goods which were in high demand in the consumer markets in Russia and abroad, investing in research and development, design documentation for the creation of new products, etc. Therefore, only a small portion of financial assets was used to purchase the “vouchers” at commercial banks, Russian Commodity Exchange (RCE) and various voucher funds in order to obtain large shares of industrial and other enterprises at voucher auctions, which were being hurriedly carried out in Russia by its “reformers”. More detailed information can be found in the Letter from YACONTO LLC to Russian President Vladimir Putin (ref. №80116-1 from 16.01.2008), which has been concealed from him.
The name “YACONTO” was a trademark of Integrated Cooperative “Continent-Olymp" and was formed by the method of abbreviation: YA - Yakunin, CONT - Continent, O - Olymp. The trademark “YACONTO” (in Russian) has been registered by the USSR State Committee for Inventions and Discoveries (Certificate №86903 from 28.04.1989); the trademark “YACONTO” (in English) was registered on the USSR State Committee for Inventions and Discoveries (Certificate №86904 from 28.04.1989).
© YACONTO, 1988-2024