Billionaire Russian Mogul Trains Kids to Beat Soccer Elite

(Bloomberg – bloomberg.com – Ilya Khrennikov – November 29, 2013) Sergey Galitskiy took less than two decades to build OAO Magnit (MGNT) from scratch into Russia’s retail leader. With the wealth that’s brought him, the billionaire is training local kids to challenge the country’s soccer elite.

Galitskiy, 46, created FC Krasnodar in 2008 and since then has spent more than $250 million bringing the southern Russian team up to a level to compete with the likes of Spartak Moscow and Zenit St Petersburg. That’s a fraction of the amounts lavished on soccer by some Russian billionaires as Galitskiy seeks to bring through the region’s best young talent, rather than spending vast amounts on the sport’s big names.

“We aren’t seeking quick blast-offs, we want to develop gradually and get only what we deserve,” Galitskiy said in an interview at the state-of-the-art campus he built to raise a future generation of stars for his team. “We haven’t rushed to set up targets, either in business or in football. Our goal was to understand how to act and then to move gradually.”

If Galitskiy is able to repeat the success of Magnit, Europe’s soccer powers will need to take notice. Formed in 1994, the business has grown rapidly to become one of the world’s most profitable food retailers with a market value exceeding $31 billion. Without recourse to takeovers, Magnit now has 6,880 convenience stores, 152 hypermarkets and 677 cosmetics stores generating annual revenue of about $18 billion.

Academy Investment

“Magnit avoided pricey acquisitions and built stores from scratch, which ultimately allowed it to become Russia’s largest retailer,” said Nikolay Kovalev, an analyst at VTB Capital. “With football, Galitskiy is trying the same — he doesn’t spend crazy dozen-million dollars to buy superstars. Instead, he invests in an infrastructure to breed his own ones.”

That investment starts with the academy. Built at a cost of $80 million, the facility is a modern coaching complex for kids who are chosen by coaches from more than 20 Galitskiy-sponsored soccer schools for 6- to 12-year-olds in the Krasnodar region.

Covering 20 hectares (49 acres) and clad in copper panels at Galitskiy’s behest, the academy includes 20 pitches, lecture halls, a swimming pool and a chess room offering children aged 12 to 17 the opportunity to learn both on and off the field.

“Success in football is impossible without a good school,” according to Galitskiy, who said his dream is to have the entire FC Krasnodar team made up of academy graduates.

The first batch of students to go through the full academy cycle will reach adult level in 2018. In the meantime, the Magnit founder has followed his business principles to form a team able to contend for a place in Europe’s elite competitions.

Local Players

The team now consists of local and international players, including four Brazilians who are yet to make an impact at international level. Its record purchase was Swedish defender Andreas Granqvist, signed in August in a deal that online information provider transfermarkt.de valued at 5 million euros ($6.8 million). The OAO Gazprom-backed Zenit St Petersburg last year paid a Russian record transfer fee for Brazil forward Hulk, estimated by transfermarkt.de at 55 million euros.

“Top clubs employ players which cost quite big money,” Galitskiy said. “It’s impossible to employ players for as little as $1 million and gain first places.”

FC Krasnodar occupies fifth spot in Russia’s 16-team standings and even though that would have been enough to gain a place in the Uefa Europa League last season, Galitskiy said he has no goal to qualify for Europe’s top tournaments this time.

Stadium Construction

The money he’s made from retailing is enabling the entrepreneur to pursue his passion for soccer. With a wealth of $13.9 billion, Galitskiy is the world’s 70th-richest individual, according to the Bloomberg billionaires index. That represents a 62 percent increase in the year to date and ranks him above Roman Abramovich, who has lavished more than $1 billion on London team Chelsea over the last decade, buying stars such as Fernando Torres of Spain and Ukraine’s Andriy Shevchenko.

“I just like football,” Galitskiy said, when asked why he’s committing so much to FC Krasnodar. “When a person earns money, it makes sense if he spends it himself. It’s a shame when a person earns money, and some strange funds spend it.”

In addition to what he’s already spent, Galitskiy is pumping $250 million into the construction of a 34,000-seat stadium that’s due for completion in 2015, though isn’t among those due to be used at the 2018 FIFA World Cup in Russia.

To keep tabs on the stadium’s progress, the entrepreneur is able to access the team’s website and view images relayed by a real-time Web camera. That’s taking a leaf from the book of his grocery business, where he tracks hypermarket construction from his desk by monitoring live pictures from the site.

‘Driven by Passion’

The similarities don’t end there. Galitskiy keeps as close an eye on his soccer interests as he does on his business, visiting the academy almost every day and watching all FC Krasnodar’s home matches, which for now are played at the stadium of neighboring team Kuban. The owner, who played the game in his youth, even enters the dressing room after matches to shake the players’ hands, be it in victory or defeat.

His unhurried plan for building the team also mirrors the way he built Magnit from a standing start, branching out from wholesaling household chemicals into convenience stores, hypermarkets and most recently cosmetics outlets.

“Galitskiy is pragmatic and cost-efficient in business,” said Dmitry Navosha, head of sports.ru., a Russian sports website. “In football he is driven by passion.”

Article ©2013 Bloomberg L.P. All Rights Reserved. Article also appeared at http://www.bloomberg.com/news/2013-11-28/billionaire-retail-mogul-trains-kids-to-beat-russia-soccer-elite.html