Where Coffee Shops Are the Test of Economic Success
WHY YOU SHOULD CARE
Because, believe it or not, not every country has a Starbucks. And in Kyrgyzstan, the battle for coffee supremacy is fierce.
By James Watkins
“I’ll take a flat white with the veggie panini, please,” I say, in English. Within seconds, the espresso machine is making its deafening but oh-so-satisfying whir — loud enough to make a nearby student glance up over his MacBook Air. A tourist is reading his Lonely Planet guidebook, and a besuited man with a briefcase ducks in for an air-conditioned break. Unremarkable, right?
Wrong. I’m somewhere where this is no mindless everyday experience but a genuine symbol of economic transformation. Here in Kyrgyzstan, the poorest of all post-Soviet republics, the international-style coffee shop is the community’s chosen measure of progress — and a metric by which Kyrgyzstan has progressed a hell of a lot. Until 2012, there was no Western-style “coffee shop” to be found here (or Western-style anything, really); now, there are more than 40. They’re on “almost every street in the city,” says Aziza Ishmakhametova, a program manager at the Central Asia Free Market Institute. “They have changed our lifestyles.” You’d be forgiven for thinking that Bishkek is starting to turn a bit Brooklyn or Shoreditch, but the rise of the independent coffee shop is also a test case for just how open the economy truly is against the forces of corruption and poor governance that continue to plague the post-Soviet world.
“Everyone wants to open a coffee shop now,” says Chihoon Jeong, the owner of Chicken Star, a Korean chicken restaurant turned specialty coffee shop that opened in 2015. Anywhere else in the world, serving Korean chicken alongside artisanal hand-drip coffee would be a little, erm, incongruent, he admits, but Bishkek embraces its newfound globalism in a clumsy fashion — the sushi restaurants serve pizza, and the pizzerias serve sushi. And the trendy power of coffee is not lost on any of them: “Now, we have shisha places, pizza places, steak places that call themselves a coffee shop,” says Stepan Golovash, founder of Qcoffee, with a sigh.
When people have discretionary money, they’re spending it in the coffee shops.
Richard Pomfret, economist, University of Adelaide
They may be upstarts, but the restaurants doubling up as coffee shops, like the independent cafés, are signs of the country’s churn.
After decades of economic stagnation, “incomes are going up now, and when people have discretionary money, they’re spending it in the coffee shops,” says Richard Pomfret, professor of international economics at the University of Adelaide. Chicken Star targets local “young professionals and trendy youth,” says the outlet’s marketing specialist Anara Selpieva — a generation that doesn’t remember life as part of the Soviet Union and is increasingly outward-looking. Though the clientele at each of these establishments initially pulled heavily from the expat and tourist communities, about half of customers in each are now locals, say multiple coffee shop owners, as the Land of Tea slowly gets accustomed to the taste of a cuppa joe.
Brad Brenneman, a New Zealander, is often credited with kickstarting the Kyrgyz coffee revolution. He opened the first Sierra Coffee shop next to the Russian Embassy in 2012, two years after a revolution that ousted then–President Kurmanbek Bakiyev and his corrupt family. Since then, Sierra Coffee has opened eight more outlets in Bishkek, though four of those have closed as Brenneman learned the intricacies of the Bishkek retail market the hard way — everything from stingy landlords to unruly neighbors. Eyeing the success of Sierra, a competing chain called Coffeeman (since rebranded as Adriano Coffee) opened up multiple locations a few months later, run by the Shin family, a mega-wealthy Korean-Kyrgyz family that has long been influential in the country’s economy, mainly in the ice cream and frozen goods sector.
The owner spent “three months studying our business, and then suddenly started opening coffee shops,” claims Brenneman. “We’re a startup that did well; Adriano is [part of] a massive Korean conglomerate business empire.” There are now nine Adriano coffee shops across the capital, according to its website (representatives from Adriano Coffee did not respond to OZY’s request for comment). Meanwhile, Sierra is now also roasting coffee in China and hoping to expand elsewhere in Central Asia.
It’s not just competition from established oligarchs that threatens the new breed of coffee entrepreneurs. Though corruption today is nothing compared to the rackets and seizures that former president Bakiyev’s son infamously used to mastermind, the culture of commerce is still hard to change. Inspectors often come in unannounced for on-the-spot, unofficial sanitary checks, fire checks or tax inspections, often with no guise of fairness, say several business leaders. “I wouldn’t call them problems, I’d call them issues,” says Golovash. “Yes, we’ve had issues.” Though Qcoffee, which also operates a second outlet called Craft Coffee, outsources all of its books to avoid the pitfalls of an outdated Soviet-era regulatory system, inspectors have been known to come in and watch over cashiers for hours to make sure that receipts are being recorded accurately, says Golovash.
When I visited, employees at a coffee shop that didn’t want to be named had had a surprise visit from a health inspector just the previous month and were forced to pay an on-the-spot bribe of 5,000 soms ($75) for failing to have a specific sign hanging in the kitchen. Separately, according to the owner of that outlet (not a Kyrgyz citizen), two years ago it received a surprise visit by immigration officials during a five-day window in which his passport was with the visa office for renewal, and so unable to be checked. As the owner tells the story, they were arrested and given a state lawyer who was negotiating the terms of their deportation from the country, before a friend came and paid a sum that allowed the door to swing open. (Representatives of the Kyrgyz government did not respond to OZY’s requests for comment.)
To be sure, entrepreneurs in many emerging economies face these challenges, and they’re not limited to the restaurant industry — in Kyrgyzstan, it’s the norm to pay a 1,000-som bribe to your examiner before state-run college examinations, one recent graduate tells me. It’s also not only officials who receive bribes, says the coffee shop owner who requested anonymity. “We pay our neighbors [who send in noise complaints]. Everything is like that, you know.” But unlike many other sectors that are still trapped in the past, the coffee shop culture that has taken root in Bishkek is continuing to push the boundaries of change.
It has an unlikely ally. Despite the corruption, the bureaucracy itself is relatively easy to deal with — Kyrgyzstan comes above China, India, Argentina and the Philippines, according to the World Bank’s Ease of Doing Business ranking, including an impressive 29th position on the “starting a new business” sub-index — better than the United States. “I don’t understand why people go out of their way to pay bribes” when getting permits and paying taxes in the first place is relatively easy, says Brenneman.
Does it ever get worse than small-scale bribes? Rumors abound of activity from the country’s Mafia or regional barons, though most tangible examples of such activity come from before the revolution — a British businessman negotiating a major gold-mining contract was gunned down in the country in 2006, for example. “No one’s ever asked us for protection money, threatened to burn us down,” says Brenneman. “I hear people say those things, but … people operating normal businesses have nothing to fear.”
Still, flying under the radar is the strategy for many of Kyrgyzstan’s new entrepreneurs. “Maybe [the officials] do not know about us,” says Zarema Sultanbekova, who works at Save the Ales, Central Asia’s first craft brewery, run entirely by women who learned to brew beer from YouTube videos. “We don’t open until 5 p.m.,” she says, and most government employees only work during normal hours. Several of the city’s smaller business owners say that they’re happy to keep to one or two outlets to avoid attracting unwanted attention.
And the secret to scale from Sierra, the poster child chain of the coffee shop boom? “I don’t know what goes on behind closed doors, but I’m sure someone at some point said don’t touch them,” says Brenneman. As we cool off with an iced coffee on a sweltering summer’s day in Bishkek, Brenneman briefly gets up to greet the city’s vice mayor, who just sat down at the table next to us. “When we first opened, we didn’t have any connections,” he says when he returns. “Now, of course, we have connections.”