He Helped Lush Expand In Russia. Soon He May Have To Fire 600 Employees And Close Up Shop.

When Dmitry Azarov opened the first Russian storefront for U.K. cosmetics chain Lush in 2002, a tiny 430-square-foot outpost in Moscow, he couldn’t have predicted how popular the colorful bath bombs, face masks and shower gels would be with locals.

Two decades later, the 61-year-old Russian franchise owner is preparing for the impending demise of his business, which has expanded to 48 stores in Russia, 15 in Ukraine and over 600 employees. He owns 65% of the venture, which is his family’s main source of income.

Like many Western brands that have bowed out of Russia in the face of logistical and moral pressure, Lush has ceased shipments of products into the country, effectively delivering a death sentence to Azarov’s business. While his stores in Russia remain open for now, he relies on imports for 95% of his sales and figures he has three months left until his shelves are bare.

“On one hand, I understand that Lush behaved the same way as the majority of Western brands,” said Azarov, who lives in Moscow but was born in the Ukrainian city of Slavyansk and still has relatives there. “On the other hand, it’s devastating to see the business which I’ve been building for 20 years is being destroyed, the stores are closing and we’re facing having to let people go.”

If nothing changes globally, he says he’ll ultimately have to close all of his stores and fire all of his employees. He’s already planning to close 17 stores, and is negotiating with his landlords to exit leases at additional stores.

His inventory is dwindling by the day, as shoppers rush to get their hands on products before they’re gone. Even though he raised prices after the exchange rate went up, sales in the last two weeks have been two or three times higher than normal, said Azarov.

The war has dealt a sudden blow to Russian franchisees who are being abandoned by the same global chains that for years relied on them to carry out ambitious global expansion plans, and in return allowed them to put food on the table, pay the mortgage and send their children to school. Now, franchisees face the difficultly of trying to keep their doors open without support from their franchisors, which ranges from the shipment of physical goods to marketing, accounting and other administrative support.

Azarov is in a more vulnerable position than fast-food chains like Papa John’s, which get most of their meat, cheese and other ingredients domestically. Indeed, Lush acknowledged “the business prospects are bleak” in Russia and Ukraine, but said in a statement that there’s no “material risk” to its overall business. It does just 2% of its sales in Russia and Ukraine. The company said it’s continuing to communicate with and offer support to local teams.

“We stand for peace and join the global community calling for an immediate ceasefire and the protection of all lives,” the U.K. company said in the statement earlier this month.

Azarov remains worried for the safety of his employees, as well as his relatives, who remain in Ukraine. He had expanded in Ukraine in recent years, in 2019 opening a location in Odessa, a city that has now been fortified with sand bags and anti-tank barriers as residents brace for an attack. “This is one of the reasons why everything that has been happening there, all the events of recent years, means a lot to me,” he said. “This has been really hard.”

While Azarov said it looks increasingly like he might lose his business, he is remaining optimistic. If he has to start over, it won’t be the first time. In the span of his career, he has started several companies, including an advertising agency and two furniture companies. There’s a quote from Joseph Heller’s Catch-22 that he says he keeps coming back to: “He had decided to live forever or die in the attempt.”