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‘Spud Trust’ to Market Potato Chips in Soviet Union

November 8, 1989

WASHINGTON (AP) _ The idea may sound a little flaky, but Ed and Fritzi Cohen and their Russian partners insist they can turn a profit on a joint venture to make ″upscale″ organic potato chips in the Soviet Union.

″What you call a potato chip is almost unknown in the Soviet Union,″ said Valeri Perekhvatov, one of two Soviet partners who signed a joint venture protocol Tuesday with the Cohens.

″We believe that potato chips are a good snack, especially after you have had a glass of vodka,″ he told a news conference called to announce the venture, the Kartoshka Trust, which translates from Russian roughly as the ″Spud Trust.″

Not only will chips ease the crunch in the Soviet snack market, said Perekhvatov, but by frying the chips down on the farm and transporting the finished product, the partners hope to avoid one of the most vexing problems of Soviet agriculture: the loss of up to half of the crop in storage and transport.

The Kartoshka Trust plans to start small, selling about 100 tons of chips annually, to a very different market than served by the Cohen’s Tabard Farm Potato Chips.

Tabard Farm accounts for a tiny fraction of America’s annual $4 billion potato chip market. The Cohens say they grow ″environmentally sound″ spuds in the Shenandoah Valley of Virginia, truck them to Aunt Annie’s Potato Chip factory in Pennsylvania’s Amish country, and market them in a few tony stores, restaurants and clubs in New York, Chicago, Washington and Philadelphia.

The Kartoshka Trust expects to market about 95 percent of its spuds in regular Moscow stores, and about 5 percent in the Beriozka stores and luxury hotels that cater to Western visitors and accept only hard currency, Perekhvatov said.

The Cohens said their low initial investment in the Kartoshka Trust will help them avoid what has been a fatal trap for some U.S.-Soviet ventures, a Soviet law that allows the foreign partner to take home only the profits that are made in convertible Western currencies.

The Soviet government on Oct. 27 devalued the ruble for a limited number of transactions involving foreign businesses, allowing them to convert at 16 cents on the ruble. But for most transactions, the rate remains at the inflated official level of $1.59, and the ban remains on converting from rubles to dollars at the higher rate for repatriating profits.

But the Cohens said they were content to run a large ruble surplus until they ″find solutions to what now seem to be insurmountable problems″ of getting the money home.

Besides, they believe they can obtain the right kind of potato chip kettle for rubles, rather than dollars. Their only other dollar expense is expected to be 10,000 bags for the initial market run, plus plane tickets to Moscow to sign a more formal contract in January, he said.

The goal of the operation, at least for the American side, is not large profits but helping the Soviets develop a new type of small-scale food industry, said Fritzi Cohen, who was a founding member of the Washington- Moscow Citizens Exchange, designed to promote friendship between the superpowers.

America is ″way ahead of the Soviet Union″ in chip technology, acknowledged Perekhvatov, but the Kartoshka Trust will try to bridge that gap by allowing the Soviets to start with a simple, manageable process.

The protocol signed Tuesday requires Perekhvatov’s Moscow-based Likino Cooperative, and the Zybina farm cooperative near the city of Tula, to minimize their use of chemicals and synthetic fertilizers, said Ed Cohen.

And they will build what he called a ″one-kettle″ chip factory, employing about a dozen people to clean, slice, fry, transport, market and account for the potato chips, he said.

″Because of our small scale, we can help people who can handle this get off to a good start,″ said Ed Cohen. ″We think that it is a model for economic development in certain parts of the Soviet Union.″

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