Ruslan Shostak, 50, has been in business for more than half of his life. For the first 27 years of his entrepreneurial career, he kept a relatively low profile. However, since the beginning of the Russian invasion, the co-owner of the EVA and Varus networks has given more interviews than in previous years combined and has been speaking at conferences nearly every month. The message permeating all his communications is one of optimism and confidence in Ukraine's rapid development post-victory.

His public visibility is driven by business logic. "We want people to know who we are and what we have achieved," says Shostak. And there is much to talk about. "We expect our total revenue to reach $2 billion in 2023," Shostak said during a Forbes Business Breakfast in September of last year.

During the war, he established the corporation Terwin, under which his 17 businesses operate. He also started an ambitious logistics project that will feature 1 million square meters of warehouse space by its completion in 2028. "We need to be clear to existing and potential employees and partners," explains Shostak about the reasons for his public presence.

Shostak's business partner Valeriy Kiptik described their group's "war" strategy in a written response to Forbes: "Development is one form of supporting the country during this challenging period. It's difficult to talk about the future during war, but it's too late after its end. Therefore, it is prudent to start now."

What Shostak and Kiptik are building and what could hinder them?

Born in Dnipro, Ruslan Shostak made his first capital in the production of armored doors, which he launched with his school friend Vadym Atamanchuk. They later imported and produced children's food at the Kherson canning plant.

In the late 1990s, he ventured into retail, managing "Pik" markets in Dnipro. Partners in this business included co-owners of the "Olvia" corporation Valeriy Kiptik and Serhiy Kasyanov. Their company was an importer and producer of FMCG products. Kasyanov speaks warmly of Shostak. "One of his important qualities is his ability to work well with people," Kasyanov told Forbes in 2020 in a commentary on the EVA network.

In 2002, together with Vadym Tugay, Shostak founded EVA, which sold beauty and health products and household chemicals, and a year later they founded the Varus supermarket chain. Interestingly, the name "Varus" derives from the initials of Tugay and Shostak. However, their paths diverged in 2004.

Nevertheless, Shostak can still claim that the name Varus is derived from its owners' names. The entrepreneur found a suitable new partner in Valeriy Kiptik. In 2004, Kiptik had just sold his stake in Procter & Gamble, a company that produced the highly popular Gala detergent and other household chemicals, and invested part of the proceeds in EVA and Varus.

Even after 20 years, Shostak says he was very lucky with his partner. As an example, he cites a case: when he fell seriously ill with COVID-19, he was not worried about his share in the business, as he trusted Kiptik's integrity.

Shostak and Kiptik's flagship joint venture, the drugstore chain EVA, is the largest in Ukraine in terms of revenue in its category and in the number of stores (now more than 1000). Prostor, a competitor, has more than 500 stores, while Watsons has around 300 retail outlets. By the way, Prostor is a project of Vadym Tugay, with whom EVA began.

EVA's success was hardly predetermined: in 2006, the largest Ukrainian network in this segment was acquired by the Hong Kong-based Watsons, the world's number one drugstore chain. For the first five to six years, EVA consistently lost out to the international giant. However, a focus on the "economy" segment in which EVA operated and aggressive expansion into regions reversed the trend: in 2013, EVA caught up with Watsons in terms of revenue, and three years later, surpassed it in the number of stores.

The Ukrainian company proved to be more agile—opening stores in small towns and locations where the foreign player hesitated to enter. "Since 2010, Shostak has aimed for EVA's leadership and systematically pursued it," says Andriy Dlyhach, CEO of the consulting company Advanter Group, who helped develop the strategy to "overtake Watsons."

Today, with more than 1000 retail outlets and over 15 billion UAH in revenue (2022 data), EVA is in a league of its own—far ahead of Prostor and Watsons in both revenue and number of stores.

Shostak's goal is to also become number one in online sales, where MakeUp has been the undisputed leader in recent years. The gap is narrowing. "EVA is a strong player. Even at the beginning of full-scale invasion, the team did not stop advertising activities for a day and continued to work on the online store. As a result, they increased their market share online," says Alexander Kolb, founder of Promodo.

In terms of traffic, EVA almost catches up with MakeUp: in January 2024, Shostak's online store had 25.3 million visitors, compared to 26.65 million for the competitor, according to SimilarWeb data. In terms of revenue, the difference is more significant: EVA's online channel accounts for 10% of sales, totaling 2.36 billion UAH in 2023. Forbes estimates MakeUp's sales in Ukraine are 30% higher.

Varus—a chain of grocery supermarkets—follows a less glamorous path. By the number of stores, the retailer has consistently ranked in the second tier among Ukrainian networks, but in terms of revenue, it has been in fifth place in recent years, behind leaders ATB, Fozzy, METRO, and Novus (data from shareuapotential.com).

Varus is a classic supermarket format, explains Igor Huglia, CEO of GT Partners consulting company. Varus primarily developed in eastern Ukraine. Aside from being "unfortunate" in the context of Russian invasion geography, the retailer has other characteristics. "The network is still searching for its uniqueness and individuality," says IDNT CEO Mykola Chumak.

In addition to major retail players, Shostak and Kiptik have founded 15 other joint businesses over two decades. A significant portion is in commercial real estate, with a total area of their shopping malls reaching approximately 200,000 square meters. Among the largest properties are the Lake Plaza shopping centers in Kyiv and "Terra" in Dnipro. Moreover, the partners own "Kraitex-Service," which manufactures household chemicals, and the distribution company "Athena Group." According to Shostak, non-retail business accounts for approximately 20% of their business.

Preparing EVA and Varus for the big war

In the fall of 2021, Shostak came across a documentary about how the Russians completely destroyed the ancient Syrian city of Aleppo. The film's author challenged viewers to consider what would happen to Dnipro if Russians reached the city.

Shostak was deeply affected by what he saw and, unlike the vast majority of Ukrainian businessmen, began to seriously prepare for war. "I had to convince colleagues that this could happen, like Noah once, who everyone thought was crazy," Shostak recalls. "Perhaps my colleagues thought I was crazy too."

"Ruslan Stanislavovych proposed to the company's managers to develop a plan of action if war broke out, even when no one believed it would," says a top manager of Varus, who spoke on condition of anonymity. By November, both networks had begun developing evacuation plans for each store and scenarios for communication loss. They also stocked up on six months' worth of consumables: paper, refrigerant for refrigerators and air conditioners, and more. This supply lasted for the first months of operation until the company established new imports.

Thanks to these preparations, EVA and Varus did not close for a single day. According to YouControl, EVA's revenue in 2022 reached 15.6 billion UAH, which is 1.3 billion less than the pre-war year. Taking into account that the network lost almost 15% of its stores in occupied and front-line territories, this is a commendable result. Financial losses for competitors were more dramatic: Watsons' revenue plummeted 1.6 times.

Varus felt worse in 2022. Despite losing and closing 10% of all stores, the network managed to increase revenue by 6%, to 14.6 billion UAH. However, it operated at a loss—the net loss was 44 million UAH. The network had 102 supermarkets left, ranking 15th in terms of the number of retail outlets among Ukrainian networks, according to GT Partners. This is a smaller number compared to before the full-scale invasion.

In 2023, Varus returned to profitability: over the first three quarters, the network earned 144 million UAH. "Recently [Shostak] gathered us, thanked us for our excellent work, and mentioned that he can confidently leave the business to us while he focuses on charitable activities," shared the aforementioned Varus top manager. At the onset of the major conflict, the businessman evacuated children from orphanages to Turkey. Later, he began supplying pickups to the front. Over two years, his "Hero Car" project delivered approximately 500 vehicles to the military. The total budget for charitable projects amounts to approximately €15 million.

Shostak's Roadmap

Already by the end of 2022, Shostak began expanding his business. Their company "Kraitex-Service," together with Kiptik, won a tender from the Asset Recovery and Management Agency (ARMA) to manage "Vinnytsiapobuthim," one of Ukraine's largest producers of laundry detergents, formerly owned by Russian company "Nevskaya Kosmetika," whose assets were seized and transferred to ARMA.

Based on this enterprise, Shostak plans to create a production hub and manufacture household chemicals and cosmetics for sale in their stores. In July 2023, they successfully launched production, which had been idle for over a year. The total planned investment amount is 400 million UAH. The businessmen aim to participate in the further privatization of the enterprise.

This move strengthens vertical integration within the group, allowing them to sell products from their own production in EVA and Varus stores. In Ukraine, the success of such integration has been demonstrated by retail leaders ATB and Fozzy. The former has its own confectionery factory and meat processing plant, while the latter is involved in fish, canned goods, and confectionery production.

Last year, Shostak initiated two additional projects. The first is the construction of Ukraine's largest network of warehouse facilities totaling 1 million square meters across four regions. "In Ukraine, the supply of Class A and B warehouses does not exceed 3 million square meters. For comparison, Poland has over 30 million square meters," Shostak notes.

The budget for this project is approximately $1 billion, with an expected payback period, according to Shostak, of eight to nine years. Construction of the first phase of the Odessa logistics complex covering 50,000 square meters has already commenced.

The second project involves restructuring the business. At the end of October 2023, the Antimonopoly Committee granted permission to establish the Terwin corporation. It is to oversee all business directions similar to Rinat Akhmetov's SCM. Shostak cites several reasons for transforming the 17 companies employing over 30,000 people.

Firstly, a clear corporate structure aims to enhance business management. Secondly, without a transparent and understandable structure, it will be more challenging to attract Western funds necessary for Shostak's ambitious projects. "Terwin's task is to be the brain center for all businesses and assist shareholders and top managers in making the right decisions," Shostak summarizes.

Amazon's Bezos as a Role Model

Which corporation serves as a benchmark for Shostak? Without hesitation, he names Amazon. He particularly admires the company's internal culture, which consistently delivers exceptional results for Jeff Bezos' brainchild. Currently, Amazon ranks fifth globally with a market capitalization of $1.6 trillion.

However, there's a nuance. Shostak's corporate culture resembles early Amazon more, according to four Forbes sources, including a former Varus manager, consulting company executives, and a headhunting agency partner. For instance, Varus practices unscheduled lie detector tests, and management style is directive, one consultant reveals.

"It's not difficult to lure specialists from Varus: people are willing to work in a more lenient corporate environment," says a headhunting agency partner. He acknowledges, however, that Shostak's managers are quite competent professionally. "Both EVA and Varus employees excel in hard skills, but their soft skills are weaker compared to Aurora's management," notes a consulting company executive. He includes emotional intelligence, creativity, and good communication skills in soft skills.

Personal Challenges and Market Risks

Shostak faces more grounded challenges. One potential issue is legal wrangling over "Vinnytsiapobuthim," which he assumed management of via ARMA. In September 2023, the Kyiv District Administrative Court overturned ARMA's decision to designate Shostak and Kiptik's firm as the contest winner. The lawsuit was filed by a company excluded from participating in the contest.

ARMA contests lack transparency, raising the risk of potential legal challenges that could overturn results, suggests AriO law firm partner Julian Khorunzhii. "If the court declares the contest invalid, no one will refund the invested funds," he adds.

Currently, the claimant has withdrawn the lawsuit. Nevertheless, results of the contest may be contested in commercial court for up to three years from the contest's conclusion, Khorunzhii notes.

A more significant risk is the prolonged conflict. Shostak's new projects require substantial investments. To construct logistics complexes totaling 1 million square meters, he estimates needing over $500 million. "We're in negotiations with several Western companies," he says.

Securing such funding during the hot phase of the war is challenging, believes FinPoint investment company partner Serhiy Budkin. He opines that Shostak may attract no more than $10-15 million from international institutions like EBRD.

Nevertheless, Budkin recognizes Shostak's strategic foresight. "The war won't last forever. And Shostak will be 'first in line' for investment," he muses. "So, assuming the war ends in 2025, it's crucial to proceed with such a large-scale project like 1 million square meters of commercial real estate right now."

But what if it doesn't end by 2025? "Ruslan is a determined optimist," says Biosphere Corporation founder Andriy Zdesenko. He adds that the EVA and Varus founder "has the ability to view everything positively, and that's his superpower."