Continuing to work through this piece by analyst Mikhail Kuvyrko. We left off detailing all the good news and positive indicators which Russian agriculture achieved in the Calendar Year 2019. Next we have to work through those issues which my boss would delicately deem as “opportunities for improvement” !
As early as 2018 some signs of trouble in the Russian Agro-Industiral Complex (АПК), involving a series of bankrupties of various enterprises. The most glaring example from this series, being a group of companies called “Evrodon” from the Rostov Oblast. Formerly the biggest hugest company producing turkey meat for the Russian market.
According to their still-existing website, Evrodon (Eurodon) was established in 2003 to produce various products, of which the flagship product was turkey meat. The project was financed by the State Bank For Development and External Enterprise (Внешэкономбанк).
The secret of Eurodon’s success was a mastery of world technologies involving the raising and slaughter of poultry. “A clustered approach to the organization of production, a developed feed basis…. One of the key factors of success involved the development of its own native stock, in addition to commercial stock…”
Evrodon pioneered the industrial-scale slaughter of turkeys within the Russian Federation. Starting from zero, within 10 years they had worked their way up to grab a full quarter of the Russian market for turkey meat. At their peak they produced over 500,000 tons of turkey meat — per day! Also mastering the technology of freezing meat and supplying their customers with high quality meat, not just turkey, but also sausages, hams, and other delicacies. At their peak their agro-complex campus occupied over 1800 hectares of land in the Rostov Oblast.
So, what happened? Apparently a series of problems, including an outbreak of bird flu. Also corporate incompetence, conflicts within management, accumulation of debts, etc. In 2016 Eurodon enjoyed a profit of 8.6 billion rubles, but soon thereafter the problems began. The company was led by a charismatic businessman named Vadim Vaneev, an Ossetian enterpreneur whose genius was to market turkey (an unfamiliar meat to most Russians) as the thing to eat for Easter dinner! Despite his talent, Vaneev proved unable to come up with a plan to restructure the company’s debts and loans. The main creditor was the aforementioned bank, Внешэкономбанк. Who proved unforgiving, and thus the company had to declare bankruptcy.
Still another famous bankruptcy, and this one also involved fowls: “White Bird”, a company that produced broilers (бройлеры) for the Kursk, Belgorod and Rostov oblasts. They too could not satisfy their main creditor, in this case PromSvyazBank.
I had to look up the word “broiler” – we’re talking hens, pretty much, no?
In the year 2019 these series of regional bankruptcies accelerated. All of this explained by analysts working for the Center of Macro-Economic Analysis and Short-Term Prognostication (ЦМАКП). They note that the First Quarter of (Calendar) 2019 was marked by a steady growth of bankruptcies in the agricultural sector. Over 50 of them – per month! In addition to “White Bird” in Kursk, a major bankruptcy involved “South of Siberia” (from the Altai Krai), a company producing oils and lard. And also many others, and these were companies involving billions of rubles. [yalensis – Writer doesn’t mention, but one can also imagine the distress of the laid-off workers and the inconvenience to their families.]
In Q2 of 2019: a new wave of bankruptcies, many of them involving products well known to the Russian consumer. For example, the Saratov Holding, “Sun Products”, a producer of vegetable oils, margarine and mayonnaise. Once again, the main issue was debt to the banking sector.
For five years in a row, the author notes, in the food-producing business, Russia has followed this Darwinian process of squeezing out smaller, ineffective companies, and concentration/monopolization of product around the larger, major players.
Next, we will meet a man named Ilya Berezniuk, who will explain these processes in more detail…
[to be continued]