CHERKIZOVO GROUP – A healthy appetite

September 4, 2018

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TIME: CHERKIZOVO GROUP – A healthy appetite

Russians like to eat meat, and with total consumption last year back to the levels they enjoyed before the financial crisis of 2014, it’s a safe bet that the animal-based food products gracing Russian dinner tables were produced in one way or another by the Cherkizovo Group.

The largest producer of meat products and mixed fodder in the country, the Group has seen sales grow in line with, and even outstrip, meat’s resurgent popularity, with revenues up 10% in 2017 to just under $1.45 billion. Even more encouragingly, Cherkizovo’s EBIDTA was up 50% over the same period. Things look set to get even better for the Group. In May of this year, Cherkizovo opened a $100 million meat processing plant in Kashira. Situated about 60 miles south of Moscow and with a daily capacity of 80 tons, the plant is the first dry sausage facility of its kind and signals the Group’s determination to expand its foothold in the Russian capital.

“The facility is unique in that it is fully automated and will give us more quality and reliability,” says Sergey Mikhailov, Cherkizovo’s CEO.

The opening of the Kashira plant is another significant step on a journey that has seen the Cherkizovo Group become a key player in the Russian agribusiness and food production industries. That journey began in 1974 in northeast Moscow with the Cherkizovsky Meat Processing Plant (ChMPZ).

“Given the size of the country, it is kind of ironic that up to 10 years ago Russia was one of the world’s biggest importers of agricultural products,” says Mikhailov. “But over the past decade, we have become much more self-sufficient. It is a process that has accelerated hugely since 2015 when we were put in the position that we simply had to produce more meat for ourselves.”

Cherkizovo has been at the forefront of this turnaround and is the secondlargest poultry and second-largest pork producer in the country. Its eight clusters of poultry farms have a total annual capacity of 600,000 tons, and the Group controls the entire cycle, from feed production and incubation to slaughter and processing.

IN RECENT YEARS, THE COMPANY HAS GROWN THROUGH THE ACQUISITION OF THE VORONEZH-BASED LISKO BROILER ENTERPRISE AND THE ESTABLISHMENT OF THE TAMBOVSKAYA TURKEY JOINT VENTURE WITH SPAIN’S GRUPO FUERTES, ONE OF EUROPE’S LARGEST TURKEY PRODUCERS.

The JV with Grupo Fuertes benefits from a combination of West European experience in poultry breeding and Cherkizovo’s proven expertise in the successful implementation of major investment projects.

While the Russian appetite for all kinds of food products has been on an upward curve since around 2000, the amount of pork the average Russian citizen eats annually doubled to almost 55 pounds by 2016— and was projected to grow a further 5% by the end of last year. Having only moved into pig farming in 2010 with the purchase of farms in Lipetsk and Penza (both to the south of Moscow), Cherkizovo’s 15 farms now bring some 2 million pigs to market each year.

Although a series of acquisitions has helped the Group achieve this meteoric growth, investment has made a significant contribution too. More than $2 billion of modernization work over the last 12 years has been undertaken in a bid to ensure that the Group’s production facilities are as good, if not better, than anywhere else in the world. Meanwhile, the company’s commitment to the health and safety of the animals is underscored by its policy of hiring the best vets available. In 2012, Cherkizovo bought a selection-genetic complex near Voronezh, giving it the capacity to rear purebred Yorkshire, Lancashire and other large white breeds.

Russians are particularly partial to sausage, and the Group has invested heavily to make sure it can provide the market with quality goods in sufficient quantity to meet the demand. In concert with the Cherkizovo Group’s three other facilities, ChMPZ daily produces several hundred tons of sausages, sausage meat, ham, kebabs and many semi-finished products. Their products are on prominent display in Russia’s major supermarket chains, including Auchan, Metro, Pyaterochka and Perekrestok.

With the Group now increasingly involved in crop production (it currently owns a grain land bank of approximately 280,000 hecta res, enabling the company to supply half its grain needs), Cherkizovo is committed to adding value to the Russian food chain at every step of the way.