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| Home > News & events > 2006 feature stories > Yug Rusi builds Russian farm economy | ||||||||||
Yug Rusi builds Russian farm economy |
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As planes landing at Rostov airport in the hot September sun come in low over the majestic Don River, they cross fields of wheat, corn and sunflowers stretching out to the horizon. It’s clear from the air that south-western Russia has become a world centre for agribusiness on par with the big farming belts of the United States, France, western Canada, Brazil and Argentina. The company largely responsible for bringing the region up to these international levels, and in some areas surpassing them, is Yug Rusi, founded in 1993 by local entrepreneur and economist Sergei Kislov. When he started in agribusiness he understood quickly that the money is less in simply growing the grain than it is in trading, processing and using it to make higher-end food products. Thus Yug Rusi has 10,000 employees busy at every link in the food chain, from the seed in the ground to the bread and oil on the table. In fact the company runs the biggest oil crushing plant in all of Europe. Yug Rusi procures over a million tonnes of sunflower seeds a year and crushes much of it. The company accounts for 80 per cent of southern Russia’s edible oils market and one-quarter of that market nationally. Its products (especially the Zolotaya Semechka line) are found in most Russian homes, as well as in other parts of the Commonwealth of Independent States and Turkey, among others. Last year’s sales totalled $425 million. Now Yug Rusi has borrowed €146.5 million from the EBRD so it can continue developing its operations on the banks of the sleepy Don. Huge operation Igor Naidyonov, one of the company’s deputy directors, walks proudly round the gleaming plant, tutting at the engorged pigeons who sit motionless, sated with grain, on the extensive lawns. “When I look at the production line, I imagine all those people all over the world standing by their stoves and picking up bottles of our oil. I wonder where that box there is going?” he ponders as the conveyor belt rolls past him, a whirring machine pasting labels on to the packaging. The plant is certainly vast, the sun glancing off shining steel storage elevators (the company owns 12) that tower over the grain crushing and processing units. Below, colossal VolgaDon haulage vessels sail in from the blue river to unload at a rate of 700 tonnes an hour. This impressive site, one of the largest river-based grain terminals in Russia, was acquired by Yug Rusi in 1996 and developed to process 3,300 tonnes of seed a day and 3,000 tonnes of soya beans. The bottling operation was added in 2000. “It’s all in house,” says Mr Naidyonov. At the Yug Rusi head office in pretty downtown Rostov, Chief Financial Officer Nelly Subbotina sits at her desk in front Van Gogh’s famous sunflower painting. “Not the original, unfortunately,” she laughs. The wall clock is also a sunflower and posters of Yug Rusi’s instantly-recognisable packaging are everywhere. “In the beginning we were exporting sunflower seeds and importing sunflower oil, so it seemed ridiculous not to produce the sunflower oil ourselves. Now we’re exporting the oil too,” says Ms Subbotina. Buying from local farmers A huge boost to local agriculture, Yug Rusi is supplied by the 200 local farms that were able to meet the company’s exacting quality standards. “We use local suppliers, of course, because it’s cheaper not to have to transport the seeds and grain too far,” she explains. They also lease 200,000 hectares of local land which they farm themselves, generating six per cent of their sunflower needs and half their grain for flour and bread. Part of the EBRD loan is being used to grow some sunflowers organically for the domestic and international markets, and for new and bigger grain storage facilities and transport. Ms Subbotina says that qualifying for an EBRD loan, while not easy, brings extra rewards. “We could have borrowed the money from any bank, but if we take it from the EBRD everyone can see immediately that we are transparent and working to European standards.” And compared to loan terms available from Russian banks, the EBRD “gives us three to four years longer to pay it back.” “Yug Rusi occupies the leading position in the bottled edible oil market and our loan will help boost the local economy by acquiring raw materials from local farmers,” says EBRD Agribusiness Banking Director Gilles Mettetal. Consumption still low Yug Rusi expects sales to increase further, especially domestically, as households slowly switch from animal fats and margarines to healthier vegetable oils. At the moment, edible oil consumption here is just 13 kilograms a year per person, markedly lower than the 25 kilograms of the US and EU, so there is obvious room for considerably increased profits. Yug Rusi has also cornered the bread market in the Rostov region in recent years with four bakeries supplying over 80 per cent of the bread consumed here. Standing amidst the bright new ovens and production lines, Olga Efremova, a Yug Rusi communications director, leans over to smell the dough rising in a large steel vat and sighs with pleasure. “My children like the fruit pastries,” she says, waving her hand towards product after product laid out on the table. Fruit and nut breads, cakes, buns, wholemeal, rye, baguettes, round loaves, biscuits, cheese puffs and all kinds of other delicacies are pored over by bakery workers as they point out their favourites and all of them, it seems, taking pride in what they’ve produced.
By Anna Blundy, EBRD Communications Consultant
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