Moscow-based Cherkizovo Group recorded sales of US$1,472 million last year. The company is a leading vertically integrated, agroindustrial business, with operations ranging from feed production and breeding to meat production and distribution. It is the largest overall meat producer in Russia, and has its sights set on also holding this position in the poultry sector.

Its poultry division, which holds 10 percent of the local market, consists of seven production and processing facilities, two feed production plants and associated sales and trading operations. The division saw sales increase by 38 percent in 2011 to reach US$691.5 million. Profits rose by 10 percent to stand at US$160.4 million. By volume, output rose by 34 percent to stand at 260,000 tons of sellable product. The division is thought to have the second-largest market share for poultry meat in Russia.

Growing with the market  

The division operates in a growing market. Overall, per capita meat consumption in Russia currently stands at 23 kg per annum; by 2015, this is expected to reach 30 kg per annum. According to the Russian National Meat Association, the share of poultry meat in this total consumption is forecast to reach 45 percent by 2020, up from today’s level of 35 percent. Growth will primarily be driven by greater affordability.

Largest incubation facility in Russia  

In 2010, Cherkizovo announced significant expansion plans and the aim of raising its market share from 9 percent to 30 percent. This is being achieved both through organic growth and acquisitions.

Sergey Mikhailov, CEO of Cherkizovo, explains: “The Russian poultry market is changing and undergoing a process of consolidation, which means that small-scale poultry complexes with capacities of less than 700,000 tons per year will no longer be competitive. Until recently, up to 50 percent of poultry meat was produced at small poultry farms, with a capacity of less than 25,000 tons per year.”

In response to this changing environment, the largest incubation facility in Russia was launched by Cherkizovo at the end of 2011 at its Penza cluster. The site has an annual capacity of 105 million eggs and a modern slaughtering facility for 8,000 birds per hour. In April this year, the company announced the opening of new bird houses at the cluster, comprising 21 additional houses at the Penza Vostochnaya facility.

Previously, this facility consisted of four bird houses with a capacity of 246,000 broilers, but with the new houses, capacity increases to 1 million head. The total investment in constructing these additional bird houses was US$18 million.

In 2011, production capacity at the Penza cluster was 83,000 tons of live weight poultry meat. Once the project is complete next year, this will increase to 140,000 tons.

Major capacity increase  

The company has also started work on a large-scale facility for the production and processing of poultry meat near the city of Elets, in the Lipetsk region. Total investment in this project is expected to total US$600 million.

Completion will result in a major increase in capacity and take its market share up to 20-24 percent. Once up and running, planned for 2014, the plant will produce 125,000 tons of poultry meat annually.

These are not the only initiatives under the expansion project. In May this year, Cherkizovo announced that it had successfully launched the first line of the breeding facility Pervomaiskaya in the Bryansk region.

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The first line of the new poultry breeding facility consists of 28 bird houses, with a combined capacity of almost 1 million broilers. A second line, comprising another 28 bird houses was due to come on-line in August this year. Once complete, annual capacity will be 2 million broilers or 26,000 tons live weight. Total investment made constructing the first and second lines at the facility is approximately US$30 million.

In addition to the above, the Bryansk capacity increase project has also resulted in the construction of 11 additional bird houses at the existing poultry breeding facilities and an incubation facility with 43 million eggs. In 2011, capacity at the Bryansk poultry cluster was in excess of 55,000 tons of live weight poultry. As a result of all the newly-constructed facilities, capacity will increase to 71,000 tons of live weight.

Commenting on the various expansion projects, a Cherkizovo representative said: “Successful implementation of the planned investment projects will help Cherkizovo to significantly increase its production capacities and strengthen its competitive advantage.

“Already in 2015, we are going to reach the level of about 470,000 tons of poultry meat per year to become the absolute leader in the Russian poultry market.”

Acquisition  

Cherkizovo has not only been investing in new plant. In 2011, the company purchased Mosselprom – a diversified vertically integrated agroindustrial group producing poultry, pork, feed and grain. The company held 2 percent of the Russian market and represented an investment for Cherkizovo of US$100 million. Not only did the purchase add one of country’s best known brands to Cherkizovo portfolio, but additionally allowed the company to strengthen its position in the lucrative Moscow region.

Turkey meat  

In May this year, the company announced the launch of a turkey meat production joint venture with Spain’s Grupo Fuertes. A new plant, due to be operational in 2014, will be built in the Tambov region of Russia, with more than Euro 100 million invested in the development.

The complex will be built on a 5,000 hectare site and will reach full capacity in 2015, with an expected production of 25-30,000 tons of turkey meat but with the possibility to reach 50,000 tons in the medium term. Once achieved, the company would become the market leader in the turkey market.

Mikhailov commented: “By launching this new project with Grupo Fuertes, we will further strengthen our leading positions and provide customers with a high quality and healthy meat product.

“Consumption of turkey has shown significant growth in Russia and we expect to soon be among the largest turkey suppliers in the country.”