Russian broiler production is expected to continue growing in 2017, albeit at a lower rate than in previous years, and those companies best able to cope with poorer market conditions will be Russia’s top poultry companies.
Growth in Russia’s broiler meat output has averaged 14 percent per annum since the start of the century, but has slowed over recent years. For 2017, production is expected to rise by only 0.5 percent to reach 3.777 million metric tons.
Market expansion will be weak this year will for a number of reasons, reports the USDA. Factors contributing to expected sluggish performance include Russia being almost self-sufficient in poultry meat and the difficulties for poultry producers in accessing credit.
In this less than favorable scenario it will be Russia’s largest poultry companies that are able to reap the most benefits.
Russia’s poultry industry is being squeezed from both sides. Plentiful chicken meat supply means that prices are low. Alongside low prices, operational costs have increased and accessing credit become more difficult. The result is that margins have decreased.
Benefits of scale
Larger-scale companies are better able to cope with reduced margins. Many, are thought to have seen profitability decrease last year, but to have nevertheless achieved an increase in sales.
Not all companies, however, were so lucky. A number of smaller businesses ran into financial difficulties and were put up for sale. Yet their debt, combined with the cost of integrating their businesses, meant that, in many cases, buyers could not be found.
The leading broiler producers in Russia have preferred to optimize their existing businesses rather than purchase smaller competitors.
Reports suggest that they have concentrated on raising flock performance and productivity per square meter of floor space, rather than grow through acquisition. For 2017, a similar path is expected to be taken. There will be little or no construction of farms or expansion of commercial farms, rather the key players will concentrate of producing more efficiently and their scale gives them more resources to invest.
Attracting investment
Russia’s top poultry companies enjoy not only economy of scale, but where finance is concerned, they also represent a more secure investment than smaller more vulnerable competitors
Over the last couple of decades, the Russian poultry industry has attracted significant government support, however, with the country now close to self-sufficiency, the authorities are reconsidering their priorities.
Credit generally in Russia is difficult to access, but where government support may be forthcoming is for those companies operating to international standards and able to access export markets.
Despite a difficult operating environment, Russia’s largest poultry companies are able to continue expanding and gaining market share, but this will be at the expense of the country’s smaller producers.
Russia's largest broiler producers:
Click on each company name to learn more about Russia’s leading broiler producers in WATT Global Media’s Top Poultry Companies database:
Slaughtering 250 million head annually, Prioskolye is thought to be Russia’s largest broiler company with a 14 percent market share.
The company has 16 broiler complexes, four primary processing plants able to process 48,500 broilers per hour, and a hatchery with an annual capacity of 210 million broiler chicks.
In addition to being Russia’s largest producer, Prioskolye is also Russia’s largest egg producer.
Processing 230 million birds each year, Cherkizovo Group is the second largest broiler producer in Russia with a 12 percent market share.
The company operates eight poultry production facilities with a total capacity of of 580,000 metric tons live weight.
Like most companies, Cherkizovo has been feeling the effects of the difficult home market. Its sales may be rising, but profitability is down. The company has been looking to export, and in November 2016, one of its facilities was approved by the European Union for export.
Third in the ranking of Russia’s top poultry companies is Severnaya, slaughtering 197 million birds per annum and with a 5 percent market share.
In late 2015, Thailand’s Charoen Pokphand Foods Public Co Ltd. (CP Foods) initiated acquisition proceedings to buy 80 percent of Severnaya and sister breeding company Woyskovitsy, from Agro Invest Brinky BV. CP Foods is expected to finalize purchase of the remaining 20 percent of the company in 2018.
With a throughput of 150 million broilers per annum Bezrk-Belgrankorm is not only a major poultry producer but one of Russia’s largest integrated agricultural companies. It produced 281,000 metric tons live weight of chicken meat in 2015.
GAP Resurs slaughtered 135 million broilers in 2015, producing 300,000 metric tones (live weight) of broiler meat.
The company has 10 breeder farms and 22 broiler farms. A new processing facility, with a total capacity of 150,000 tons was slated to open in 2016. The same yar, GAP Resurs opened a new hatchery able to hatch 105 million eggs annually.
Occupying sixth position, Akashevskaya slaughters 57 million head annually. Also known as Akashevo, the company was the first in Russia to be approved for halal exports. Investments over recent years have included a 4 million chick hatchery.
Chelny Broiler slaughters 56 million broilers each year. In addition to producing chicken meat, the company also owns retail outlets operating under the same name.
Last year, it opened a new processing plant and gained halal certification. It has already started exporting to Bahrain.
Slaughtering 50 million birds annually, Balaya Ptitsa is a conglomerate of 22 companies operating 40 production facilities, including one of the largest hatcheries in Europe. Recent investments have included a new feed mill.
