Cargill chicken plant sale presages shift to value-add focus in Russia

Country director Oleg Klein says opportunities in Russian agriculture remain for foreign investors engaged in constructive dialogue with the national government.

Cargill’s July sale of a chicken processing facility in Russia reflects a wider shift of focus in what remains a key market for the company, according to the director of its local operations.

Oleg Klein, Cargill’s country director for Russia, told Agri Investor in an email the decision to sell Cargill’s facility in the town of Efremov, 240 miles south-east of Moscow, came after an analysis found other businesses within the country would bring more value to shareholders.

“Russia is an important market for Cargill,” wrote Klein. “Private investors – including foreign ones – remain of importance to the Russian government. Investors in agriculture and processing are welcome and they enjoy open and constructive dialogue with the government.”

Klein explained that over recent years, food security concerns led to a strong focus on agriculture, food processing and import substitution on the part of the national government. With initial targets of that effort mostly achieved, according to Klein, governmental focus within the sector has shifted more recently toward supporting further development of agricultural exports.

Resulting support programs, Klein added, have included low-interest loans, partial compensation of costs related to construction and modernization of industrial facilities and assistance in entering new markets.

“Indeed, these developments are good for the industry overall and Cargill businesses in Russia in particular,” Klein added.

“Here to stay”

In mid-July, Moscow Stock Exchange-traded meat producer Cherkizovo Group announced it had acquired Cargill’s Efremov chicken processing facility for an undisclosed price.

Cherkizovo Group chief executive Sergey Mikhailov said in a mid-July statement: “This acquisition fits well with our strategic plans to increase our share of value-added products and broaden our presence with foodservice clientele, transforming this channel into a significant revenue stream for the company.”

Cargill opened the facility in 2013, describing it then as a $40 million addition to its industrial complex in Efremov that would be predominantly used to supply chicken products to McDonald’s restaurants in Russia.

Klein explained that when Cargill entered the Russian market in 1995, it became the majority stakeholder of a corn-milling plant in Efremov that was unproductive and did not meet international safety standards. After a $10 million investment in advanced technologies, that plant’s intake of wheat and corn rose to the level of similar operations in western countries, according to Cargill.

The years since, he added, have seen more than $600 million in subsequent investments at the industrial site in Efremov – including the expansion of wheat processing, oils refinery and feed milling equipment, among others – to create what is today a high-tech industrial site capable of producing a wide range of specialty fats, oils, feeds and starches.

“Cargill is here to stay and we will keep investing for the long term,” Klein wrote.