Produkti Pitania invests in meeting western poultry standards
million on bringing its production up to western standards amid
growing demand from consumers. But, asks Angela Drujinina,
how will it get over the problem of improving the quality of the
chickens it processes?
Produkti Pitania, best known for its Zolotoi Petushok and Domashniaia Skazka brands, is one of Russia's biggest suppliers of frozen poultry products, but clearly has no plans to rest on its laurel. The $50 million loan, from the European Bank for Reconstruction and Development and a consortium of Russian banks, will help the company install new production lines and invest in new processing technology, but this is only part of the story.
According to the company, its expansion plans are being hampered by the fact the Russian chickens are simply too small to meet its current requirements (consumers prefer larger birds because they look and cook better).
Stefano Vlakhovich, president of Produkti Pitania, said that a further $200 million investment was needed "in order to start breeding chickens in sufficient quantity that meet the standards of Produkti Pitania" and that"so far, nobody in Russia is moving towards that goal, but we are hoping to solve the problem ourselves in the near future".
Russian chickens are smaller than those in the west mainly because of the very poor quality of chicken feed there, and it is likely that Produkti Pitania will invest much of the $200 million in rectifying this situation. Some cynical observers have suggested an alternative solution - a short-cut involving the use of artificial steroids to increase bird size - but there is currently no indication that the company has contemplated this possibility.
Whatever it spends the money on, Produkti Pitania clearly wants to get ahead of its competitors as quickly as possible. With the opening of the company's fourth production facility in the Kaliningrad district earlier this summer, the company has now increased its daily capacity from 350 tons to 680 tons, putting it on a par with most of its main rivals, and the $50 million investment in the three older plants will increase capacity even further, to around 820 tons a day.
But Produkti Pitania's growth plans are likely to have wider implications for the rest of the meat industry, according to Musheg Mamikoyan, president of the Meat Union of Russia. "The five biggest Russian manufacturers of frozen meat products currently produce about 700 tons a day, but with the market for frozen poultry products already saturated, growth is likely to come from only one area - diversification into other niches such as chilled products."
He continued: "If Produkti Pitania manages to get ahead of its competitors in those niche markets as well, then the company will control around 30-40 per cent of Russia's processed meat market - more than twice the share of any company at the current time."
But Mamikoyan said he did not expect any overnight change, with the sheer scale of the investment announced by Produkti Pitania suggesting that growth will be slow and painful. "In my opinion, companies with that size share of the market are unlikely to emerge any time soon,"he said.
