Neva Milk will invest 1 billion rubles in a newly purchased plant of LLC Kursk Moloko
As the owner of GC Neva Milk Albert Sufiyarov told RBC Petersburg, in August, Neva Milk purchased LLC Kursk Moloko, owned by the Ukrainian dairy producer Milkiland, for 217 million rubles. The plant processed 150-170 tons of milk per day and produced 300-400 tons of cheese per month. ‘We plan to invest 1 billion rubles in expanding and automating production through a VTB loan. As a result, the cost of production should decrease by 10-15%, and the volume of cheese produced should double,’ explained Albert Sufiyarov, adding that he expects to recoup the investment in 5 years.
At the acquired factory, the St. Petersburg entrepreneur plans to produce semi-hard cheeses under his brands "Gold of Europe", "City of cheese" and "Thousand lakes" (medium, economy and premium price segments, respectively). In general, the company produces 60% of cheese in the middle and middle+ price segments and 40% — in the low. ‘In the middle price segment, the marginality of the business is higher, and our current task is to increase or at least maintain existing positions,’ said Albert Sufiyarov.
According to the entrepreneur, currently the situation in the retail cheese market is difficult, competition for the buyer is escalating — and manufacturers are investing in prices by conducting various promotional activities. ‘In March, our sales exceeded the monthly average almost twice. However, in April-June, they fell by 20-25% from the monthly average. And we expect that in terms of sales this year will be equal to last year,’ says Albert Sufiyarov.
The entrepreneur said that his company has been monitoring the level of sales of cheese at promotional prices for several years. Moreover, if in 2016-2017, 40% of cheese was sold in retail chains by promo, in 2020 — already 75%. ‘The average Russian buys cheese once or twice a week. Thus, it turns out that 75% of the volume of purchased cheese is purchased by households during the promotional activity. This means that people are looking for cheaper products. They become more calculating,’ says Albert Sufiyarov. Despite the drop in household income, the entrepreneur is confident that the consumption of cheese in the middle price segment will not fall.
Currently, according to the analytical center The DairyNews, there are more than a thousand enterprises producing cheese in Russia. More than a hundred of them are large manufacturers, which include Wimm-Bill-Dann, Molvest, Hochland, PIR, Neva Milk, Dominant, etc.
‘The cheese market is highly fragmented, so in the near future we are waiting for serious changes - consolidation. Companies that failed to build a strong brand, cost-effective production, and good communication with consumers will leave,’ says Artem Belov, General Director of the National Union of milk producers.
Albert Sufiyarov agrees with him, noting that today about two or three dozen small cheese factories are operating at zero profitability and may not survive the next year.
Mikhail Mishchenko, Director of the analytical center The DairyNews, believes that the roots of the problem lie in 2014, when the "import substitution stage" came and everyone rushed to invest in the production of cheese, including cheap ones. However, not everyone did it, the expert notes. As a result, today there is an overproduction of cheese in Russia, some enterprises have already closed, and small players who produced cheap cheese or cheese products will continue to leave the market. According to the expert, demand for such products is falling in Russia today, because consumers ' attitude to cheese is changing. ‘Today, this product is treated as a delicacy that is bought, for example, to wine. And people who have a limited budget do not buy cheese at all,’ says Mikhail Mishchenko.
St. Petersburg entrepreneur Alexey Feliksov (owner of the jewelry retail chain 585.Gold), which on the wave of import substitution invested in a small cheese factory Medovoye in Leningrad region agrees with the fact that the consumer has become more attentive to the quality of the product. However, he does not agree that small players are doomed to fail in the current conditions. ‘Those who do not have alternative sources of funds are dying today. Cost optimization also plays a significant role, including the status of the production site - ownership or lease. Since profitability in this business is in a very narrow corridor, every penny is important. I now have it in a small plus, but for me, the first place is the observance of good quality. I will gradually develop and now I am looking for another platform, as the current one cannot cope with the volume. I looked at several cheese factories for purchase, all of them are unprofitable, and the price is too high, so I haven't found a suitable option yet,’ says Alexey Feliksov.
Nevertheless, the cheese market is one of the most promising in the dairy segment of Russia, analysts say. ‘In the next three or four years, the volume of planned investment projects will amount to about 200 thousand tons, which is a third of the cheese produced in the country today,’ says Artem Belov. - Investors are actively entering this segment, counting on the growth of consumption and import substitution. In addition, in the future, the focus is on exports.’
According to The DairyNews, by the results of 2019, 278 thousand tons of cheese were imported to Russia (excluding processed cheeses), of which 86% were imported from Belarus. 503 thousand tons of cheese and 190 thousand tons of cheese product were produced in Russia.
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