Cherkizovo Group is the largest producer of meat and fodder in Russia and one of the top three producers of poultry, pork and sausage products. The most well-known brands of the company are Cherkizovskiy, Petelinka, Kurinoe tsarstvo and Mosselprom.
History and turning points
Cherkizovo Group was founded in 2005. Today JSC Cherkizovo is the largest producer of meat and fodder in Russia. High production standards, careful selection of raw materials and components, innovations and technology allows Cherkizovo to create products that satisfy customer needs. The most well-known brands of the company are Cherkizovskiy, Petelinka, Kurinoe tsarstvo and Mosselprom. In 2013 Petelinka brand was recognized with Product of the Year award and new marketing campaigns and branding initiatives significantly increased the share of branded poultry products in sales. Cherkizovo became Russia’s second largest pork producer, increasing its sales of hogs by 50%. As part of a unique project for chilled meat production “Cherkizovo - Express” the company has formed a strong portfolio of brands and implemented production modernization program at Cherkizovsky plant. The construction of feed plant in the Bryansk region, hatchery for 240 million eggs p.a. and grain storage facility of 215 000 tones in the Lipetsk region is now underway. And large-scale projects aimed to double production capacity at the Bryansk and Penza poultry clusters were completed. Due to its vertically integrated structure, which includes agricultural land, grain storage facilities, feed production, livestock breeding, growing and slaughtering as well as meat processing and integrated distribution, Cherkizovo has consistently delivered sustainable revenue and profit growth. In 2013 Cherkizovo’s consolidated revenues exceeded $ 1.6 billion.
Production and major brands
The Group includes 8 full cycle poultry production facilities, with a total capacity of 550,000 tons live weight p.a.; 15 modern pork production facilities with a total capacity of 180,000 tons live weight p.a.; 6 meat processing plants with a total capacity of 160,000 tons p.a.; 7 fodder plants with a total capacity of 1.4 million tons p.a.; grain storage facilities with a total storage capacity exceeding 700,000 tons; and a land bank exceeding 140,000 hectares. In 2013, Cherkizovo produced more than half a million tons of meat products. The company uses the most modern hi-tech equipment. Products manufactured in ecologically clean regions of Penza at company’s won stock-farms are produced on “Cherkizovo - Express” production line. Thanks to portioned plastic trays packaging chilled meat stays fresh for several days. Customers can enjoy a high quality product combined with more than a dozen different marinades, from the new product line. This year, Cherkizovo Group’s flagship brand in the meat processing received an updated name. Now all of the company’s sausage products, hams, delicatessen, vacuum packed chilled meat, and other products of the Cherkizovsky Meat Processing Plant will be called “Cherkizovo”. The logo placed on the products has also been updated. The new Cherkizovo brand will emphasize the link between processed meat products and the company’s agribusinesses, since the Group’s main competitive advantage is making sausages out of meat from its own farms. The slogan “Quality from farm to fork” also underlines this, and it will be the focus of marketing communications. Group controls all the links in the agricultural chain. Cherkizovo grows wheat and corn on its farmlands in Voronezh, Orel and Lipetsk regions, and this grain goes to the company’s own feed mills. Cherkizovo is almost completely self-sufficient in feed, which guarantees biological security of company’s livestock. Group breeds more than 200 million broilers and more than one and half a million pigs every year. This means that company’s meat processing plants receive farm-fresh chilled meat that has undergone strict veterinary control. The new logo of “Cherkizovo” products bears a stylized anagram of Igor Babaev (Chairman) initials - “I.B.” in accordance with centuries-old tradition of Russian manufacturers, who put their name on the product as a guarantee of quality.
Cherkizovo is making significant steps towards becoming the market leader, constantly improving its production efficiency and investing in new projects.The company has acquired LISKO-Broiler, one of the largest poultry producers in Russia. The deal was based on the enterprise value of approximately RUB 5 billion. As a result of the acquisition, Cherkizovo increased its market share by 2 p.p. to 13%, making an important step to the poultry market leadership. Operational land bank of the Grain Division in Voronezh, Lipetsk, Moscow and Orel regions was increased from 40 000 to 58 000 ha. The Group invested in modern high-tech agricultural equipment in order to promote the efficiency of the grain segment and expects a harvest of approximately 250 thousand tons of grain in 2014. Cherkizovsky plant launched a production line “Cherkizovo Express” for semi-finished products production, with a capacity of about 100 tons per day. Cherkizovo Group plans to significantly increase the production of poultry and pork in the Voronezh region, investing about 4 billion rubles. The company intends to build 7 feedlots with a total capacity of more than 35,000 tons of marketable pork per year in Voronezh region in order to expand pork production. Project implementation will enable Cherkizovo Group to triple pork output at regional facilities to more than 50,000 tons of live weight per year. In 2012 Cherkizovo signed an agreement on establishing a joint venture for the production of turkey meat with the Spanish company Grupo Fuertes.The “Tambov Turkey” project is being carried out in the Tambov region, and its successful implementation will allow the company to take the leading position in the market for turkey meat.
Mission and vision
Cherkizovo is committed to being a socially responsible company, which seeks to reduce its impact on the environment and keep good relations with the communities in which it operates. The company also makes considerable efforts to communicate with shareholders, suppliers and employees. Cherkizovo complies with applicable environmental legislation and observe biological and veterinary safety requirements in poultry and pig-farming operations.In a highly competitive market Cherkizovo plans to focus on marketing, brand development and strengthening of sales and logistics, while maintaining high profitability and increasing their goods share in food stores. The company sees its strategic potential in more than 20 thousand employees, working for Cherkizovo Group. The Group’s strategy includes both organic growth and investment in new projects, driving the consolidation of the Russian meat market. Within the last five years alone, Cherkizovo has invested more than USD 1 billion into the development of Russia’s agriculture sector. Thanks to business diversification strategy, which proves to be effective year to year, the company was able to achieve success and gain customer trust providing the highest quality products.
Achievements and plans
The Cherkizovo Group products released under the Petelinka brand won two gold medals in the “Product of the Year” category at the international exhibition World Food Moscow 2013, while Petelino Trading House exhibit took first place out of 1600 participants as “Debut of the Year 2013”. The secret of Petelinka’s golden victories is the freshness of its natural products, its professional team of poultry farmers, and its policy of continuous monitoring for quality at all production stages. Production is based in an environmentally pristine area of the Moscow region, and the products spend a minimal amount of time en route from farms to store counters in order to remain fresh and tasty. The company carefully analyzes the state of the meat market, to be able to take advantage of growing sectors and promising niches. One of these niches is a fast growing market for turkey meat. Turkey consumption in Russia is still very low; the whole market is worth a little more than 100 thousand tons. Furthermore, due to the high nutritional value turkey meat can be used in the production of sausages. Dynamic development strategy of the company is producing positive results. On a reported currency basis sales for 1H14 increased by 12% to $872.3 million (1H13: $779.6 million). Gross profit increased by 69% to $255.1 million (1H13: $150.6 million). Gross margin rose from 19% to 29% in six months. Cherkizovo plans to further develop its brands and strengthen logistics, as well as expanding into new markets. The company’s strategy also envisages the creation of new enterpises by using the most modern high-tech equipment.