KOSAROM's founder: "We aim for a production of 600,000 pigs a year"
For 2018, you announced investments reaching 28 million euros. What are the projects you are developing and at what stage are they by now?
One of the projects, worth 8 million euros, is targeting the building of an integrated farming system at the Suinprod Roman facility in which we will have 1,500 sows and piglets to be raised until they reach the optimal weight for slaughter.
This project will become operational in May and it will stand for an increase in production capacity from 100,000 to 142,000 head.We have a similar project which is to be built by 2020 with a reproduction area for 4,000 sows, weaners and the fattening area where we will produce annually 110,000 pigs for slaughter. It represents an investment of 19,5 million euros which will be covered by 20-30% from internal financial resources and the rest will come from the banks. The banks are financing this kind of projects due to the fact that this integrated system is considered to be on top of the farming industry and the technical and economic performance are high.
By 2020, Suinprod Roman will have an annual production of 252,000 head. Regarding the genetics, at Suinprod we use imported semen from the best breeding lines and we also have a reserve of semen collected in the core farm.
How important are these investments for KOSAROM Group?
After these projects will become operational, we will be able to operate the slaughterhouse at full capacity. We also have an integrated production system which allows us to buy grain and soy, to deposit them and then process it in our feeding facilities.
Furthermore, we have genetic farms where we produce hybrid sows and farms where we produce hogs for slaughter. The system includes the transportation to the slaughterhouse in Pascani; slaughtering, cutting; processing; storage and distribution to our own stores, retail, modern commerce and intracommunity trade. The system gives us a great advantage in terms of traceability, from feed acquisition to the supermarket shelves.
You had a visit from a potential partner from China who is willing to invest in your business. In what stage is the negotiation process?
We agreed on a project that is meant to develop on medium and long-term and is targeting the development of the pork industry in the Northeast region of Romania. This area has a great potential for grain and soy production. Here we have a good University in Iasi and we also have a workforce in the area.
We negotiate bigger production by creating new pig and chicken farms in all the area. In this way, farmers who are growing grains and soy will benefit by eliminating the need to store their products. This kind of project will create added value on different segments: agriculture, zootechnical, food industry and it will have a social and economic effect by creating new jobs and reducing the need of pork and poultry imports.
Besides that, we can count on exporting our products and rebalance our country's trade deficit. In the first phase, we can produce more than 600,000 pigs annually, doubling our capacities on production, slaughtering, freezing and storage.
We can also open our export gates to China thanks to this partnership. In 4-5 years, the whole pig production potential in this region could be developed to reach 6-7 million head annually.
What is the export ratio in your production? Do you count on it to expand your business?
20% of Kosarom's products are exported. Last year, we had a 22% growth on trade inside EU's single market and we intend to reach a level of 25% exported products by adding new products in our portfolio, opening new markets and entering private labels system.
The export market has the biggest growth expected for 2018 vs 2017. This market requires seriousness, a good quality of products and safety that can be proven and guaranteed.
Until now, we didn't encounter any obstacles for KOSAROM's meat products abroad and as long as the company is compliant with international requests in terms of traceability and other standards, like lab analysis, labeling, packaging and logistic forms, we don't expect to hit any barriers.
Being present in the EU's single market is not by chance. We had support from our retail partners that sell our products in Germany, UK, Spain and Italy. For this year, we hope to access the Belgian and the Netherlands markets.
How was the start on the German market and how do you list in their supermarkets?
Our company is present on the German market for five years now, and we deliver products every week. We were the first Romanian meat processor to have all of its products accepted and listed. That took about a year and a half of hard work in order to offer details on every ingredient present in the 25 products that we sell in Germany. We have products in a few hundred Mix Markt stores all over Germany.
This partnership has brought us another contract with a big retailer in Germany and we already have 3 products listed in their stores. At their 20th anniversary, we were invited to present a bigger range of products to another retail company from Germany. For us, it was an honor and a sign of appreciation for the quality of KOSAROM products.
How do you respond to the changes in the meat industry segment?
The price will dictate the willingness to buy a product, followed by quality and proximity. We invest continuously in our products, in making them better. In 2017, KOSAROM launched a transparent label in order to respond to a trend met with the consumers. We don't use monoglutamate, soy protein, MDM, starch, gluten in our products. The E-free range of products was launched at Anuga Food last year. We also intend to inform the public about the benefits of a healthy meat consumption.
Which are the products that sell best?
That depends on every market. As a main asset we have the natural flavor of KOSAROM's products that are appreciated by both internal and external clients. We use only good quality meat, spices that are carefully selected and high technology in processing. In fact, we try to sell the product, not the label. We were in this business well before 1989 and for our clients, KOSAROM's brand stands for a premium product.
What are your internal channels of distribution?
We have 24 stores of our own and we also sell in traditional groceries by a radius of 250 km. In the rest of the country, our products can be found on the shelves of every big retailer. In the traditional retail system, we choose to address the consumers in the area in order to eliminate any logistic and expedition impediments and to make it more efficient. Shipping on a long distance increases the costs on fuel, vehicles, personnel, maintenance. We also want a quick delivery system in order to serve our customer with fresh products.
Do you have any new plans in the poultry segment of your business?
In 2016, at the AviTop facility, we expanded the production area for poultry with 30% and we also want to reach a level of 5,000 chicken head/ hour in the slaughterhouse by 2020.
The slaughterhouse is built in order to allow an increase in operation every time we expand our production capacity.
How do you see the pork industry in Romania at this point?
In order to cover the internal demand, we have to double the national herd to 10 million pigs. Still, we have to be open-minded and to accept the imports as a part of the free and competitive market. It is good to have competition. Still, countries like Germany, The Netherlands or Denmark will have to limit their pig production due to environmental issues.
We propose that they come to invest in Romania, to become partners. We don't have a problem with soil contamination, only with its texture. Romania is part of Europe and this thing should not remain only on paper. It should lead to the development of programs on Agricultural and Food Industry from European Commision. We need a real brotherhood in developing that sort of projects. From our point of view, any imports that are made according to the law do not affect us.
There was a big volatility for the last two years. How did the industry respond to that?
Prices will always go up and down. Our job is to manage the situation and to see a pattern in these fluctuations. Grain prices, for example, don't vary that much. Only in time of crises, you could see speculators buying on futures market and that could lead to an increase. Maybe then we can talk about an increase in prices for meat and poultry.
How was 2017, financially speaking, for your company?
At the end of 2017, KOSAROM registered a turnover of 165.7 million RON (35.55 million euros), Suinprod Roman reported a turnover of 63 million RON (13.2 million euros) and AviTop registered 68 million RON (14.59 million euros). In total, the Group registered 296.7 million RON (63.66 euros). For this year we expect a growth in turnover of 12%.
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