Cherkizovo finalises the biggest acquisition deal in the Russian poultry industry

By Vladislav Vorotnikov

- Last updated on GMT

Cherkizovo seeks to further strengthen its positions on the domestic meat market
Cherkizovo seeks to further strengthen its positions on the domestic meat market
Russian meat producer Cherkizovo has purchased poultry producer Altai Broiler from major agricultural holding Prioskolie for Rub4.6bn (US$80m).

The deal has been already approved by the Russian Federal Antimonopoly Service (FAS) according to Cherkizovo.

With this deal, Cherkizovo seeks to enter the market of the Siberian federal district of Russia and to further strengthen its positions on the domestic meat market, an official spokesperson for Cherkizovo told GlobalMeatNews.

Siberia is a prospective region for the further development of Cherkizovo, Sergey Mikhailov, general director of Cherkizovo commented. At the moment, the big federal retail chains are developing their business in that part of the country, and Cherkizovo is interested in growing together with them, he explained.

Altai Broiler runs several poultry farms all located in Siberia. The overall designed production capacity of the company is around 67,000 tonnes (t) of poultry production per year.

Speaking on the meeting with the regional governor in Altai Krai on December 4, Igor Babaev, founder of Cherkizovo, disclosed that the company plans to invest additional $20 million into the modernization of the poultry farms operated by Altai Broiler. Babaev estimated that this project would drive the total production capacity of this asset to 100,000t per year.

In addition, Cherkizovo considers Altai Krai in Siberia as a basis for its new projects in the area of pig farming. So far, all Cherkizovo’s pig farms are located in European Russia.

Siberia is the biggest, but poorly populated part of Russia. In 2017, its population was 36 million. Siberia is also considered having one of the lowest rates of self-sufficiency in meat production in Russia.

Ongoing consolidation

The recent acquisition deal is a part of the bigger consolidation trend that has been seen in the Russian meat industry in the recent few years. This trend is likely to continue, according to Russian analysts. 

“Further consolidation in the Russian poultry industry is inevitable and will be gaining scale and speed in the next couple of years due to increasing production costs and liquidity problems for many domestic producers regardless of their production capacity or geographic location,”​ Albert Davleyev, president of the Russian analytical agency Agrifood Strategies told GlobalMeatNews. 

In such situation most attractive assets will be acquired by the most successful companies, predominantly, by bigger vertically integrated complexes, while less profitable companies will go down and run bankruptcy. The coming year will bring a record number of examples of both trends. 

As a result, the broiler meat production in Russia is most likely to stagnate, evidencing further increase and restructuring of bigger companies' market shares,” ​Davleyev added.

Related topics: Financial, Russia

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