Ukrainian pet food industry – alive and kicking
For the European pet food industry, the year 2022 was about rising energy and raw material costs. For the Ukrainian businesses, it also was about shelling, power outages, and a shrinking customer base as millions of citizens fled their homes seeking shelter in Europe. In this dire context, leading Ukrainian pet food manufacturer Kormotech managed to rearrange while launching a large humanitarian programme.
Rostyslav Vovk, CEO of Kormotech, a family-owned business in the second generation, recalled that the first days after the Russian troops crossed the Ukrainian border were some of the most challenging since the first shock wreaked havoc on the supply chains
'Since February 24, the company's factories in Lviv Oblast, near the Polish border, have only been shut down for one week for security reasons. Back then, we had several weeks' stock of finished products and raw materials which allowed us to maintain our operations; still, logistics were interrupted countrywide,' Vovk said.
'The Russian military severely damaged infrastructure in many parts of Ukraine. Our distributors couldn't transport our products in some regions. But looking back, we can safely say that our partners and local teams coped brilliantly in those conditions,' he added.
Shipping to Belarus stopped
Since February 24, Kormotech stopped shipping to Belarus, which accounted for nearly 20% of its export sales in 2021 and redistributed the withdrawn volumes among other export destinations. This move has not entailed a drop in sales, which on the contrary, increased by 36% in cash and 14% in volume compared to the same period in 2021. Kormotech has not been exporting anything to Russia since 2014.
Re-shaped management structure to face challenges
Kormotech has shaped up its management structure to better address the new challenges. 'Our strategic team split into 3 more flexible groups in just one week. The first focused on providing our home market with products and ensuring uninterrupted operations of our facilities in Ukraine and Lithuania; The second – was on strengthening the presence in the export markets, and the third one – was on launching 'Save Pets of Ukraine', a global humanitarian aid for pets suffering from war. We had this experience back in 2014 when the war started. In 2014, when Russia started the war in Donbass and occupied Crimea, we launched an initiative so called 'Don`t leave us in ATO'. We rescued pets suffering from the war. Later we transform this initiative into stable loyalty system of cooperation with volunteers, shelters and NGO.' Vovk said.
The humanitarian efforts aimed at protecting pets are much-needed in Ukraine. Over 150,000 cats and dogs need humanitarian aid in Ukraine, according to a survey conducted by the international organisation Four Paws. The exact number of stray animals that lost their parents remains unknown but is believed to be huge.
Market shows resilience
Despite all the horrors the Ukrainian nation is going through, the country's pet food market demonstrates surprising buoyancy. 'We predict that the pet food market will remain the same in volume as in 2021. A year ago, it equalled 120,000 tonnes in 2021 and was considered one of the fastest growing in the world,' Vovk said, adding that Kormotech's turnover in 2021 was $110 million, 35% up compared to 2020
Currently, almost all pet shops in central and western Ukraine continue operation. The pet food businesses have also managed to bounce back in the east – the territories primarily affected by the hostilities. For instance, in the Kharkiv region, nearly 85% of pet shops maintain operation, Vovk estimated, adding that during the worst period of fights in the region, this figure was close to 40%.
Importance of e-commerce
The war has also affected customer behaviour, as a growing number of Ukrainians are now opting to making purchases online. 'E-commerce has become more vital for customers. As supermarket sales didn't grow due to infrastructure damage, the client went online, and sales in this channel for Kormotech brands tripled,' Vovk said.
'Importers had some delivery breakdowns due to border queues and infrastructure damage. Local producers located far from the front line coped well in these conditions,' Vovk said, adding that currently, all market players have sorted the logistics issues.
Thanks to the stable domestic market situation, Kormotech has not abandoned its development plans. In 2021, Kormotech was ranked 51st among the world's top 101 companies and the 7th fastest-growing pet food company by the Petfood Industry magazine. 'In 2023, we are willing to be ranked among the top 50 world pet food industry leaders worldwide due to our vision,' Vovk said.
'The Ukrainian pet food market, we predict, will grow, but slower than before. Ukrainians show great humanity and a love for their pets. Many now have switched to pet food due to its convenience. Yet affordability will be one of the key trends, not only in Ukraine,' Vovk said.
Every cloud has a silver lining
'For the first time in the history, the Ukrainian [origin of] brands work in favour of the companies. We are not treated as a part of Soviet Union heritage. It's about trust and willingness to cooperate with Ukrainian businesses,' Vovk said.
'It used to take years to win trust and loyalty. Now there is incredible support for our business. European networks are happy to expand the company's range on their shelves, label the product with Ukrainian symbols, and refuse to sell Russian commodities,' he said, adding that the company is currently promoting its brands at European, American, and Asian events.
Kormotech joined forces with other pet food sector exporting companies of the 'Ukrainian Pet Alliance'. The United States Agency for International Development (USAID) support the project with funds. The Alliance was to kick off in April officially, but it was launched and presented at the Global Pet Expo (USA) in March. Its main goal is to support Ukrainian pet care brands in the global market. Among its members are the Animal ID, Collar, Harley and Cho, etc. Kormotech has a mentoring role as one of the most successful exporters.
'Regarding future development plans, we are considering launching new facilities worldwide and, in 2023, expanding our current production capacities both in Ukraine and Lithuania,' Vovk said.
Currently, Kormotech operates a pet food factory in Lithuania. Vovk said that the facility currently covers 100% of all orders, and the company plans to deepen cooperation with our long-term outsourcing partners from Europe. He added that the company are receiving our orders produced outsourced constantly. Product stocks in warehouses, including those in Europe and America, are constantly replenished.
'We will launch new products, present them in the most prominent exhibitions – same as in 2022, pay taxes, and support our team, especially those who serve the Army Forces of Ukraine. Also, we will continue saving pets suffering from war. Since March 2022, we have delivered over 916 tons of pet food to cats and dogs in need,' Vovk said.
'Today's essential part of our impact is to be the voice of war in our professional network and to involve the world community in supporting Ukraine and its 4-legged friends,' he added.
Looking forward to better days
Over the past few months, Russia has been increasingly pondering Ukrainian energy infrastructure with missile and drone strikes, causing widespread power outages across the country. This tactic not only leaves millions of citizens without heating during winter but also affects the power supply to industrial operations. Like other businesses, Kormotech ensured to have backup power generation sources to guarantee uninterrupted operations.
'Our Ukrainian facilities are equipped with potent generators allowing us to produce at a maximum capacity of 10 hours (stand alone) if needed – the same as our local suppliers,' Vovk said, adding that when the time comes, everything destroyed or damaged will be restored.
'As a nation, we will have to rebuild infrastructure, institutions, and businesses,' he said. Despite all the challenges, Kormotech, like the rest of the Ukrainian nation, remains optimistic about the future. In a recent opinion poll, when asked if they believe Ukraine will win the war, 98% said yes.
'Resilience is in our DNA. So, we keep doing our job,' Vovk said.
by Marieke Ploegmakers - All About Feed
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