Cherkizovo and Spanish Grupo Fuertes to Produce Turkey Meat in Tambov

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May 16 – Russian meat firm OJSC said on Saturday that it has set up a 100 million euro joint venture with Spanish company Grupo Fuertes to produce turkey meat in the Tambov region south of Moscow.

The Board of Directors of Cherkizovo approved the joint venture between Cherkizovo Group and Grupo Fuertes on May 10, 2012.

As the company says, it is planned that a complex for the production of turkey meat will be built on a plot of five hectares on the First and Staroyurevskom areas of the Tambov region.

The companies will invest a total of 4.5 billion rubles (US$150 million) in the project and aim to produce 25,000-30,000 tons of meat a year, potentially rising to 50,000 tons.

“The payoff period for the investment could comprise eight years,” Aleksandr Kostikov, the company official, said to the Russian business daily Vedomosti.

Production will start in 2014, Cherkizovo said in a statement, adding the facility is planned to reach target capacity in 2015. Each shareholder owns 50 percent of shares in the new asset.

The project will be financed from Cherkizovo and Grupo Fuertes’s existing funds, and through bank loans. The Tambov regional administration has agreed to provide the necessary infrastructure for the construction of the complex.

Once achieved, this would make Cherkizovo the market leader in the fast growing and profitable Russian turkey meat market.

The turkey meat market in Russia is currently experiencing record levels of growth. According to experts, the annual consumption of turkey meat in Russia is gradually increasing and exceeded 100,000 tons in 2011. In 2010, consumption grew by 20 percent compared to 2009. Industrial production of turkey meat grew by 46 percent over the same period of time. The share of imported turkey meat into Russia has been decreasing constantly and today imports account for approximately 30 percent.

Meanwhile, consumption of turkey in Russia per capita is about 0.68 kilograms per year, which is far below the level in developed countries. For example, in the United States, consumption of turkey per capita is about 7 kilograms, while in Canada and European Union countries it is about 4 kilograms.

The Cherkizovo Group, established in 2005, now includes seven meat processing plants, seven poultry farms, three feed mills and three trading houses.

Cherkizovo’s net income increased by 2 percent in 2011 compared to 2010, amounting to US$147.8 million.

Commenting on the joint venture, Sergey Mikhailov, Cherkizovo’s CEO, had the following to say.

“Cherkizovo is already the largest agro industrial group in Russia, and by launching this new project with Grupo Fuertes, we will further strengthen our leading positions and provide customers with a new high quality and healthy meat products. Grupo Fuertes has many years of experience that will ensure the highest product standards and quality control – we look forward to working with them on this joint venture. In addition, the proximity of the turkey production complex to our existing meat processing facilities will provide substantial synergy benefits, and our large-scale distribution network will enable rapid and efficient delivery of new products to the markets of Central Russia.”

In Russia, six major enterprises are engaged the production of turkey meat with the largest being Eurodon, with 35,000 tons produced annually. Tula enterprise JSC Krasnobor is the second largest producer of turkey meat and Sibyrskay Gubernia completes the top three.

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