5 лет назад 710

Three pillars of Success

Three pillars of Success

Author: Victoria Zagorovskaja


During the annual roundtable discussion ‘Russian pork market in the new environment’, organized by the Institute of Agricultural Marketing, President of the Russian Meat Union Mushegh Mamikonyan described the future of the domestic pig breeding and counseled company executives on the options of an effective development strategy.

Guarantee of a better tomorrow

- Pig breeding is the most promising sector of animal husbandry; it has a very big future in the Russian agricultural sector.

There is a downturn in beef production around the world: the number of herds is declining, even in countries famous for great achievements in breeding cattle, beef prices increase along with increased costs for stockkeeping.

Genetics and selection of new breeds of cattle has been slower than in the poultry breeding and pig breeding. The sector faces the finiteness of natural resources and increasing pig and poultry breeding competition for the resources. Reduction of pasture areas and their deterioration, decrease of the production volume of leguminous crops and climate change make the problem of rational use of natural resources increasingly urgent.

Конференция Масложировая индустрия 2016

All this creates the necessary prerequisites for the pork and poultry production and consumption development, both in Russia and all over the world.

Russiacould never boast of success in breeding cattle. What we call beef is really meat obtained from culling of underproductive dairy herd. In the USSR, industrial production of beef was about 2-3%, while in Russia there is no any beef production at all, except for individual projects with state support. The government allocates 4.5 billion rubles a year to develop this sector and support the declining industry and inefficient management artificially, but it’s a waste of money. Last year, livestock fell by 2%, and a similar drop is expected this year. The program of the improvement of dairy herds and the support of poultry and pork production growth as the most affordable types of meat for people is much more important. In 2011, the beef will continue to go up (price increase of 25%), and customer demand will completely switch from red meat to pork and poultry.

Russiais a country with abundant land resources and surpluses of grain supplies. We produce more vegetable protein, which can be converted to animal protein, such as poultry and pork, than we consume.

Moreover, the Southern Hemisphere, with its huge volumes of leguminous crops and ability to provide birds with forage, is ideal for developing poultry breeding, and the Northern Hemisphere (Russia, Canada and others), with its high level of barley production, is good for pig breeding.


Developing a strategic platform

A common systematic approach to solving problems of the meat industry needs to be developed by the administration. This approach would take into account new realities, like the forthcoming WTO accession. Moreover, branch associations should take an active part in developing a strategic platform for the improvement of poultry and pig breeding.

The more intelligence, the better. The emergence of unions and associations is a positive factor for the market development. After a long period of suppression of personality in Russia, self-educated people, who have their own point of view and who are prepared to offer strategies of the development, are worthy of respect. Only in this case we become a full-fledged player in the debate with the Government.

The WTO accession is a painful question for Russian farmers, since it provides for free markets and free products movement. In Russia, prices for live swine are among the highest. The production cost of pork is twice higher than in other countries, and advance in price on forage can make the price difference even more significant. In this situation, domestic producers may be uncompetitive compared to European companies, which enjoy substantial government support.

In Europe, in the USA and other developed countries, an aggregate measure of support (AMS) agriculture exceeds Russia in several units. For instance, the European Union appropriates $ 90 billion, while in Russia the amount of $4.5 billion is under discussion.

According to WTO rules, a country can claim the AMS comparable to the annual volume of agricultural support in the past three years. And if we joined the organization two years ago, it would have been only about $2.5 billion.

But it doesn’t make the situation easier. Imbalances and open borders make it impossible for us to compete with Europe anyway. So, what’s to be done?

The WTO accession negotiations aim to fill the ‘green basket’ with some measures from the ‘amber basket’.

The Russian Constitution says that the Russian Federation is a social welfare state. Therefore, we must implement measures encouraging financially disadvantaged population to consume meat products, into the ‘green basket’, and enhance our competitiveness through the reward system of the food market.

But, unfortunately, politicians still don’t understand that this is the only possible way, a necessity which may strengthen the agricultural sector and create a new turn in development of the agricultural economy.

Localization and Specialization

The "new" agricultural policy has been implemented over the past seven or eight years: national projects and branch programs, investors support, interest rate subsidies on loans, customs and tariff regulation. Nonquota rates of import customs duties on pork were increased the last year. Since early 2011, the government increased the duty on the import of living swine, which provided a market space for domestic producers.

The government's targeted support, modernization of pig breeding, and recovering demand for meat products have shown positive results: the production of pork has increased by more than 8% since early 2010.

In the near future, there will be a significant change in the structure of pig breeding sector. Russian pig husbandry moves on an industrial basis. In January – September, 2010 in the modern technological mode agricultural organizations, pork production increased by more than 20% compared to the same period of 2009. Steady production growth is seen for the past five years. At the same time, production figures are falling in peasant farms and households. Decrease in the proportion of small forms of economic and personal holdings leads to a reduction in pig population along with efficiency growth.

The increasing demand for white meat poultry and lean pork will be the main feature of pig and poultry breeding market, and those companies will benefit, which are able to reduce the total cost on lean meat. And the producers, who will manage to sell meat at a price of 1-2% higher than competitors, will benefit most of all.

This issue must be solved through the search of options to justify the price for consumers. How to sell overstock of lean pork for higher price than, let’s say, a branded ham? Solve the main problem - and become the Market King!

Marketing is also very important for successful business. It’s promoting the whole industry, it sets customer for buying. This requires considerable investment, which, however, is yielding good results.

A Businessman can establish marketing department or hire marketing company. Also he can create marketing strategy himself, because a person who loves his job and has a personal responsibility for the business, often finds better options for the development than the external specialist. Marketing companies research the market and use the general trends as their know-how.

Here is an example. Seven or ten years ago, according to marketing forecasts, the production of ready-to-eat foods in Russia was to grow much more intense than it really did. Marketing specialists didn’t take into account peculiarities of the Russian market, they’ve just copied worldwide trend.

Companies should be more skeptical of forecasts, and not follow them every time. Businessmen are the ones who build the market, not forecasts!

How to  singularize a product among the others, make sure that the customer comes back for it, and is ready to pay 2% more? Marketing experts can tell you how to emphasize product’s usefulness for health, how to use eco-friendly packaging, how to convey product’s unique taste characteristics and so on.

You know, I’ll give an advice. Place an ad, which says that your pork company buys wild acorns, set the price, write the addresses on it - and you won’t have to think about conveying the idea of eco-friendly packaging and natural ingredients! You are buying acorns - this says it all. Thinking outside of the box can lead to a revolutionary result.

The geographical origin of the manufacturer becomes increasingly important. The number of people who prefer local products, will continue to grow. Regional leadership is more beneficial than the federal. Obtaining the loyalty of local customers is easier and less expensive.

Despite the fact that the companies engaged in the meat industry, face similar problems, there’s no one-stop solution for everyone. It is important for the producers to have a clear-cut idea on the development strategy and its implementation, and, of course, on the company's capabilities.

Mistakes made at this stage can be costly in the future. Let me warn you about one of them: a geographical criterion is not always dominating in lining up a strategy. If the company doesn’t manage to maintain high level of retail sales in the regions, it will be driven out of the local market.

When your sales volume is about $10 thousand per one square meter of retail space a year, you have to follow the rules of the retail store, but if it increases to $20 thousand, you are the one to dictate terms. Uniqueness is the company’s trump card. What about salami with chocolate? Market participants should experiment more, launch new pilot products, try unusual approaches of promotion and be able to reject ineffective solutions in time.

In addition to geographic location and patriotism, an important factor of the modern production success is specialization. Imagine, You are the best producer of canned meat in the premium segment, let’s say, you produce ravioli, frozen food and something else. The specialization depends on the policy of regional authorities, market characteristics, investments volume, established goals and, of course, personal desire. The European experience shows that specialized production are the most cost-effective, and this is the reason why we recommend companies, participating in the meat market, to change their development strategy.

In subsequent years, the share of imports in the domestic market will decline; the level of competition between Russian companies will rise sharply. Future leaders will be those producers who can implement “three pillars” strategy: localization, specialization, uniqueness. 


Ваш технолог
Каталог компаний
«Мясная Сфера»
«Молочная Сфера»
Журнал «Хлебопечение/
Кондитерская Сфера»
«Рыбная Сфера»