Russian grower comments on greenhouse industry growth

In 2019, the greenhouse complex Donskaya Usadba reached the forecasted production capacity of 11 thousand tons of vegetables per year. The enterprise sells medium-sized cucumbers and tomatoes. The company are planning the construction of the second phase of the complex, which will allow them to increase the productivity from 14.7 to 21.7 ha.

What are the results of Donskaya Usadba for 2019?
"We consider the results of 2019 to be positive. Vegetable production in the greenhouse complex Donskaya Usadba, launched at the end of 2018, reached full production capacity in the shortest possible time. Overall, CG ROST in the second part of the year launched new production facilities in the Bryansk and Moscow regions (GC Zhurinichi and partly the second phase of GC Lukhovitskie ovoschi). In 2019, we also started the construction of two more greenhouse complexes in the Nizhny Novgorod region and the third phase of the Tyumen-Agro. Thus, we not only increased the volumes in comparison with 2018 but also set a base for 2020."

What factors influenced the dynamics of Donskaya Usadba production volume?
"The key factor here is the alignment of the production processes."

What assortment does Donskaya Usadba plan to grow in the Rostov region? Is an expansion of the assortment planned?
"As of today, Donskaya Usadba grows the most highly demanded varieties of fresh vegetables: medium-sized cucumbers and tomatoes. We are especially proud of the rich flavor and color of the plum tomatoes. All the produce grown in the complex is sold under the ROST brand."

What are the conditions of Donskaya Usadba produce distribution?
"As our priority is freshness and flavor of vegetables, we establish product distribution first of all in the region where the production units are present. For the produce of GC Donskaya Usadba it is the south of Russia. Retail chain stores are our main channel. Because of the high level of quality and freshness (and therefore, fewer unhappy customers), our produce is in high demand."

How would you characterize the situation in the greenhouse vegetable market today?
"In recent years, greenhouse vegetable production grew 15% per year on average. In 2018, the production reached pre-2014 crisis levels. With that, the production continues to grow, stimulating competition.

"In the current state of the market development, it has become even more important for the company to provide economically efficient production and distribution. According to the assessment by the Tehnologii Rosta company, only 52% of the greenhouses in Russia can be considered contemporary ones. Crop yield and production efficiency of the others is several times lower. Thus, they are less competitive. In the current situation in the market, it leads to the acceleration of consolidation and growth of leading companies. The ROST group of companies is a leader in greenhouse vegetable production. GC Donskaya Usadba is one of four complexes. As all other company facilities, it has been built and exploited in accordance with the latest technologies. It is unique in the Russian and world market because we use gas from our own field. This allows us to increase the efficiency of the enterprise economy. Another considerable advantage is the expertise in the agricultural field, accumulated in the previously opened complexes of the holding."

Is there a limit to the greenhouse vegetable market growth?
"The experts have evaluated that as of today, local producers meet the demand in cucumbers almost by 100%, while in tomatoes the demand is met only partially. Thus, even with the current level of consumption, there is a possibility of growth by means of import replacing. Apart from that, it is expected that the current level of consumption will be growing largely because of the greenhouse industry development in Russia."

How can the growth of production influence the consumption growth? With pricing?
"Of course, with growth of production in Russia, the prices will be less dependent on dollar rate and logistics costs, but we should not forget that our own cost of power-consuming industrial vegetable produce in Russia is a lot higher than that imported from the countries with warm climates. Therefore, the price factor will not be the key one. Consumption will be influenced by the quality of Russian produce, which is incomparably higher than that of the imported goods. Local vegetables that were not subject to long transportation are fresher, juicier and more aromatic. We expect that those consumers that refrain from buying the imported vegetables because of the plastic flavor, will start regularly purchasing greenhouse vegetables produced in Russia. Another factor, already influencing the change of consumer habits in many product categories is popularity of a healthy way of living."

How would you estimate the profitability of your greenhouse business in the Rostov region, what ways to increase it do you see?
"We estimate our profitability as higher than average in the market. This is due to the fact that our equipment allows us to gather more kilos per square meter than the market average, the fact that we use own gas, manage our own efficient power generation, have expertise in growing and distribution,  have strong brands and direct contact with retail chains."

Do you experience issues with recruitment, what specialists are lacking?
"Of course we do, just as our colleagues, I am sure. There are few specialists of the agro technical sphere in the market with experience of operating high tech equipment. We manage to solve the issue by exchanging best practices between the greenhouse complexes and attracting specialists from neighboring regions."

What are the expansion plans for Donskaya Usadba in Rostov region? What will be the acreage and the production volume after the expansion?
"We have received a confirmation of production expansion to another 7 ha. The project cost is being estimated. Due to the infrastructure, shaped in the previous stage, the investments in the new phase will be more efficient."

Who will be financing the project? Will it receive regional support and if so, what kind?
"The support of the project has been confirmed with the Ministry of Agriculture of the Russian Federation. In addition, the government of Rostov region and our main partner Rosselhozbank will be supporting us with the project."


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