Viktor Biryukov, President of Talina Group: "The key to success and profitability in any business is a focus on efficiency"
The company’s CEO spoke to the Adam Smith Institute about the potential of the Russian agricultural sector and Talina Group’s plans for this year.
How would you assess the results of this year’s harvest with regard to the future development of Russian agriculture? How prepared was the agricultural sector for such an extreme situation, and could some of its losses have been avoided?
The weather is unpredictable, that’s the biggest risk in agriculture - rain, frost, scorching sun. But difficult to call what happened this year just a problem. This has been a disaster. To anticipate it was impossible, just as you can’t get ready for a sea storm, an earthquake, or a volcanic eruption. In our region (the Volga), it’s vital that the soil is saturated with moisture, and therefore, fertile. In order to preserve precious moisture, we have abandoned traditional ploughing and use modern technology, which has a minimal impact on soil and helps retain moisture in its layers. This method has been used for more than five years, enabling an average 50% increase in crop yields. Extreme weather conditions such as we’ve seen this year, cannot be avoided or somehow prevented, and no preventive measures are enough.
How did the drought and fires affect the Talina Group’s business?
The drought altered our expectations. This year we harvested only a quarter of what was planned; the rest is burnt. At Talina, we have more than 90 thousand pigs and about 10 thousand head of cattle. Therefore, every year part of the grain harvest is used to make feed. The remainder is sold on the Russian market. This year, we’re not even talking about selling the grain. The entire crop will be used by our Group. But even this is not enough to feed the pigs. Additional grain will have to be bought elsewhere. We have already begun sowing winter crops. In place of the abnormal heat, we now have rain, which allows us to make optimistic forecasts. The Group’s fields are currently being sown with winter wheat. In any business there are difficulties, that’s the law of life. But we have learned to overcome them, thanks to our own knowledge and experience, by bringing in first-class professionals, by working with our partners.
Agriculture in Russia has the image of being an unprofitable sector, and yet you have managed to create a successful company. What is the key to success and profitability?
That’s not true. Russian agriculture had an unprofitable image a few years ago. Now the situation has changed radically. Modern agricultural enterprises use latest computers, Internet, satellites, advanced breeding technologies. It’s no longer a black hole, sucking money in, but a lucrative business. The greatest tempo of modernisation can be seen in the poultry and pig sectors. Pig farming is a major part of our business, and so I know it from my own experience.
The overall growth of the Russian agricultural sector in 2009, the crisis year, was about 1%, while growth in pork production was 8.6%. But only recently, between 1992 and 2005, the industry witnessed a steady decline in production volumes. The turning point was 2005, when a national project was launched, and today we have the Agricultural Development Programme. Pork production has gone up. At the same time, its share of overall industrial production has increased. In 2009, Russia produced around 1.2 million tons of pork, 2.8 times more than in 2005. This proves that with the correct approach, with good management, with the right strategy, that everything will turn out ok. The core of our company is natural products. Often they are more expensive than non-organic, but I can assure you that they will always be of a highest quality. I don’t think that good things can be cheap. The key to success and profitability in any business is to focus on efficiency. For me it is crucial in any kind of business.
What is your forecast for the development of the agricultural sector in Russia?
Food always has been, and always will be, a fundamental part of civilization. The planet's population is steadily increasing, and people have higher requirements. Our grandmothers were happy with steamed turnips, we want quality and variety. Even the portions of food set before the Apostles in paintings of the Last Supper have been growing in size during last centuries. Over the last few years Russian government has finally begun to pay proper attention to the industry, and the situation in agriculture changed. National projects have stimulated rapid growth in the agri-food sector. If agriculture continues to get the same attention from the government, Russia will increase its food and economic security.
Your presentation will take place at the Russian Food & Beverage Forum. What can delegates expect?
I plan to share with colleagues my views concerning the need to ensure the food security of our country and will talk about meat farming. Our country’s agricultural sector has huge potential for development and is capable of becoming a major food exporter. A serious obstacle in the development of the livestock industry is a shortage of high capacity slaughterhouses, one of the reasons for the high costs and low profits of meat producers in Russia. But if there were enough of them in the country, it would be a turning point for both meat and grain industries. It is well known that coarse grains are not in demand due to reductions in cattle herds. After all, we’re talking about raw materials, products with low added value. With the development of the cattle and poultry sectors, Russian farmers will benefit from the deep-processing grain products - meat, cheese, egg powder, powdered milk, everything what Russia is importing today. Also, thanks to the rise of agricultural sector, the domestic agricultural machine manufacturing will switch to a modern track.
PS Viktor Biryukov will be speaking at the