Company name: DuPont Pioneer - https://www.pioneer.com
Representation in Ukraine: Pioner Nasinnia Ukraine LLC (Pioner Nasinnya Ukraina) - https://www.pioneer.com/web/site/ukraine
Sector: production of hybrid seed crops
Date of incorporation: 1926 (Henry A. Wallace)
Headquarters: USA, Iowa, Johnston
Global representation: more than 90 countries worldwide
Global performance of DuPont Pioneer (2016):
- Net asset value: $ 39.9 billion*
- Turnover: $ 24.6 billion*
- Number of employees worldwide - 12 300
- Brands: Pioneer, Plenish, Optimum Brand Innovations, Optimum AcreMax 1, Optimum AcreMax RW, Optimum AQUAmax
* Source: 2016 DUPONT ANNUAL REPORT
DuPont Pioneer & M&A*:
1975 Lankhartt and Lockett (acquisition)
1977 Microbial Products (acquisition)
1991 Mycogen Seeds (aacquisition)
1996 Sunseeds Co. (takeover of 20% of shares)
1997 Sale of a 20% stake Pioneer to DuPont
1999 Sale of 80% stake Pioneer to DuPont ($7.7 billion)
2006 The joint venture GreenLeaf Genetics LLC (DuPont and Syngenta)
2014 Sale of DuPont Pioneer Alfalfa Research and Production by S&W Seed Company
2017 DowDuPont: The Dow Chemical Company ("Dow") and E.I. du Pont de Nemours & Company ("DuPont") (merger)
* Source - Wikipedia "DuPont Pioneer"
DuPont Pioneer in Ukraine:
- Entering the market of Ukraine: 1998
- Investments in Ukraine (2017): more than $ 55 million.
- The main assets in Ukraine: a plant for the production of seeds in the village Stasi (Poltava region), a research station in the village Lyubartsy (Kyiv region)
- Director in Ukraine: Elena Dunina
The history of the presence of Pioneer seeds in Ukraine dates back to 1959, when Nikita Khrushchev visited the US state of Iowa. He returned to the USSR with a clear vision of the future development of agriculture. One more, he brought with him the Pioneer® corn hybrids that he had purchased from Roswell Garst, the exclusive distributor of Pioneer products and those days forward looking farmer.
InVenture Investment portal carries out We Invest in Ukraine project. This is a series of interviews with foreign investors in Ukraine. For this time, InVenture met Elena Dunina who is the CEO of Pioneer Seeds Ukraine LLC that recently has become a part of the agricultural division of DowDuPont ™. We talked on why foreign investors choose Ukraine, how to minimize risks, and how do the perspectives look like with foreign investors in Ukraine.
InVenture: Why did DuPont Pioneer, predecessor in title of agricultural division of DowDuPont™, choose Ukraine as a destination for its investment?
By happy chance, our country is very noticeable on the world map. And when we talk about agriculture, Ukraine is in top 5 most attractive countries over the globe for the development of the agrarian sector and food industry at large. In the context of Europe, we are definitely among the top 3 choice countries for the crop production.
Michael Porter, who is a pillar of economic understanding, used to emphasize that it is essential for every country to develop its comparative advantages. He wrote many books about the competitive edges.
And indeed, each country is unique in its own way, and it makes no sense to simultaneously develop all industries. It's like chasing two hares and catching neither. There are outstanding opportunities for development of agriculture in Ukraine, and they are not limited to the strategy of our company alone. In general, multinational corporations really have space for development and have interest for making investment here.
“Branded Pioneer seeds were brought to Ukraine by Nikita Khrushchev”
InVenture: DuPont is 215 years old, Pioneer brand is over 90 years. And for how many years do farmers of Ukraine plant Pioneer seeds?
Elena Dunina: Bearing comparison of a hundred years duration on your part, indeed, is eloquent for us. The time period in Ukraine may be somewhat different, because for the first time a product under the Pioneer brand, namely corn, was brought to Ukraine thanks to Nikita Khrushchev.
After his visit to the USA in the middle of the last century, he returned with the Pioneer hybrids, and after that cultivated areas of the territory of the Soviet Union (mainly the territory of Ukraine) were given an opportunity to be sown with branded Pioneer corn. Officially, the company entered Ukraine’s market in the end of the 90s of the XX century, as a legally registered company. And it has been operating since then.
"We are proud that our company has a complete production cycle in the Ukrainian market”
InVenture: Tell us about the company’s business as an investor in Ukraine. Where did you invest and what is the amount of investment?
Elena Dunina: We are proud that Pioneer has a complete production cycle in the Ukrainian market. The scientific research station has been set up and is operating in the village of Lyubartsy, Kyiv region. At this, research crops are planted in most regions of Ukraine in order to see how the hybrids behave in different climatic parameters.
The company has seeds production plant in the village of Stasi in Poltava region. It was built there in a "green field", so to say. The most modern equipment is mounted there and it is the most modern Pioneer plant in Europe, being the youngest. The investment into construction and expansion amounted to USD 55mln. The plant started operations in 2013. It is one of the company's many investments aimed at supporting the development of local commodity production of corn and sunflower seeds under Pioneer brand. We contribute to increasing productivity and efficiency in growing such crops by Ukrainian farmers.
A successful synergy was brought with the development of Ukraine's agriculture as a whole. If to consider the overall cultivated areas, most of the fields are under crops of maize (corn), sunflower and wheat in Ukraine.
Pioneer does business with two of these crops here - corn and sunflower. Ukrainian farmers are becoming less dependent on imported seeds, thanks to the plant in the village of Stasi.
“The success of the company would not be possible without feedback from customers”
InVenture: What strategy works for the company: the construction of new plants, or acquisitions of complexes and renovating of older plants and enterprises?
Elena Dunina: We work in more than 90 countries. Approaches may differ. The only uncompromising factor is respect for the legislation in a country of presence. In respect to our experience in Ukraine, we cooperate with a number of farms that grow products for the production plant.
We take their products for treatment. Of course, there are certain requirements, like spatial isolation of seed crops in arid soils along with an irrigation system. At the same time, our company is ready to cooperate with farmers offering more flexible payment terms so that farmers are able to reinvest. There are also bonuses, discounts, loyalty programs and re-cultivation programs.
The success of the company would not be possible without feedback from customers. For this reason Pioneer offers serious agronomic support. The long-term investment in the expansion of the production complex here, clearly demonstrates Pioneer's commitment to supporting Ukrainian agriculture and delivering high-quality Pioneer seeds to farmers throughout the country.
InVenture: How many farms do you cooperate with in Ukraine?
Elena Dunina: As for the partner farms whom we work with to producing seeds, they are not hundreds as of yet, but dozens of partners. It makes a little over than 40. These are both large and medium-sized farms, as the main criteria are quality and reliability of cooperation for us. At the same time, we are ready to increase the number of partners. The production volumes are growing at our plant. After all, the partner farms can also become buyers of our finished products.
"We constantly invest in the very village of Stasi"
InVenture: Do you fund or support social projects in Ukraine, and which ones?
Elena Dunina: We directly support and develop the social infrastructure of the village of Stasi in Poltava region. We continually invest in a kindergarten and school. We also purchased an ambulance and provided for road repairs. And of course we will continue in this direction. Social investments in the village of Stasi have exceeded UAH 1.7mln already.
InVenture: What are the difficulties of doing business for investors in Ukraine?
Elena Dunina: For the reason that the company operates in various countries (both emerging economies and developed countries), we understand that the legislative base is more stable in developed countries.
In developing countries, legislation changes more often. The very name "emerging or developing" suggests that states are still looking for a balance of regulatory norms, in administrative and restrictive measures both.
Fortunately, we can say that there are no insurmountable obstacles. It is essential to conduct business transparently on our part following corporate rules. Everything can work out well, and our company is an example.
All sorts of difficulties can happen sometime, like it was in early 2017 when there were delays in seed certification. It happened close to opening season, but fortunately the situation was managed shortly.
There can be situations that affect the company's operations. And at the same time, we are members in a number of business associations, such as the American Chamber of Commerce, the Ukrainian Agribusiness Club, the European Business Association, and other specialized organizations. It gives us an opportunity to express opinions as the business involved and make our own assessment of a situation.
Another risk is counterfeiting. It is typical not only for Ukraine. About 6% of all products are counterfeit worldwide, and not just agriculture suffers it.
The company is struggling with counterfeit products by its own means too. We have our hologram IZON, which is not easily replaced with a fake one but it needs upgrade all the time. But from the point of view of the regulatory acts, I would like our state to fight more actively against counterfeit products.
There is a need to regulate certain norms. For example, we are ready to invest in infrastructure at the areas of the company’s presence. We are ready to carry construction of another road in the village of Stasi, as there is a necessity for an interchange road. It can bring improvement for the situation with the locals and for the Pioneer plant alike. Nevertheless, we had received setbacks in resolving this issue for several years. But we hope indeed for its coming resolution and obtaining of all the needed permissions soon.
Of the positive moments - we see that public policies are more reactive to solving the issues that arise and real steps are being taken to create favorable conditions for doing business in Ukraine. This speed is now higher than it was a few years ago.
"The moment of the world crisis and world prosperity has not yet been predicted by anybody"
InVenture: There are issues that are of interest for everyone: on the one hand, investors are attracted by Ukraine's investment opportunities. At the same time, many people are stopped by market volatility and complications in legislation. What instructions would you give to investors who are just entering Ukraine?
Elena Dunina: I think that businesslike investors like our corporation, come through experiences in various parts and countries of the world. Such experience makes it possible to distinguish the issues of concern when entering new countries.
I like Nassim Taleb's book "The Black Swan" illustrating unpredictable moments as a constant. It is applicable not only to Ukrainian state. But in a more broadly sense, the moment of the world crisis and world prosperity has not yet been predicted by anybody. Earlier in the past, there were periods of economic stability periodically changed by revolutionary shocks like crisis, recession, and recoveries likewise.
For the moment, we see how fast the dynamics of life has become. Entrepreneur Bill Gates said that electronic information impose conditions for doing business in a manner of a constant variable. Therefore, it is important to have capacities to faster decision making in the emerging economies compared to stable environments in order to successfully carry on business there.
"Large corporations consider and decide every day where to invest, where to close up and where to expand"
When I worked on my thesis MBA, I discovered a few facts. Before the crisis of 2008-2009, there were more foreign direct investments from multinational corporations to the developed countries. There, the yield is lower, but the situation is more stable. And it was a competitive advantage.
And 2009 was a turning point, when the number of direct foreign investments equaled in developed and developing countries. Reasonably for such countries as Ukraine, it is important to understand that the attractiveness for foreign investors has increased. But at the same time, there is no way to relaxing and forgetting about competition for investments which is very high. It is so because investments can bring change to the economic growth. And again just consider, 1% of multinational corporations manage a half of foreign direct investments all over the world, according to the statistics of the World Bank.
Or consider in the opposite that more than 50% of the world investments belong to 1% of multinational corporations.
This is a major capital that has to work. And large corporations consider and decide every day where to invest, where to close up and where to expand.
"At the moment, we see that managing agribusiness in Ukraine is quite difficult, even with its attractiveness"
InVenture: Return on investment. What level of profitability is fine for Ukraine?
Elena Dunina: In this regard, it is difficult to come up with some universal conclusion because a payback period may differ within industries here. Same concern if comparing by countries, the unpredictability factor is higher for Ukraine. That’s why payback period has to be shorter here. Moreover, if we consider inflation, the recent slump in GDP and the depreciation of the national currency. These all are the factors calling for a higher degree of return on investment.
Classical approach means that if it is more profitable to keep money on deposit then there is no point for investing in business. So, the returns have to be higher than a discount rate of the currency board.
We know that loans in Ukraine are quite expensive for Ukrainian farmers, and ideally the profitability of business should cover the interest rate of the borrowed funds and additional costs, like wages, purchase of machinery and equipment, etc. At the moment, we see that managing agribusiness in Ukraine is quite difficult, even with its attractiveness
InVenture: Referring to the recent changes on your part, what characterizes your company best over the past 5 years?
Elena Dunina: Undoubtedly, the number one is that such a powerful plant has been built and put into operations. At the moment, it is capable to meet Ukraine's domestic demand up to two thirds for corn with Pioneer brand and up to one third in the coming season for sunflower Pioneer seeds with a tendency to further growth.
It is also the development of the research station in Ukraine. In terms of sales of the finished products to farmers, the recent distinctive accomplishment is launching of agronomic support for customers. We do not just sell seed, but our agronomists and consultants also provide support to farmers who work in different parts of Ukraine, under our slogan "Specific Hectare calls for Specific Hybrid." Proper agronomic support contributes to obtaining higher yields. The higher yield is the most excellent vehicle for making profitable business. The Pioneer brand has already received recognition from farmers around the world and built professional reputation up. The most important change in the history of the company was the merger of large corporations of Dow and DuPont. And now the Pioneer business has become part of the DowDuPont ™ Agricultural Division. We are on the way to unbundling the agricultural unit into a separate business. And Ukraine remains among the priority countries at the moment.
Authors: Katerina Zvereva, Katerina Dyachenko (InVenture Media Group)