Investor profile
Company: DuPont Pioneer — https://www.pioneer.com
Ukrainian operation: Pioner Nasinnia Ukraina LLC — https://www.pioneer.com/web/site/ukraine
Business: Production of hybrid seeds for agricultural crops.
Founded: 1926 (Henry A. Wallace).
Headquarters: Johnston, Iowa, US.
Global presence: More than 90 countries.
DuPont Pioneer global figures (2016):
- Net asset value: $39.9 billion*.
- Revenue: $24.6 billion*.
- Global workforce: 12,300.
- Brands: Pioneer, Plenish, Optimum Brand Innovations, The Optimum AcreMax 1, Optimum AcreMax RW, Optimum AQUAmax.
Source: 2016 DUPONT ANNUAL REPORT.
DuPont Pioneer M&A history:*
- 1975 — Acquisition of Lankhartt and Lockett.
- 1977 — Acquisition of Microbial Products.
- 1991 — Acquisition of Mycogen Seeds.
- 1996 — Acquisition of a 20% stake in Sunseeds Co.
- 1997 — Sale of a 20% stake in Pioneer to DuPont.
- 1999 — Sale of an 80% stake in Pioneer to DuPont for $7.7 billion.
- 2006 — Establishment of GreenLeaf Genetics LLC, a joint venture between DuPont and Syngenta.
- 2014 — Sale of DuPont Pioneer Alfalfa Research and Production to S&W Seed Company.
- 2017 — DowDuPont: Merger of The Dow Chemical Company (“Dow”) and E.I. du Pont de Nemours & Company (“DuPont”).
Source: Wikipedia, “DuPont Pioneer.”
DuPont Pioneer in Ukraine:
- Market entry: 1998.
- Investment in Ukraine (2017): More than $55 million.
- Main assets in Ukraine: A seed production plant in Stasi, Poltava region, and a research station in Liubartsi, Kyiv region.
- Director in Ukraine: Olena Dunina.
The history of Pioneer seeds in Ukraine dates back to 1959, when Nikita Khrushchev visited the US state of Iowa. He returned to the Soviet Union with a clear vision for the further development of agriculture. He also brought back Pioneer® corn hybrids purchased from Roswell Garst, an exclusive distributor of Pioneer products and a progressive farmer of his time.
Investment portal InVenture is running “Investing in Ukraine,” a series examining the activities of foreign investors in the country. In this interview, InVenture speaks with Olena Dunina, Director of Pioner Nasinnia Ukraina LLC, which recently became part of DowDuPont™’s Agriculture Division, about why foreign investors choose Ukraine, how they navigate risks and where they see opportunities.
Olena Dunina, Director of DuPont Pioneer in Ukraine.
InVenture: Why did DuPont Pioneer, a predecessor company of DowDuPont™’s Agriculture Division, originally choose Ukraine as an investment destination?
Olena Dunina: Fortunately, our country has a prominent place on the world map. In agriculture, we rank among the world’s five most attractive countries for developing farming and the food industry. Within Europe, we are definitely among the top three most attractive agricultural markets. Michael Porter, one of the leading economic thinkers, argued that every country should develop its competitive advantages. He has written many books on competitiveness. Indeed, every country is unique, and there is little point in trying to develop every industry at once. If you chase two rabbits, you catch neither. Ukraine offers substantial opportunities in agriculture, extending well beyond our company’s strategy. Overall, multinational corporations have room to grow here and an interest in investing.
More than 70% of Ukraine’s land is suitable for growing various crops. Both crop production and livestock farming require cultivated areas and arable land.
Looking at Ukraine’s strengths, agriculture can serve as a springboard for faster economic development, which is particularly important for the country. Despite the modest GDP growth recorded last year, compared with the much sharper declines of preceding years, Ukraine needs to accelerate growth to restore the standard of living seen in 2013. We understand that, from where we stand today, this will take years.
“Pioneer products first reached Ukraine thanks to Nikita Khrushchev.”
InVenture: DuPont is 215 years old, and the Pioneer brand is more than 90. How long have Ukrainian farmers been growing Pioneer seeds?
Olena Dunina: Your reference to these century-long milestones is indeed meaningful to us. The starting point of our presence in Ukraine can vary, because the first Pioneer product to arrive here was corn brought back by Nikita Khrushchev. Following his visit to the United States in the middle of the last century, he returned with Pioneer hybrids. After that, farmers in the Soviet Union, primarily in Ukraine, began growing Pioneer-branded corn. Officially, the company established a legally registered business here in the late 1990s and began commercial operations.
“We are proud that our company operates across the full value chain in the Ukrainian market.”
InVenture: Tell us about the company’s activities as an investor in Ukraine. Where have you invested, and how much?
Olena Dunina: We are proud that Pioneer operates across the full value chain in Ukraine. We have established a research station in Liubartsi, Kyiv region. However, we also have trial plots in most regions of Ukraine, allowing us to observe how hybrids perform in different climatic conditions.
In Stasi, a village in Poltava region, the company has a seed production plant built as a greenfield project. It uses state-of-the-art equipment and is Pioneer’s newest and most advanced plant in Europe.
The plant opened in 2013. The more than $55 million invested in its construction and capacity expansion is one of the company’s many investments supporting local commercial production of Pioneer corn and sunflower seeds and helping Ukrainian farmers improve the productivity and efficiency of growing these crops. This has created strong synergies with the development of Ukrainian agriculture as a whole. Looking at planted areas, most hectares in the country are devoted to corn, sunflower and wheat. Pioneer offers two of these crops in Ukraine: corn and sunflower. The Stasi plant is helping Ukrainian farmers become less dependent on imported seed.
DuPont Pioneer’s seed production plant in Stasi, Poltava region.
“Success would have been impossible without feedback from our customers.”
InVenture: Which strategy works for you: building new plants and businesses, or acquiring existing facilities and repurposing older plants?
Olena Dunina: We operate in more than 90 countries. Our approaches may differ, but compliance with the laws of the countries where we operate remains non-negotiable. In Ukraine, we work with a number of farms that grow crops for the plant. Their output is then processed, and there are, of course, specific requirements, such as maintaining spatial isolation and having irrigation systems in dry regions. At the same time, we are willing to accommodate farmers’ needs. We offer more flexible payment terms so they can reinvest in their farms, as well as bonuses, discounts, loyalty programmes and replanting programmes.
The company’s success would have been impossible without customer feedback. That is why Pioneer provides extensive agronomic support. Our sustained investment in expanding the facility clearly demonstrates Pioneer’s commitment to supporting Ukrainian agriculture and supplying high-quality Pioneer seeds to farmers across the country.
InVenture: How many farms do you work with in Ukraine?
Olena Dunina: In terms of the partner farms that produce seed for us, we are talking about dozens rather than hundreds: just over 40. These include both large and medium-sized farms, because our main criteria are quality and reliability. We are also ready to expand our partner network. The plant is increasing production volumes. These same farms may subsequently buy our finished products.
“We invest in Stasi on an ongoing basis.”
InVenture: Do you run or support social projects in Ukraine? If so, which ones?
Olena Dunina: We directly support and develop social infrastructure in Stasi, Poltava region. We regularly invest in the kindergarten and school, have purchased an ambulance and fund road repairs. We will certainly continue this work. Investment in social infrastructure and services in Stasi alone already exceeds UAH 1.7 million.
InVenture: What challenges do investors face when doing business in Ukraine?
Olena Dunina: Through our experience in both developed and developing countries, we know that the legislative framework is more stable in developed markets. In developing countries, it changes more frequently. The term itself suggests that these countries are still seeking the right balance between permissive and restrictive regulations. Fortunately, we can say that no obstacle is insurmountable. It is important to operate transparently and follow corporate principles. Our company’s experience shows that it is possible to succeed. Various difficulties arise from time to time. For example, seed certification was temporarily suspended in early 2017, just before the season began. Fortunately, the delay was resolved. Situations occasionally arise that can affect our operations. At the same time, we belong to several business associations, including the American Chamber of Commerce, the Ukrainian Agribusiness Club, the European Business Association and other industry organisations. This allows us to express the business community’s views and our assessment of the situation.
Another risk is counterfeit products, and it is not unique to Ukraine. Around 6% of products worldwide are counterfeited, across all categories, not just agriculture. The company also combats counterfeiting through its own measures. We have our IZON hologram, which cannot be counterfeited, but we must keep improving. From a regulatory perspective, however, we would like the government to take a more active role in tackling counterfeit products.
Certain rules also need to be clarified. For example, we are ready to invest in infrastructure where we operate. We are willing to fund the construction of another road in Stasi because a particular road junction is needed. This would improve conditions for both residents and the plant. However, the issue has remained unresolved for several years. We very much hope it will be settled soon and that we will receive the necessary permission.
On the positive side, we see steps being taken at the public-policy level to create a favourable business environment, including more responsive problem-solving. Issues are being addressed more quickly than they were a few years ago.
“In investing, there is always a variable. No one has yet accurately predicted the timing of a global crisis or a period of global prosperity.”
InVenture: Some questions concern everyone. On the one hand, investors are attracted by Ukraine’s investment opportunities. On the other, many are deterred by market volatility and difficulties with the legislative framework. What advice would you give investors entering Ukraine?
Olena Dunina: I believe major investors, like our corporation, have experience in many countries and regions. That experience helps them identify the key factors when entering a new market. I appreciate Nassim Taleb’s book The Black Swan, which discusses the fact that unpredictable events always occur. This applies far beyond Ukraine. Looking at the world more broadly, no one has accurately predicted the timing of a global crisis or a period of global prosperity. In the past, periods of economic stability were periodically interrupted by radical upheavals: crisis, decline and recovery. Today, we can see how much the pace of life has accelerated. Entrepreneur Bill Gates has said that electronic information creates a business environment in which there is a constant variable. It is therefore important to be prepared to make decisions more quickly in developing countries than in more stable environments if you want to continue operating successfully.
“Large corporations assess their options every day and decide where to invest, where to scale back and where to expand.”
While working on my MBA dissertation, I identified several findings. Before the 2008–2009 crisis, multinational corporations directed more foreign direct investment towards developed countries. Although returns were lower, conditions were more stable. That is a competitive advantage.
The turning point came in 2009, when foreign direct investment flows into developed and developing countries became equal. Countries such as Ukraine should recognise that their attractiveness to foreign investors has increased. At the same time, they should not become complacent or forget that competition for investment is intense, given its potential contribution to economic growth. According to World Bank statistics, 1% of multinational corporations hold half of all foreign direct investment worldwide. Put another way, more than 50% of investment is concentrated in 1% of multinational corporations.
These are substantial amounts of capital at work. Large corporations assess their options every day and decide where to invest, where to scale back and where to expand.
“Today, we see that running an agricultural business in Ukraine is quite challenging, despite its appeal.”
InVenture: Turning to investment returns, what level of profitability is acceptable in Ukraine?
Olena Dunina: It is difficult to offer a universal formula, because investment payback periods vary by industry. They also vary across countries, particularly where uncertainty is higher. Ukraine still falls into that category. Shorter payback periods are preferable here, especially given inflation, declining GDP and the depreciation of the national currency. All these factors point to the need for higher investment returns.
Traditional economic reasoning holds that if keeping money on deposit offers a better return and faster turnover, there is no reason to invest it in a business. Business returns must therefore be more attractive than the central bank’s policy rate.
We know that loans are quite expensive for Ukrainian farmers. Ideally, business earnings should cover borrowing obligations and additional expenses, including wages, equipment purchases and so on. Today, we see that running an agricultural business in Ukraine is quite challenging, despite its appeal.
InVenture: You mentioned change. What have been the most significant changes for the company over the past five years?
Olena Dunina: Without question, the most important has been the construction and commissioning of this major plant. It can now meet up to two-thirds of Ukraine’s domestic demand for Pioneer-branded corn seed and is expected to cover one-third of demand for Pioneer sunflower seed in the coming season, with that share continuing to grow.
Another development has been the expansion of our research station’s activities in Ukraine. In terms of sales of finished products to farmers, one of the notable recent changes has been the growth of agronomic support. We do not simply sell seed; we also support agricultural producers through our agronomy advisers, who work in every region of Ukraine under our slogan, “The right hybrid for the right hectare.” Proper agronomic support helps deliver high yields, which are the most reliable foundation for a profitable business. The Pioneer brand has already earned recognition among farmers worldwide and a strong reputation. The most significant change in the company’s history has been the merger of Dow and DuPont. Pioneer is now part of DowDuPont™’s Agriculture Division. We are moving towards spinning off that division into a standalone business. Ukraine remains one of our priority markets.
