Poultry complex - production of environmentally friendly and organic eggs

Company: LLC

Operational and legal adress : Ukraine, Khmelnitsky oblast

Shareholders: 1 owner (100% ownership of LLC)

Types of economic activities (CEA):

Code CEA 01.11: grain growing, vegetable farming
Code CEA 01.11: landscape gardening and breeding-ground production growing
Code CEA: 01.46 pig breeding
Code CEA: 01.47 poultry breeding 

Short description of the business

Bird breeding complex is located in Khmelnitskiy region and it is a leader in manufacturing of environmentally friendly eggs in Ukraine. The complex keeps egg-laying birds according to all EU standards of organic farming and also uses the experience of foreign companies, which produce the FREE RANGE production.

Egg production plant has a continuous cycle starting with the grain growing and up to eggs packing and delivery to supermarkets. Fields are labored partly by using own forces, and partly by engaged ones. The harvesting is made by using haired equipment. Compound poultry feed is made on-site. There is a great part of manual labor in the process of production. Administration is performed directly at the manufacturing, also there is a representational office in Kyiv, where the elementary accounting is kept and logistics and sales departments` work is coordinated. The problem of quality and safe product always exists. For those, who care about their health it is difficult to find right products of reasonable price. Our consumer is provided with the quality and environmentally friendly product, which is delivered in the shortest terms directly from manufacturer to the capital and other big cities of Ukraine.

Information about the product

The main type of production – eggs of free range, organic chickens, with an international organic standards certification. Eggs is packaged when on sale in a brand package for 6, 10, 12 pc, specially designed for a premium-segment customers, under its own “Svit Bio” brand, and also under PRIVATE LABLE for the national Silpo supermarket chain.

Competitive advantages of the product

The unicity of the product is that it is derived as a result of loose housing system of keeping animals in freedom and without using any artificial production stimulation, which is the traditional method of poultry breeding on poultry farms. The value of this kind of eggs is undoubtedly high. The company is the single representative in Ukraine, which provides with this kind of product in sufficient quantities and on the stable layer.

Our advantage is a high quality of the product, which earned a great reputation among the customers and its competitive price. We can manufacture much more eggs in comparison to owner-operated farms, but without losing the quality, as it happens with big manufacturers, and provide an uninterrupted supply to a lot of distribution networks with a reasonable price.

Production and suppliers

Complex is located on the territory of 29 ha and consists of 8 manufacturing poultry houses, currently works the building for 15 000 ch., and the second building for 15 000 ch. is on reconstruction, the building for 3 000 ch. is in operational state.

Feed is produced on-site of the available ingredients by processing the grains into the fraction with the addition of vitamins and minerals, which are necessary for the complete feed. Also succulent feed is cultivated for ration enrichment of poultry during the winter. The technology of chicken breeding is free range, namely animals can freely move around the poultry house, and also enter the ground run during the warm year season. Egg-collecting is performed automatically with the help of the Dutch equipment for the chicken parent flock, merging and packaging of eggs is performed manually.

On the territory of the poultry plant are located 5 buildings for rearing flocks breeding, which also are fractionally dismantled and not operational. One of them is used as grainery and feed-processing room.

Also there is an impounded area on the territory of the plant, which is used for dace breeding.

Currently the selection works for creation and expansion of dairy goats` flock, which is going to be used to manufacture milk and dairy products under the personal mark, are in progress. This direction of cattle production also has the ORGANIC status.

Market and competitive environment

Our category of consumers is middle/ business / premium class. Middle-aged people, who care about their health, have children and upper-middle income.

Chicken meat and eggs market is the most dynamically upcoming in Ukraine. 7778,8 mln pc were produced on agricultural enterprises during the 6 month of 2014, price – 10-20 UAH in season, the principal demand  autumn-spring with annual gross growth, we are the single enterprise, which offers eco product.

It has a big potential, like the rest of agrarian market, and currently in the structure of implementation, product export is no more than 1%, when at the same time in foreign countries this figures is equal to 10-15%. Business segment: eco product, premium product.

Main competitors-manufacturers of packaged eggs are ”Ovostar union” and “Yasensvit” companies group, LLC “Avis Ukaina”, LLC “Kvochkino” and “Gospodin Petuhoff”. Our distinguishing feature: we are not just selling eggs in a good package and hold them out as the useful ones, we also do the right thing – keep chickens on the loose, and this is a vital difference.

Distribution and promotion

The main channel of distribution is the nationwide and local supermarket chains. Logistics from the manufacturing and directly to shops is performed with the help of associate contractors of logistics companies. As a result of development and strengthening of the eco product trend chains are actively searching for permanent suppliers. Currently demand exceeds supply. Main byers: LLC “FOZZY FOOD” “Silpo” chain, LLC “ASHAN UKRAINA” “ASHAN” chain, LLC “OMEGA” “Varus” chain, LLC “Novus Ukraina” “Novus” chain, “MEGAARKET” chain, LLC “Buro Vin” “GOODWINE” chain and several boutiques of organic production in Kyiv.

Promotion and advertising: how will costumers know about the product? Distribution networks personally promote our production with a purpose to be in trend and to be the first with a new product.  Company takes part in a specialized exhibition, eco product fairs, is a member of noncommercial association, which distributes information about healthy lifestyle and nutrition.   

Possibilities and risks

Perspectives of business development depend on capacity of eco product market, as it is only on its initial stages and our aim is to keep the leadership in our segment. Apart from chicken eggs manufacturing it is necessary to develop the dimension of meat poultry industry and also of quail eggs.  

The key risks are the risks of conducting of a business in Ukraine. Market monopolists` actions are focused on destabilization of prices, currency changes, which project on the cost of energy resources, fuel, oil and lubricants, packaging materials, feed and the possibility of forcible takeover. Currently we handle these risks as a result of our product being in demand, loyalty of the costumers, segment of the rich people, who are used to quality product, in spite of difficulties in economic situation of the country.

Management and personnel

Yablonskaya Tatyana and Yatskov Sergiy, experience in the agro sphere – since 2009, organic manufacturing, crop husbandry, animal breeding, European certification, Achievements: creation of agribusiness, creation of the well-known brand, regaining a part of the market from big manufacturers.

Owners` part in business managing: performing of operational management, providing of product distribution, determination of business strategy, fund raising.  

Employment size – to 30 people:

1. Poultry woman 4 p.
2. Candler яиц 4 p.
3. Electrician 2 p.
4. Electric and gas welder 1 p.
5. Machine-servicer 2 p.
6. Brigadier 1 p.
7. Sanitary technician 2 p.
8. Shiftman 6 p.
9. Guard 3 p.
10. Director
11. Chief accountant

Payroll budget - 71 000 UAH.

Personnel loss is minimal; by using reward scheme this loss can be prevented.

Business success factors

The unicity of the business lie in the fact that it produces the product, which corresponds to people needs and in a way it outruns the demand and forms it. It is oriented on the specific segment of consumers, which will always exist, under any economic conditions.  Innovativeness and competitive positions of the business lie in the fact that we didn`t become the 100<sup>th</sup> manufacturers of the ordinary product, but we became the 1<sup>st</sup> manufacturers of more cash-consuming product, which was ignored by big manufacturers, we acceded consumers` request on the “quality” product , and also we managed to connect the usage of modern technological equipment with the principles of organic manufacturing, where nature, animals` wellbeing and environmental friendliness are at the center of attention. It is understandable for people and they are paying back with loyalty, for which big manufacturers are struggling by spending a lot of money for advertising and promotion of the product.

 Business success factors lie in the fact that we produce a quality product, make it available for as much consumers as possible, run the business with honesty and openness, make a brand of family business with values, which are intelligible and familiar to people. Among the other reasons of success there is an increasing demand on eco product and the beginning of market grouping, so the one, who will be the first and will develop properly and continuously, will be successful.

Taking into consideration the availability of organic certification demand on gain export increased.  After raising the funds there is possibility to expand the land bank up to 500 ha and more with the purpose of growing feed for export. Demand exceeds supply as the number of certificated manufacturers is limited.

CURRENT FINANCES

The main sources of income:

• Revenue from sales of products, 99% of non-cash payment

Cost structure:

• Purchase of grain, packaging (corrugated), fuel for field work
• Purchase of seeds for sowing
• Payments harvest
• Payroll
• Logistics costs
• Expenses for electricity

Standards of accounting: Ukrainian

The system of taxation: general status of agricultural producers, the payer of the fixed agricultural tax.

Accounts receivable $ 6,220 shopping online for sold goods

Accounts payable: $ 440 for goods

Gross revenue (turnover):
• 2012 - $ 15,249 (the rate of 8.0 UAH / USD)
• 2013 - $ 41,930 (rate 8.24 UAH / USD)
• 2014 - $ 323,687 (rate of 9.9 UAH / USD)
• I quarter 2015 - $ 54,763 (rate 24.00 UAH / USD)

Net profit:

• 2012 - $ 16,500
• 2013 - $ 35,109
• 2014 - $ 116,273
• I quarter 2015 - $ 13,092

 Fixed assets

Investment project

Offer to investor

Investment offer to make a co-investing in the project of expansion of the bird-breeding-complex -production of organic, environmentally friendly eggs on the terms of “cash-in” investment:

$ 200 000 – offer to investor 15% in owner`s equity

$ 600 000 – offer to investor 40% in owner`s equity

$ 1 000 000 – offer to investor 49% in owner`s equity

Investment plan

Target value of implementation of the first stage of investment project (31 000 ch. / 2 poultry buildings)