December 30, 2009

 

Russian meat processing industry wary of foreign competition

 

 

Business expansion in Russia by major European meat processing companies could paralyse the operations of the local firms in the same market segment.

 

A new EUR20 million (US$28.7 million) project of Talex Holdings related to the construction of enterprises for the production of chilled meat in the Voronezh region and recent plans of German Tonnies Fleisch to construct a new pig-breeding complex in the same region are the main causes of concerns for local companies.

 

According to local producers, most of the regional meat processing plants will withdraw from the market as they will not be able to compete with foreigners. Only the largest Russian meat processing companies would be able to retain its market share amid fierce competition with Talex, Tonnies Fleisch and other European companies.

 

As a result, the local producers have asked the Russian government to prevent the bankruptcy of leading regional meat processing companies.

 

But most local analysts said the expansion of the Russian regional meat market by the foreigners will help the business of local farmers, who will have the opportunity to sell their meat at a price nearly 1.5 times higher than current prices.

 

Talex Holdings's project will establish an enterprise that will have a processing capacity of about 1,700 tonnes of meat per shift or 500 pigs in live weight. The payback period will not exceed five years.

 

Tonnies Fleisch's pig breeding complex will have a processing capacity of 2-3 million pigs per year. The amount of investments is estimated at EUR200-400 million (US$286.2-US$572.4 million).