Major deal sees consolidation in Russian greenhouse vegetable production

05.01.2021

The Russian market of greenhouse vegetables is on the verge of consolidation, due to the recently announced plans of Rost Group of Companies, one of the country’s leading producers of greenhouse vegetables to acquire its major rival the local "Valley of Vegetables" Group.

The Valley of Vegetables currently remains a large producer of cucumbers, tomatoes, eggplants and greens under the brand of the same name, as well as strawberries under the "Vybery Menya" brand. The total area of greenhouses under its operation is 195 hectares, of which 182 hectares are operating greenhouses. The company has recently announced its plans to complete the construction of the remaining 13 hectares by the end of 2020.

As for Rost Group, the company already has four operating and two greenhouse complexes under construction, which are located on the total area of more than 193 hectares. The company has plans to complete the construction of another 100 hectares in the short term.

The company specializes in the production of branded greenhouse vegetables, which are positioned both for the middle price (Rost, Lukhovitsky Vegetables) and premium segments of the market (Dolce Vita, Flamenco, Honey Tomatoes, etc.).

The deal will allow Rost to expand the total area of its greenhouses up to 388 hectares and to increase its total production up to 320,000 tonnes of tomatoes, cucumbers, salads and berries annually.

According to Mikhail Glushkov, director of the National Fruit and Vegetable Union of Russia, a public association that unites some leading Russian fruits and vegetables producers, as a result of the deal the Rost Group will become the leader in the domestic market of greenhouses vegetables and one of the leading players in the world.

Yegor Shumilin, Director of the department of Category Management of Fresh Goods at Magnit, one of Russia’s leading food chains, considers this deal as the largest in the modern history of the Russian market of fruits and vegetables.

Despite the fact that its financial details are not disclosed, Russian analysts estimate it about RUB 45 billion (US$592 million).

According to Sergey Rukin, head of Rost Group, the current strategy of development of the company involves the expansion of its presence in key regions of Russia and better cooperation with customers. According to Rukin, this allows vegetables to be harvested at the time of ripening, when they reach their best taste.

Rukin also believes merging of the companies will have a positive effect on their operational efficiency and strengthen their positions in the domestic market. Some analysts also believe the deal may provide an opportunity to newly established company to begin foreign expansion.

In the meantime, the same position is shared by Dmitry Medvedev, commercial director of Perekrestok, another leading Russian retail chain, according to which such a merger can lead to an improvement of quality of final products and their better delivery to end users, that will be mainly achieved through the improvement of logistics.

Overall, the deal will increase the number greenhouse production sites to 10 under the operation of Rost Group.

NAI Contributor Eugene Gerden

 

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