Agricola Bacau: Counting one's chickens after they hatch

After a tough 2010 which brought lower sale prices, higher input costs and no more subsidies, local poultry producers are hoping to wing it on a flat market this year, with growth not expected until 2012. Grigore Horoi, president of Agricola Bacau, told BR about the group’s export strategy and EUR 7 million investment budget for 2011.

Simona Bazavan

How has the local poultry market evolved so far? Do you have predictions for 2012?
The first half of this year brought a 26 percent increase in poultry sales volumes for Agricola Bacau compared to the same period last year, against the fact that the market as a whole has stagnated. The Romanian poultry market amounted to about EUR 850,000 at the end of last and, so far, poultry consumption in 2011 is mainly characterized by caution. I estimate that the market will remain flat with slight signs of growth only in 2012, when we are most likely looking at a volume increase of no more than 3 percent.
At Agricola Bacau, we plan to sell 31,000 tons of poultry this year, 5,000 tons more than in 2010, with a significant portion of this amount going abroad.

Would you say that we are presently dealing with a new wave of the economic crisis?
Following the last two years’ experience, we can say that we are prepared to deal with the possible effects of recent international events.
Regarding the development of the local poultry industry, 2010 has brought massive changes – deflation, the lack of subsidies and more expensive inputs – which have meant higher costs, of about 11.3 percent of the turnover. Against this backdrop, Agricola Bacau has tried – and we like to believe that it has succeeded – to improve its operational performances, make better use of internal resources, invest in people, better communicate with clients and customers and adjust and foresee market changes. We want to stay on the same track and remain among the top local producers.

How do you think that the price of poultry will evolve by yearend?
For poultry we have successfully recovered the 11.65 percent price decrease recorded in 2010 compared to 2009. So we have come back to the prices charged in 2009 and I do not think that this will significantly change by the end of 2011. This price recovery was essential, especially given the price increases for fodder. Otherwise, companies would simply not have been able to cover their costs.

What would you say are the main challenges for Romanian poultry producers?
After subsidies were dropped in 2010, the industry has faced, at least in the first half of the year, great pressure due to the higher costs of raw materials. Although expenses for cereals, our main input, are up in 2011 by an average of 120 percent compared to 2009, poultry prices have increased this year by only 11 percent compared to 2010 which is still 3 percent below the average of 2009. With raw materials accounting for more than 50 percent of the final price, the negative impact of more expensive raw materials translates into 27 percent of the cost of a kilogram of poultry in 2011 against 2009. We hope, however, that as this is a good agricultural year, there will be price decreases for the main raw materials we use.

What were your objectives for Agricola Bacau in 2009 when you became president?
My mandate began in a seemingly quiet period for the poultry industry, but this has quickly turned into a challenging one. My main objectives have been to restructure the business, to bring a new approach as well as strengthening relations with final consumers. The present structure of the Agricola Bacau group of companies, which is based on business lines, is a met objective. Also, one of the most important aspects of our brand is innovation especially when it comes to new concepts for our products as well as introducing last generation technologies. There is of course room for improvement. The biggest challenge was in 2010, a tough year for the poultry industry in general. But we have managed to adapt, respond to market requirements, make our operations more efficient and thus come out with our head held high. As for future objectives, I want to keep Agricola Bacau where it belongs: the main producer of poultry in Romania.

What are Agricola Bacau’s turnover targets for 2011?
For the Agricola Bacau group of companies we have budgeted a turnover of up to RON 440 million for the current year, which is 7 percent higher than the previous year. Thus, for poultry we target a 15 percent hike, 10 percent for pre-cooked and ready-meal products, another 10 percent for dry salami and boiled and smoked products and flat figures for eggs.

Why did you decide to focus on external markets and what is the export strategy for 2011 and the years to come?
One of Agricola Bacau’s objectives for 2011 is to boost its market share for poultry from 14 percent last year to 16 percent. Considering that the Romanian market is a flat one, turning to exports is only natural and their significant increase in value was mainly generated by higher volumes of exported refrigerated meat. While in 2010 the company’s exports did not exceed 12 percent of production, this year we estimate that the share will be around 20 percent. The main countries where we export are Germany, the Netherlands, France and Greece and we also have a special focus on the UK where we have gained market access this year. The first shipments of ready-meal products have already been made by Europrod and we are also looking to export raw dry salami from Salbac. To achieve this requires an increased production capacity for dry raw salami, an investment that we are presently making.

What are your investment plans for 2011?
In 2011 the Agricola Bacau group plans to make total investments of about EUR 7 million. Out of this, EUR 3.2 million will be invested in poultry production, EUR 600,000 in the production of raw dry salami, EUR 500,000 in expanding our network of own stores and another EUR 2.5 million will go into modernizing the egg-producing farms. Investments in development make up a share of more than 75 percent of the total investment budget and the remainder is various allocations for cutting costs and law compliance costs.

simona.bazavan@business-review.ro

CV Grigore Horoi
1997- 2008 vice-president of Agricola International
1996-1997 CFO of Agricola International
1994-1996 chief accountant of Agricola International

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