Sunny Verghese and Naum Babaev performed on SPIEF-2014

On May 22, Sunny Verghese, CEO of the company Olam International (Singapore), and Naum Babaev, chairman of the board of directors of the holding company "Rusmolco" made a speech at the St-Petersburg International Economic Forum within the open discussion "Role of state support in increase of investment appeal of dairy animal husbandry".

Top managers of the main players in the Russian dairy market took part in that event: Sunny Verghese, CEO of the company Olam International (Singapore), Naum Babaev, chairman of the board of directors of the company "Rusmolco", Gilles Burleaut, director general of Danone Belorussia, Yves Legrot, director general of Danone Russia, Andrey Danilenko, chairman of the board of the National Union of Dairy Producers (Souzmoloco), Sergey Yakhnyuk, chairman of the committee on Agri and Fishery farming of the Leningrad region, Dmitry Sergeyev, vice-chairman of the board of Rosselkhozbank, and Jan Dirk Vaybur, managing director of the American analytical agency BCG in CIS.

During the discussion they canvassed a program of the development of the Russian dairy branch till 2020, created by Souzmoloco. The draft of this program is planned to submit for public discussion in June, 2014.

Sunny Verghese noted that the correct investment policy and the state support will be able to make Russia the absolute leader of the market, to exclude the import or, even, to turn it into the exporter. According to him, Olam International considers the milk production in Russia as an investment attractive branch. "In Russia the conditions are potentially much more favorable for the development of the dairy animal husbandry than in other large countries. For comparison: in China the cost of production of 1 liter of milk is 52 cents, whereas in Russia – 30 cents. From the point of view of the amount and cost of the land, Russia is the world's second country in terms of the potential. But one of the main issues is the cost of the capital", - explained Sunny. "There are no, practically, long-term loans for the period of 15 years. The rate of 15% is very high! In other countries, for example in the USA, the rate is about 6 - 7%. At the same time, the efficiency of the dairy production and financial support of producers by the government (which is a guarantee of the development of the branch) is very low”.

Naum Babaev drew attention to HR problem in the agri sector in Russia. According to him, in Russia there are about 80 000 graduates (with higher agricultural education) a year. But not all of them go to work for the agri branch. "That is why we decided to grow up experts for this sector literally from school. We are going to open classes where future land specialists will get trainings and then come to work for us", - said Naum Babaev.

All the participants of the open discussion agreed in opinion that the present state of affairs in the dairy branch needs a radical change. The main problems of the milk production in Russia are as follows: low profitability, high level of expenses, evident seasonality. Thus the milk consumption in Russia is 30% less than it is recommended in accordance with the medical norms. These factors lead to high volatility of the prices in the market of the dairy raw materials, unpredictability of outputs and, on the whole, interfere with the construction of a long-term steady business.

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