Rostyslav Vovk, CEO of Kormotech, a second-generation family business, recalled that the first days after Russian troops crossed the border into Ukraine were some of the most challenging since the first impact wreaked havoc on supply chains.
“Since February 24, the company’s factories in Lviv Oblast, near the border with Poland, have only been closed for a week for security reasons. At that time, we had several weeks’ stock of finished products and raw materials that allowed us to maintain our operations; even so, logistics were disrupted across the country,” Vovk said.
“The Russian army severely damaged the infrastructure in many parts of Ukraine. Our distributors could not transport our products in some regions. But looking back, we can safely say that our local partners and teams coped brilliantly in those conditions,” he added.
Shipping to Belarus stopped
As of February 24, Kormotech stopped shipping to Belarus, which accounted for almost 20% of its export sales in 2021, and redistributed the recalled volumes among other export destinations. This movement has not meant a drop in sales, which, on the contrary, increased by 36% in cash and 14% in volume compared to the same period in 2021. Kormotech has not exported anything to Russia since 2014.
Management structure reshaped to meet challenges
Kormotech has shaped its management structure to better address new challenges.
“Our strategic team was divided into 3 more flexible groups in just one week. The first focused on providing products to our domestic market and ensuring uninterrupted operations of our facilities in Ukraine and Lithuania; The second was about strengthening the presence in export markets, and the third was about the launch of ‘Save Pets of Ukraine’, a global humanitarian aid for pets suffering from war. We had this experience in 2014 when the war started. In 2014, when Russia started the war in Donbass and occupied Crimea, we launched an initiative called “Don’t leave us in ATO”. We rescued pets that suffered from war. Later we transformed this initiative into a stable loyalty system of cooperation with volunteers, hostels and NGOs”. Vovk said.
Humanitarian efforts aimed at protecting pets are badly needed in Ukraine. More than 150,000 cats and dogs need humanitarian aid in Ukraine, according to a survey conducted by the international organization Four Paws. The exact number of stray animals that lost their parents is unknown, but is believed to be huge.
The market shows resilience
Despite all the horrors the Ukrainian nation is going through, the country’s pet food market is showing surprising dynamism.
“We predict that the pet food market will remain the same in volume as it was in 2021. A year ago, it was equivalent to 120,000 tons in 2021 and was considered one of the fastest growing in the world,” Vovk said, adding that Kormotech’s turnover in 2021 was $110 million, 35% more compared to 2020.
Currently, almost all pet stores in central and western Ukraine are still operating. Pet food businesses also managed to recover in the east, the territories mainly affected by the hostilities. For example, in the Kharkiv region, almost 85% of pet shops are still in business, Vovk estimated, adding that during the worst period of fighting in the region, this figure was close to 40%.
Importance of electronic commerce
The war has also affected customer behavior as a growing number of Ukrainians now choose to shop online.
“E-commerce has become more vital for customers. As supermarket sales did not grow due to infrastructure damage, the customer came online and sales on this channel for Kormotech brands tripled,” Vovk said.
“Importers had some delivery failures due to queues at the border and infrastructure damage. Local producers located far from the front line coped well in these conditions,” Vovk said, adding that by now, all market players have resolved logistics issues.
Development plans
Thanks to the stable situation on the domestic market, Kormotech has not abandoned its development plans.
In 2021, Kormotech was ranked 51st among the world’s top 101 companies and the 7th fastest growing pet food company by Petfood Industry magazine. “By 2023, we are set to be ranked among the top 50 global leaders in the pet food industry worldwide because of our vision,” Vovk said.
“We anticipate that the Ukrainian pet food market will grow, but slower than before. Ukrainians show great humanity and love for their pets. Many have now switched to pet food due to its convenience. However, affordability will be one of the key trends, not only in Ukraine,” Vovk said.
Every cloud has a silver lining
“For the first time in history, the Ukrainian [origin of] brands work in favor of companies. We are not treated as part of the heritage of the Soviet Union. It is about trust and willingness to cooperate with Ukrainian companies,” Vovk said.
“It used to take years to earn trust and loyalty. Now there is incredible support for our business. European networks are happy to expand the company’s range on their shelves, label the product with Ukrainian symbols and refuse to sell Russian products,” he said, adding that the company currently promotes its brands at European, American and Asian events.
Kormotech joined forces with other exporting companies in the pet food sector of the ‘Ukrainian Pet Alliance’. The United States Agency for International Development (USAID) supports the project with funds. The Alliance was to officially launch in April, but was launched and presented at the Global Pet Expo (USA) in March. Its main goal is to support Ukrainian pet care brands in the global market. Its members include Animal ID, Collar, Harley and Cho, etc. Kormotech has a mentor role as one of the most successful exporters.
“Regarding future development plans, we are considering launching new facilities around the world and, in 2023, expanding our current production capacities in both Ukraine and Lithuania,” Vovk said.
Kormotech currently operates a pet food factory in Lithuania. Vovk said that the facility currently covers 100% of all orders and that the company plans to deepen cooperation with our long-term subcontracting partners in Europe. He added that the company is constantly receiving our outsourced orders. Stocks of products in warehouses, including those in Europe and America, are constantly replenished.
“We will launch new products, present them at the most prominent exhibitions, just like in 2022, pay taxes and support our team, especially those who serve in the Ukrainian Armed Forces. In addition, we will continue to save pets that suffer from war. Since March 2022, we have delivered more than 916 tons of pet food to cats and dogs in need,” Vovk said.
“The essential part of our impact today is to be the voice of war in our professional network and to engage the world community in supporting Ukraine and its 4-legged friends,” he added.
waiting for better days
In recent months, Russia has increasingly targeted Ukraine’s energy infrastructure with missile and drone strikes, leading to widespread power outages across the country. This tactic not only leaves millions of citizens without heat during the winter, but also affects the power supply to industrial operations. Like other businesses, Kormotech made sure it had backup power generation sources to ensure uninterrupted operations.
“Our Ukrainian facilities are equipped with powerful generators that allow us to produce at a maximum capacity of 10 hours (independent) if necessary, just like our local suppliers,” Vovk said, adding that when the time comes, everything destroyed or damaged will recover. be restored
“As a nation, we will have to rebuild the infrastructure, institutions and businesses,” he said.
Despite all the challenges, Kormotech, like the rest of the Ukrainian nation, remains optimistic about the future. In a recent opinion poll, when asked if they thought Ukraine would win the war, 98% said yes.
“Resilience is in our DNA. So, we continue to do our job,” Vovk said.