Managing Megatrends In Russia
12th September 2017 Paul Andrews
Globalisation, digitisation, demographic change: Managing the megatrends in Russia from a family firm.
It’s relatively rare for Russian businesses to be genuinely international, and even more so for a private business. But Avgust is an exception. The first Russian pesticide producer to operate across the world, Avgust has a joint-venture company in China, a subsidiary in Brazil, sales in Eastern Europe and Latin America, and plans to expand in Asia and North Africa.
The ambition, says Boris Tarasov, one of the founders and CFO of Avgust, a pesticide producer in Russia, is to “be one of the top twenty companies in the sector in the world. And we think we can do it. Five years ago, we predicted that Russia would be the world’s biggest grain exporter, and no-one believed us. But we were right. During that time, our own business has grown dramatically, and we’re competing successfully with global brands like Syngenta and Bayer.”
Globalisation is clearly opening up significant opportunities for Avgust and it has made the successful transition from selling in adjacent markets, to those with very different languages and business practices: “Our business has its historical base in Russia, Belarus, Ukraine, and Kazakhstan, and the ‘mindset affinity’ between those countries has made it easy for us to trade between them. But now we’re looking much further away, and we have to find new ways to build relationships. We do this by hiring experts who understand those markets, and as a result we’ve discovered some important common ground with farmers in Colombia.”
Another megatrend that Avgust is exploiting is digitisation. “There comes a time when you realise the world is never going to be the same. People are ordering taxis via their smart phones – they have everything they need on their tablets. Clearly, agriculture will never be entirely digital, because farmers will always have to go out in the field and see what’s going on. But there’s a lot happening in this sector all the same. Remote monitoring of crops, using temperature and precipitation data to help improve yields – that sort of thing. We are always open to new ideas. When we started, 26 years ago, no-one could have predicted the world we have today, but we’ve survived and grown by being flexible – by being able to adapt.”
One thing that certainly can be predicted over the next 26 years is the impact of demographic change. More people will become middle class, and have the spending power to buy better goods, and eat better food.
“That’s an opportunity for us too. The long term trend for our sector can only be positive, as the world’s population keeps growing, and people eat more and more meat. That’s why we’re positioning our business for growth. As well as selling into new markets, we’re also constructing a new plant in Russia, one of the biggest in Eastern Europe."
"We’re lucky in that we are generating enough cash to fund our expansion – we have a great credit rating so we could raise money from outside if we wanted to, but we don’t. That said, I think we will go for an IPO in the next five years or so. Not so much to raise funds, but more as part of our work to professionalise the company. Having a listing forces you to be more transparent, to comply with accounting and other regulations. That’s a good thing.”
About the piece - This feature forms part of the PwC Global Family Business Survey 2016, a piece of research that interviewed over 2,800 representatives around the world. It has been reproduced with permission of PwC. Click here to see the full results of the survey and other features.