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"Dobroflot": we were left alone in the field
Alexander Efremov in an interview with EastRussia told how the herring of Ivasi can double the volume of Russian fishing, and how Russian fishing as a whole was not ready for this doubling
Photo: Tass / VEF Photobank
In August 2016, at a fair in Vladivostok, canned food from Iwashi sardine, which has not been mined for the last 25 years, appeared. Buyers surrounded the Dobroflot point of sale from all sides, and the queue stretched for several tens of meters. Due to the excitement, no more than three cans were released into one hands. Iwashi is a strategic stake for Dobroflot, the company has been preparing for the arrival of fish for several years. All the more the surprise of the company executives when it became clear that none of the major players was interested in a resource that is not quoted, and which, in general, is enough for everyone in abundance. The head of the company Alexander Efremov told the EastRussia analytical agency about this and much more on the sidelines of the Eastern Economic Forum.
HOW IVASI CAN DO DOUBLE MARKET - Will the appearance of iwasi greatly change the market?
- Cardinally. In order to assess the scale of this phenomenon, one can simply recall the statistics of the Soviet period. The Union harvested 1 million tons of Ivasi, and in parallel in the same water area Japanese fishermen took up to 4 million tons of this fish. Just to compare, today all Russian fishing across the country is 4,3 million tons.
- That is, together with the Japanese we caught in the water area of the Far East as much as Ivasi, how much is today extracted in principle all the fish in Russia?
- Quite right. Even a little more. This means that, in fact, in a fairly short period of time, we will potentially get the opportunity to double the volume of fishing in the country. If the cyclicality is the same as 20-25 years ago, we can talk about 3-5 million tons of production. Provided, of course, that fishermen will really be engaged in these biological resources, and if there is an appropriate production base and a fleet.
- Catching of Iwashi is somehow quoted?
- No, no way. This is a huge biomass coming from the Pacific Ocean, it is not our domestic fish that feed and spawn in our exclusive economic zone.
- And besides you, someone else was interested in catching Ivasi?
- For the second year in a row, several companies of the Far East are trying to master these facilities with some measure of success. But at the moment, unfortunately, this kind of fishing has been lost, forgotten, and its formation is fraught with considerable risks and uncertainties. And the risks in fishing are quite an expensive thing.
- What's the problem?
- There has been no practice of catching Iwashi for 20 years. We were faced with the fact that the knowledge that the fishermen had was absolutely not documented. And everything is there - geometry, physics, hydrology, and biology. It is necessary to take into account the geometry under water, taking into account the hydrology of currents, the behavior of biomass - and so that this biomass, let's say, was caught. Let's put it this way, akin to a mixture of science, art and some kind of traditional craft. All the decisions, the methodology are in the memory of the people who last did it two decades ago. And these are not just words - the price of a mistake is very high. We have partners in the fishery who started with us two years ago, they experimented, lost half a million dollars on this, without achieving results. We stopped at this and decided not to participate anymore.
- And the scientists that predict? The fish has come - will not leave in the next year or two?
- Scientists 10 years in a row predicted her arrival. It was not a surprise, everyone knew it, prepared for it. She came here two or three years ago, well, and what's the use? She came, but there is not much excitement. That is, we initially thought that a very large number of fleets would be present in this fishery, this would also help us, because we would learn from experience, see how other solutions find solutions. And so, it turns out, we were alone in the fishery.
- So, in the near future you do not expect that there will be a powerful competitor?
- To date, the production base for this type of fishery needs to be formed long enough. We are already engaged in this 3-4 year, so in the next year or two I think that will not appear.
- Feel like monopolists?
- You know, monopolists are supposed to have some kind of restriction. In this case, there are so many fish and it is generally available, which, in fact, it can catch anyone. Just at the moment, catching it is not so easy. Therefore, it is difficult to talk about monopoly here.
- And how is Iwashi consumed today? Have people forgotten this fish since Soviet times?
- Last year showed a very big interest. In fact, high demand did not even allow us to adequately represent this fish for the central regions of the European part of the country. This year, the production of preserves will be 10-15 more, and we hope that it will reach the majority of Russians.
- What do you associate such interest with the consumer?
- Value for money. This is very cheap, tasty and massive fish, so it is extremely in demand by the consumer. And then everything depends only on the fishermen, to ensure this demand from Russian consumers.
- Well, probably, from the retail chains, too.
- In some part it also depends on retail chains, since it is necessary to provide logistics with a continuous temperature chain (–4–5 degrees Celsius). We do not make canned food, but preserves. Fresh fish is placed in a jar with added salt. That is, in fact, fish with a shelf life of 7 months is delivered to the consumer fresh.
- That is, in principle, if the retail chains took the product more actively, then would your customers find even more of their customers?
- Oh sure. And this would seriously change the market of fish consumption in Russia.
FORCE OF BRAND - Say a few words, except herring, what are you still aiming at?
- We master all the Far Eastern mass fish breeds. These are Pacific herring, pollock, salmon, saury - all these are traditionally our products. Dobroflot has the largest onshore processing, every year we process 30-35 thousand tons of fish products on the seaside.
- Do you mine so much?
- About 80-85 thousand tons.
- Among colleagues in the shop, these volumes - is it much or little?
- In terms of catch volumes, I think that we are not even among the top ten Far Eastern companies.
- And if on shore production?
- If we manufacture onshore, we are definitely the largest company, I think, even in Russia. And if you take the production of canned food, then, most likely, too. Today, the total annual output of the coastal plant Yuzhmorrybflot and the floating base Vsevolod Sibirtsev is 150 million cans. In the 2018-2019 season, we plan to increase it to 200 million cans.
- You are, in fact, one of the few companies who have created their own brand - Dobroflot - and are promoting it throughout Russia. How difficult is it in general, and is it necessary?
- Of course, this is costly, it requires some creative approach. But for us it is a compulsory measure: we are a company that produces products primarily for the Russian consumer, because we have 85-87% of all products going to the domestic market. Therefore, we must bring the value of our product and create recognition among our compatriots.
- Does Rosrybolovstvo help in this plan? Previously, three or four years ago, there was an information campaign for Russian consumers about the value of fish consumption.
- The project "Russian Fish" is an annual, we are actively involved in it, it really helps us. This allows, for example, such an umbrella brand "Russian Fish" in general to attract the attention of the Russian consumer. Wild ecologically clean fish, the Russian fish industry and, in particular, brands that are aimed at the Russian market, such as Dobruflot, are also in great demand in the framework of these programs.
- At the end of last year, "Dobroflot" applied to enter the TOP "Big Stone". Moreover, including you, the government has changed the boundaries of this territory. Has your opinion on the status of the resident of the TOP changed?
"We are working actively with this issue, we are preparing another investment project within the framework of investment quotas for the construction of a coastal processing complex for the production of pollock fillets, we will expand our investment program and, accordingly, qualify for the status of a resident of the TOP. At the moment, the scheme is being developed, in which we must somehow be involved in infrastructure projects, this issue is now being agreed upon. But for the time being there is no certainty.
- Your logo flaunts at the factory complex in Artem, not far from Vladivostok airport. Did you buy it from the previous owner?
- Yes, we purchased the complex from the Korean Hyundai Heavy Industries. This platform will be used in our country for the expansion of the production base for sewing net-tackle materials, the production of fishing gear, as well as for storing medium-temperature storage of herring preserves. Actually, our main goal is to provide logistics with a new volume with such a temperature chain, which we have not previously used.
CHINESE MARKET DOES NOT ALLOW TO BE FAULTS - How interesting are your products for export promotion, and will you be engaged in this?
- Still, for us the main priority is to fill a rather scarce domestic market. Therefore, until the export was not applied. But in the future we expect to try our hand at China.
- Such concern for the Russian consumer is a social responsibility or is it business, after all? From a rare fisherman you will hear that he does not think about exports, where the demand is stable and the proceeds in currency.
- This is not social responsibility, it's a bet made on the traditional taste preferences of the Russian consumer, and this is a fairly stable thing, which at the moment has not been fully implemented by anyone. Through the brand "Dobroflot" we bring these traditional taste preferences to the Russian consumer.
- And the Chinese consumer will have to do something else? And the brand of another, right?
- Of course.
- Have you already conducted market research? What surprises can you wait for in China?
- China's market is very specific and complex. Today he is going through a period of searching. The Chinese consumer, having received a certain degree of financial freedom, fell into the testing phase, sampling. On the shelves comes a huge amount of goods, flavors, recipes, including a very large flow of Russian products. But the peculiarity of this demand lies in the fact that it is testing. As soon as the Russian product gets support from the Chinese consumer, local producers immediately forge it and repeat the recipe in their own production.
I think that many people remember the consumption boom of ice cream and other, say, dairy products. To date, the export of these products from Russia has almost dried up, because those proven recipes that were received by the Chinese consumer are already satisfied at the expense of domestic Chinese production of exactly the same brands, exactly the same flavoring solutions, even with the same color and visual solutions . In fact, in the modern world of food production there are no secrets and it is not difficult to repeat any taste. And given the cost of production organization and labor productivity, which is now in China, if the product has already been copied, there are practically no chances to resist local production.
Against this background, our products have certain advantages: the fact is that we are able to compete not only by prescription and technological factors, but also by price ones. Almost no Russian manufacturer can compete with production in the Chinese market, located in China and addressed to the Chinese consumer. And we have some chances in this part, first of all, because the Russian raw materials base, our logistics, and the labor productivity at the enterprises of "Dobroflot" are quite high.
- Are there any trade barriers in the Chinese market? How much is this market open for Russian products?
"China is careful enough and tenaciously protects its consumer market, so, of course, there are problems with this, but in this part they are solvable.
- So, now, in essence, the question is only in your strategic decision and expansion of production?
- We will definitely prepare for this seriously, because the Chinese market does not allow us to make mistakes. A huge volume, huge inventory, which is only needed to be presented, to exhibit their products on the Chinese market. Well, accordingly, the risks are huge, related to the loss or error in this matter.