The epidemic did not get in the way of the growth of the Ukrainian pet food producer. Since the beginning of 2020, Kormotech sales have grown by 31% in US dollars. Under quarantine, the company's plants continue to operate in compliance with all sanitary and epidemiological norms, in accordance with WHO recommendations and the requirements of the Ukrainian government.
About 8 million domestic cats and dogs live in Ukraine. This is confirmed by the company data. Kormotech provides about 30% of the pet food market in Ukraine. 55% of the manufacturer's products are sold through pet stores. During the quarantine, this retail segment has gone through serious turbulence, market operators say. At first, the Ukrainian government did not include them in the list of strategically important trade establishments. The need was taken into account after Kormotech's appeals to the Prime Minister and the President. A Ukrainian pet store is by and large a small private business where the owner decides if it works or not. A third of them are located in the markets. If the market was closed, the store was closed too. Now the situation has changed. In the middle of the May many markets and following pet stores (80%) started to work.
"Demand for our products increased in the second half of March. We suppose pet owners stocked up on pet food, like other types of food. The largest increase in sales took place in grocery stores and doorstep shops (in our sales, this channel occupies about 15%) and online stores (less than 5%)", - says CEO of Kormotech Rostyslav Vovk.
According to him, the crisis in the field of pet care in Ukraine will be felt in one and a half to two years. Since 2015, the Ukrainian food market for cats and dogs has grown by 15% annually. This year, it will not grow in full size, but it will not significantly sag, as food is a product that is difficult to replace quickly.
"We predict that the demand for expensive purebred dogs and cats in Ukraine will slightly decline. Catteries and kennels will be less involved in breeding. This will reduce pet food intake. On the other hand, IT companies are partially collapsing, manufacturing companies will not raise wages, the tourism industry and the restaurant business in the country will be quarantined for a long time. By the fall, people will have less money. And if prices rise, pet owners will not only buy less, they will also look for a cheaper alternative,” says Rostyslav Vovk.
The COVID-19 pandemic did not prevent Kormotech from expanding its export geography. Norway has become the 29th export country for the Ukrainian company. By the end of 2020, the producer plans to sell 18 tons of pet food there. Over the next two years, it is planned to sell another 100 tons of products. Following the results of four months, Kormotech's exports abroad account for 18% of the total volume of manufactured products. In 2019, this figure was 13%.
"We understand that the quarantine is difficult. 50% of our employees switched to remote working. However, each member of the team realizes that staying in the game means working hard. Signing a contract with a new export country under partial or full lockdown is a common victory,” adds Rostyslav Vovk.
Following the results of the first four months, the manufacturer increased its revenue in US dollars by 31% compared to the same period in 2019. In terms of sales, the company holds the leading position with a share of 29.2% of the Ukrainian market.
The company spends part of the funds on the purchase of personal protective equipment for employees. In March-April, Kormotech spent USD 15,000 on masks, gloves and disinfectants.
The company continues to invest in route-to-market. According to the CEO, the shutdown will put the company back for at least a month: “Communications cannot be reduced. We have not stopped developing strategic products and continue to work on the product lines, as well as creating a new brand for export markets. The approach is not to cut, but to optimize or scale. We are working on thrift, reviewing the terms of cooperation and real current needs.”
Kormotech draws on the experience of the previous crisis in 2014 during the Revolution of Dignity in Ukraine. Then the company helped evacuate animals from the war zone and donated over 40 tons of petfood to volunteers caring for stray cats and dogs in the occupied cities. COVID-19 led to new initiatives. During the quarantine, Kormotech has already initiated three social projects:
Support for doctors and the local community
Together with Enzym (a biotech company that makes yeast and extracts, part of a family business, ed.), companies purchased equipment for local hospitals worth USD 150,000 and joined the insurance fund initiative for doctors fighting COVID-19. At the cost of Lviv businessmen, the regional authorities insured 3,200 medical workers. Kormotech also provide pet food to the food kits of the Zhyznelyub (The One Who Loves Life) Charitable Foundation for the seniors.
Flashmob "United by Love"
A new initiative of the company under the premium food brand CLUB 4 PAWS launched the collection of food for animal shelters in Ukraine. Social media users post thank-you videos, saying thanks to their four-legged friends. For each post, the company transfers 1 kg of pet food to animal shelters. During the first week of the campaign we managed to collect more than 1 ton of pet food. Ukrainian stars also joined the flash mob. The campaign continues.
Animal Shelters Assistance Program
Kormotech transfers up to 30 tons of pet food annually for the needs of Ukrainian animal shelters and zoo volunteers. With the beginning of the quarantine, Ukrainians began to save and donate less to charity. As a result, the number of requests for assistance from the company increased sharply. The manufacturer has decided to launch a special program for volunteers, under which animal shelters in Ukraine can buy products at reduced prices on a regular basis. The company also plans to help the Chernobyl Exclusion Zone Shelter.
Pet owners want a lot from their pet food brands. They want primary proteins that suit what they believe is best for their animal. They want grains or they don't. They want something customized, but it has to be easy to understand.
Constraints and crises, like those experienced in 2020, help drive innovation and sustainability offers context.