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. Last Updated: 07/27/2016

Ex-WBD Execs Set Up Milk Venture

Itar-TassA cow being milked at a Moscow fair. The founders of the new firm will seek to supply a shortfall in the milk market.
Two former managers at dairy firms Wimm-Bill-Dann and Nutritek have left to set up a new milk venture, Russagroprom Holding, which will invest $550 million in the next five years buying land and producing milk.

Deputy general director Nikolai Dyachkov said the new firm would seek bank loans to finance a huge agricultural complex to supply a shortfall in the country's milk market and that the company would consider an initial public share offering in three years.

"This year we will determine where to acquire land. The project could start as soon as May or June next year," Dyachkov, the former chief executive of dairy and baby food company Nutritek's agricultural business, said in an interview.

Milk powder prices have more than doubled this year in the country and bread prices have risen sharply in line with world grain markets, fueling inflation that is set to overshoot the government's 2007 target of 8 percent.

Dyachkov's partner in the project is Vladimir Alginin, a deputy agriculture minister from 1996 to 2002 and the former head of the agricultural division of Wimm-Bill-Dann, the country's largest dairy and fruit juice company.

"In the space of five years, we intend to create one of the biggest agricultural holdings in Russia," Alginin, the new company's general director, said in a statement announcing the creation of Russagroprom.

Russagroprom plans to acquire about 250,000 hectares of arable land and to build a major complex to house at least 50,000 to 100,000 head of dairy cattle, which will allow for production of about 1,000 tons of milk daily.

Dyachkov said the firm would grow feed crops and was looking at sites in several central and western regions, including Kaluga, Penza, Tambov, Voronezh and Belgorod. The project could be built in several of these regions, he said.

Russia has named agriculture as one of four priority areas for development as it seeks to introduce modern technology and boost production that had slumped after the Soviet Union collapsed.

Dyachkov said Russagroprom, through its participation in the national project, would seek financing from state-owned banks, including Russian Agricultural Bank and Sberbank. He said an initial public share offering was possible in two or three years. "It will depend on how efficiently we realize our projects."

Nutrinvestholding, the parent of Dyachkov's previous company Nutritek, floated its shares in April.

Russia is suffering from a deficit of milk as dairy cattle numbers have slumped in the last few years, although they are now beginning to stabilize, Dyachkov said.

On a world level, India and China are now consuming more milk that might previously have been sold to Russia, while Belarus is supplying some milk to Venezuela that it previously shipped across the border, he said.

Russia's top two dairy companies, Wimm-Bill-Dann and Unimilk, also have plans to expand milk production to meet the shortfall.