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. Last Updated: 07/27/2016

Italians To Make Meat for Big Macs

For MTLuigi Cremonini

The Big Mac that you pick up at a local McDonald’s restaurant might soon contain meat from an Orenburg cow processed by an Italian plant in the Moscow region.

It’s all part of Italian businessman Luigi Cremonini’s strategy to tap into Russia’s “huge potential” by making “huge investments.”

Italy’s Cremonini Group will open a new meat-processing plant in the Moscow region to produce hamburgers for McDonald’s by year-end as it moves to build a full production chain in Russia, Cremonini told The Moscow Times.

The founder of the Italian giant, one of the largest food companies in Europe, is not at all dismayed that the plant will cost twice as much as expected or that Russia’s cattle population is steadily declining.

“We strongly believe in the prospects of doing business in Russia, and this is why we decided to make a strong direct investment, 100 million euros [$148 million], to build the meat-processing plant in Odintsovo,” he said in an interview Wednesday.

“We are already a supplier of beef for McDonald’s restaurants across Europe and will now make hamburgers for the Russian branch of the international fast-food chain,” he said.

The Odintsovo plant, which will occupy 25,000 square meters, will initially produce 25,000 tons of meat products per year and increase in capacity to 50,000 tons in a few years, he said. Work on the plant started in 2007.

The plant will be operated by Cremonini’s local subsidiary, Marrusia.

McDonald’s, which is rapidly expanding worldwide and plans to open 30 new restaurants in Russia this year, has processed its own food needs but said it needed Cremonini to keep up with growing demand.

“Due to an extensive McDonald’s expansion in Russia, the decision was made to outsource the production facilities of ZAO Moscow-McDonald’s Food Processing Complex,” McDonald’s said in an e-mailed statement Thursday.

“Marrusia … will ensure production, storage and delivery of meat products for McDonald’s restaurants,” it said. “Supplies are planned to begin with the opening of the partner’s facility.”

The plant will provide 10,000 tons of meat to McDonald’s next year.

Cremonini said he saw the plant as a strategic investment and was cautious in predicting when it might break even.

“In normal conditions, you would expect to justify your expenses for a project like this in 10 years, but Russia is a country where it is kind of difficult to make this kind of precise calculation,” he said.

Cremonini stressed, however, that only major investments work in Russia and said his company has invested more here than in any other country outside Italy.

“This is a country with great perspectives, so the logic behind this is simple: huge potential, huge investments,” he said. “At the beginning, we of course made a business plan outlining a lot of unpredictable factors, so we are quite aware of what we got ourselves into.”

Cremonini Group was founded by Cremonini in 1963 and entered the Soviet market in 1985, supplying meat to the state-owned trade concern Prodintorg. The company started to target Russian consumers in the late 1980s and set up Marrusia in 1998. In 2008, the company reported turnover of 133 million euros in Russia, up 5 percent from the previous year. The group’s total consolidated revenues were 2.2 billion euros, an increase of 6.6 percent.

The new Odintsovo plant will become the final stage of a full-cycle production chain that the company intends to build over the next few years, starting with several small slaughterhouses in the Orenburg region.

“Our strong conviction is that if you want to succeed in this country, you have to produce and to process here. You cannot consider Russia just as an export market,” Cremonini said.

The businessman would not disclose exact investment figures for the Orenburg region, saying only that the amount would not be as big as in Odintsovo.

“Judging by the experience of our Odintsovo project, we prefer not to disclose figures,” he said. “Initially we planned to invest 45 million to 50 million euros in the Odintsovo project, but the final cost doubled.”

The major challenge during the construction of the plant in Odintsovo was meeting all official rules and regulations, he said.

“It was an incredible adventure to both meet the timing of the construction and respect all the formalities,” he said. “In Europe, we sometimes think that we have the highest construction, hygienic and other standards, but this is not true. In Russia you have to multiply everything by two.”

The reason the company plans to build several small slaughterhouses instead of one big enterprise is the relatively low density of the cattle population in Russia.

“In Italy, we have two big slaughterhouses that each process 1,000 cattle per day,” Cremonini said. “In Russia, it’s better to have several smaller plants in different areas of the country where the cattle population is concentrated.”

He said his company’s principle was to build slaughterhouses no farther than 500 kilometers from cattle farms in the interest of the humane treatment of live cattle during shipping. He said he had calculated all the possible risks of shipping meat from Orenburg to the Moscow region.

“If the trucks can cover the distance from the slaughterhouse to the plant in two days, there is no problem for us,” he said.

The distance between Orenburg and Moscow is roughly 1,500 kilometers.

Cremonini would not speculate about the possible costs of highway bribery, a common phenomenon in Russia that poses a serious obstacle for quick transportation and increases costs.

“Regarding highway bribery, we have never faced this kind of problem,” he said. “Anyway, if there are some difficulties in this country, they are absolutely the same in all the other countries of the world.”

During the last decade, meat production has dropped by 55 percent, according to statistics from the Agriculture Ministry. But Cremonini said “meat” was too general a term, and pork and poultry should be separated from beef, which requires a more complicated production process.

“Poultry and pork production is now doing pretty well, while beef production is decreasing,” he said. “In order to organize pork and poultry production, all you basically need is cereal to transfer fodder into animal protein — and Russia is rich with cereals — while beef production is more complicated.”

In January, there were 20.7 million head of cattle in Russia, down 2 percent from the same month in 2008, according to the State Statistics Service.

In order to efficiently produce cattle and beef, you have to “produce” cattle farmers, Cremonini said.

“And this is the problem in Russia — you need people to produce cattle, and finding such people and stimulating them to grow cattle takes a very long time,” he said.

“This industry has been destroyed in the last 20 years,” he said. “It is a very slow and long-term process to rebuild the cattle population.”