People probably have never heard of Dmitriy Volkov but have likely eaten one of 30 kinds of frozen dumplings that his family-owned business produces. He's the co-owner and chief operating officer of Levada, Ukraine's biggest producer of frozen pelmeni, varenyky, ravioli, pancakes and khinkali, as well as pastry and pizza dough.
Born and raised in Odesa where Levada is based, the 30-year-old Volkov took over the business three years ago when his parents divorced. He’s seeking to expand the company’s 28-30 percent share in the frozen food market in Ukraine.
“I want to buy regional and local producers, not their factories, just their brands,” Volkov told the Kyiv Post during a business trip to the capital on Oct. 21.
Consumers are loyal to regional brands, so they are his main competitors. Thus, in Kyiv, customers usually prefer the Try Medvedi brand of frozen varenyky or pelmeni. Khinkali, Georgian dumplings made of twisted knobs of dough stuffed with meat, are enjoyed in the east but not popular in western Ukraine. The opposite is true of pancakes.
Educated in England’s Lancaster University with a degree in human resources, Volkov has seen growth – sales in volume and in hryvnia rose 15 percent in 2013, with earnings before interest, taxes, depreciation and amortization – a measurement of a company’s value – reaching $35 million.
Despite Russia’s war and recession last year, Levada’s sales volume surged another 10 percent and sales in hryvnia rose by 15-20 percent. This year, production volumes will stay the same at about 28,000 tons. Yet the factory has the capacity to produce 40 percent more.
The top 10 frozen food producers account for 62 percent of the frozen foods market
Levada also has about 20,000 branded refrigerators filled with frozen food across Ukraine located in kiosks, shops and large supermarkets. It also produces “private labels for all the supermarkets in Ukraine: ATB, Silpo, Auchan, Metro, Billa – well for everyone,” Volkov said.
Most of the meat the company uses apart from poultry is imported because of shortages in pork, beef, turkey and lamb. Remarkably, according to Volkov, the firm has survived for much of its existence with exorbitant loans from Ukrainian banks, currently paying an annual 25 percent interest rate.
Last year, with the hryvnia dropping sharply, Volkov realized he couldn’t rely on the national currency anymore. Plans were canceled to build a new plant on 10 hectares of land in Ilichivsk.
“So we decided to expand to export markets,” he said. “My first priority was sales in exports with euros or U.S. dollars, which will help my country, my company.”
He started selling to much of the former Soviet countries except for Russia, entered Dubai, Israel, and has new orders from the U.S. and is conducting market research and negotiating with potential Chinese buyers.
About 15 percent of sales come from exports.
“I would like it to be 50 percent,” Volkov said. “I would even drop the cheaper products I sell in Ukraine if I had the chance to sell in euros or dollars.”
After spending more than $150,000 on trips to Russia over the last five years, Volkov cancelled plans to push his products in the market of 142 million people. He didn’t want to be dependent on political risks when “my or their country decides to stop economic relations… I don’t want my potential partners to get into this business because they have to invest money in branding and marketing… they are scared.”
Top-to-bottom corruption is the company’s biggest challenge. The tax and customs authorities, as well as the judicial system, haven’t changed at all, in Volkov’s opinion.
“I cannot say for sure, but I understand that Serhiy Kivalov’s people probably have a monopoly on the judges in Odesa Oblast.” Volkov said. “All of this pisses me off.”
“The scale of corruption doesn’t matter, whether it’s Hr 10 or $100,000,” the employer of 500 workers said. “But we were all waiting for cardinal, total change of the system. And we didn’t get it. This really disappoints me as a businessman. It makes me consider moving to another country and doing business there.”
Things have improved since 2012-2013 when prosecutors under ex-President Viktor Yanukovych hassled his business.
“In this country they could accuse anybody of anything just to take over the business,” Volkov added. “I could stay in the U.K., but I didn’t stay there because I love this land, I want my children to do what they want to do in this country, not somewhere else.”
He feels safer in Odesa than in any other Ukrainian region because Mikheil Saakashvili, the former president of Georgia, runs the oblast as governor.
“Today, Saakashvili is Odesa’s hope,” Volkov said. “I think it is quite a strong brand for changes in terms of all the Ukrainian people. He has to show extraordinary results and he is doing that.”
For this reason he is trying to join Saakashvili’s team as an adviser and has shown him “places and schemes where corruption can be.” Volkov already is an adviser to the Mykolayiv governor.
He also wouldn’t mind getting cheaper loans from Western or international financial institutions like the European Bank for Reconstruction Development to upgrade or buy new equipment and facilities, but he wouldn’t feel safe with the loans in foreign currency because his business operates in hryvnias mostly.
Western investors are also welcome to buy a majority stake in Levada, according to Volkov.
“I don’t mind having a minority share, I’ll still be the CEO of the company,” he said. “I know the strategy, understand this market. I understand where, when and how we have to go.”
Given the high loan rates in Ukraine, Volkov said that “Ukraine really needs investors, we are ready to accept them, we are ready to let them in our companies.”
Kyiv Post editor Mark Rachkevych can be reached at [email protected].
