The “Gardens of Stavropol” company will soon spend 1.1 billion rubles to plant an orchard with output capacity of 13 500 tonnes of fruit per year. Investments are expected to be repaid within seven years, though this will only be possible if the investor uses its own storage facility, construction of which has been postponed.
The beginning of the project “Expert South” was recently discussed in the Development Corporation for the Stavropol Territory: intensive orchards were to be planted as part of the launch of the second stage of the “Nevinomyssk” regional industrial park. “A positive decision was made with regard to Stavropol Fruit Valley becoming a resident of the park” said the group’s general director, Ruslan Attaev. “It has also been helpful that the investor will take up 300 hectares almost immediately as a second stage for the industrial park. In three years there will be an intensive orchard here, which in the longer term will produce as much as 14 000 tonnes of fruit per year.”
Economist Igor Tarasov of Gardens of Stavropol explained that in planting the new gardens, the company will use saplings from local nurseries. “The garden itself will occupy 276,7 hectares; the remaining territory will be occupied by internal access roads, a pumping station, and facilities for workers” Tarasov clarified. “The territory is already being prepared. In fall 2019 we will begin planting the first 96,2 hectares. At this step, investment in the project is expected to be at 500 million rubles. In the spring we will begin work on the second and third stages. Total investment is estimated at 1,1 billion rubles. Within five years (through 2026) full output capacity of over 13 500 tonnes of fruit per year should be reached, with investment recouped in year 7.”
The land for the orchard was not chosen by accident. The second stage of the “Nevinnomyssk” park is located on previously-irrigated grounds that hosted vegetable cultivation, and has the necessary engineering infrastructure already as well as an exit to a nearby federal highway. Nearby are other transport links, and the area is free of other industrial impact (the park’s first stage is being developed in a different part of Nevinnomyssk).
Tarasov added that the group is considering the prospect of constructing a fruit storage facility nearby, with sorting and packaging components. The facilities are expected to be completed in 2020, when the first stage of gardens begins to produce harvests – the first of which is expected to be approximately 5 tonnes of apples. By the closest analyses of the company, construction of a contemporary refrigeration unit and associated infrastructure will cost an additional 1 billion rubles, approximately. “Thus far, the project has employed only the investor’s own funds. Further support for the project has been offered by the Ministry of the Caucasus and the Agency for Investment Development of the Stavropol Territory, negotiations for which are already underway” commented a representative from Gardens of Stavropol.
Apples, pears and plums grown by the company will be offered in major retail networks, which “will offer attractive prices and an immediate outlet for large volumes”. As a major outlet for production, the investor is targeting not the south of Russia, where there is strong competition from many similar projects already, but the central and northwest regions.
According to data provided by IAS Seldon.Basis, Stavropol Fruit Valley LLC was registered in 2012 in Nevinnomysske. The company director is Dmitry Shepelev; it is 95% owned by Gardens of Stavropol LLC and the remaining 5% is held by Dmitry Landyrev. By 2017 accoounts, the company had revenue of 644 million rubles and clean profits of 3 000 rubles.
Gardens of Stavropol LLC was registered in the Mineralnye Vody region in April 2006. Established capital – over 1,3 million rubles. Its primary area of business was listed as grain cultivation (non-rice), legumes, and olive culture. Shepelev is likewise registered as company director. In 2017, the company’s revenue amounted to 139 million rubles; profits – over 68 million rubles.
Based on commentary of Tarasov, the company has its own plant nursery facility in its home region with a selective breeding centre, and in Karachaevo-Cherkesk, an intensive orchard on 207 hectares with projected capacity of 10 000 tonnes per year, planting of which has been ongoing for approximately two years. The company plans to plant the final 20 hectares this spring. Investment in the project is approximately 800 million rubles.
According to data provided by the regional government, the plant nursery of Gardens of Stavropol is the largest in the region, with capacity of 1,5 million seedlings on an area of 100 hectares. Plans have been made to increase the area of the nursery to 300 hectares, with capacity to produce up to 5 million seedlings by 2024.
“We are interested in projects whose initiators have the necessary experience” noted Vadim Merzlyakov, General Director of the regional Agency for Investment Development. “Only then we can reduce the risk typically associated with questions surrounding whether a project that receives money from the budget will be realised; whether the investments will ultimately be effective for business and for the region. Gardens of Stavropol has the experience, and we are considering the possibility of support from an investor, but in a concrete sense it’s still early on in the process.”
General Director of the analytics company “Growth Technologies” Tamara Reshetnikova views prospective new orchard projects positively. “Intensive orchards in the south are a trend” noted the expert. “The existing programme of government support includes subsidised credit and other various subsidies, for example, for planting of gardens. The goal – to substitute imports. Without consideration for the current prohibition on apple imports from Poland, and growth of internal production, in Russia, during winter and early spring, imports of fresh table apples typically reach as high as 50% of total supply. Meanwhile, climactic conditions in Stavropol are very similar to those of Italy, the largest producer of apples throughout Europe. Consequently, Stavropol fruit – assuming that quality production in the region is realised – could potentially substitute all imports on quality and characteristics of goods. At the same time, it would be necessary to use contemporary technologies for storage and presale preparation of product.”
Reshetnikova also noted that intensive orchards typically pay off within five to seven years, but only in cases where no less than 60% of total harvests are stored in medium and long-term storage facilities (for up to 9 months). Under those conditions, fresh fruits can be sold all winter and spring at prices that are more attractive to producers.
According to “Growth Technologies”, today in the South tens of orchard projects are being realised, more than half of which are orchards of intensive or superintensive type. Of these, the better known are those of “Southern Lands” (part of the agricultural holding AFG National), with orchards on 700 hectares in the Krasnodar Territory producing 10 500 tonnes of apples per year at an investment of over 6 billion rubles between 2015-2018; “Alma Holding” (316 hectares of gardens in the Abinsky region of the Kuban, at investment of 1,3 billion rubles); and Cherkessky Orchards (part of AXIS Agro, with 460 hectares in Adygea producing 4 500 tonnes per year at investment of 1,6 billion rubles).
“Beyond those, the EKO-Culture holding group has also floated a major project” Reshetnikova added. “During the 2018-2020 period, the company expects to set up 900 hectares of superintensive apple orchards in the Stavropol region, and to build a storage facility. Total investment is expected in the region of 3 billion rubles.”