Algae fed to salmon
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Russia’s largest salmon and trout producer, Inarctica, is diversifying its business amid an expected decline in demand for redfish. The company became the owner of the Arkhangelsk Algae Plant (AVK), which produces algae in the White Sea region and produces food and cosmetics. Inarctica can expand AVK’s business through its distribution, but promoting algae products will require investment.
The Arkhangelsk Algae Plant, which is engaged in the extraction and processing of algae in the White Sea region, has become the property of the salmon and trout producer Inarctica. Changes to the Unified State Register of Legal Entities were made on February 1, Kommersant drew attention.
AVK exists since 1918. It produces dietary supplements, snacks, sweets, and cosmetics under the AB1918 brand. Sells products in its own online store, on third-party online platforms, as well as in a network of branded outlets in Moscow, St. Petersburg and other cities.
Inarctica (formerly Russian Aquaculture) owns the rights to 35 salmon and trout farming sites in the Barents Sea and lakes of Karelia. In 2021, sales increased by 80%, to 27.9 thousand tons, revenue – by 91% year-on-year, to RUB 15.9 billion. The company has not yet published results for last year. In mid-December 2022, Maxim Vorobyov, who owned about 47% of Inarctica, and his brother, Governor of the Moscow Region Andrei Vorobyov, came under US sanctions. The next day, Inarctica reported that Maxim Vorobyov’s share had been reduced to less than 24%.
Some of the former owners of AVK were previously associated with Inarctica. Prior to the current transaction, more than 60% of AVK LLC through Okean LLC belonged to a fund managed by Svinyin and Partners Management Company, the fund of which also owned about 25% of Inarctica. Another 25% of the plant belonged to the shareholder of the development group “Airplane” Mikhail Kenin. Minority stakes in AVK were owned by Inarctica CEO Ilya Sosnov, CFC Management founder Ekaterina Chernova and Svetlana Vorobieva.
Kommersant has confirmed the acquisition of AVK in Inarctica.
According to a company representative, the deal will diversify the business: enter a growing market, develop in the field of biotechnology and algae breeding. The financial terms of the deal were not disclosed by Inarctica.
Alexander Fomin, executive director of the Association of Production and Trade Enterprises of the Fish Market, agrees that AVK can become a new promising direction for Inarctica. But, he notes, it is extremely difficult to compete with Chinese suppliers of algae products on price, this industry requires significant investments, including in research and development, and marketing investments are needed to expand AVK’s business.
Marat Ibragimov, senior analyst at Gazprombank, says that Inarctica already has established contacts with the largest networks, which will, if necessary, expand the distribution of the algae plant. According to Mr. Fomin, AVK Inarctica will probably be able to use part of the by-products as a feed additive, but we are talking about small volumes.
Inarctica’s desire to diversify its business may be relevant in the face of a decrease in the consumption of red fish in Russia.
Due to disruption in supply chains and currency fluctuations, the Russian redfish market in 2022 could be reduced compared to 2014-2015. In the coming years, against the background of difficulties in the economy, fish consumption in Russia may decrease by 5-7% per person per year with a reduction in the share of salmon in the structure of demand, the National Rating Agency predicted.
The acquisition of AVK is not Inarctica’s first deal in recent months. At the end of October 2022 became known on the purchase by the company of a complex for breeding trout fry in the Kaluga region. And this February, Inarctica announced the sale of three fry hatcheries in Norway to local management, explaining the deal by regulatory restrictions on Russian business in Norway, which could lead to liquidation risks.
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