The Trading House “NOVAAGRO” has been in the Ukrainian market for three years. During this time period the company has successfully mastered several activity fields. What the company deals today with, what plans are being built and whether these plans’ implementation is successful, Latifundist.com journalists have decided to learn from its head, Maksym Pylypenko.
Latifundist.com: Maksym, share with us when and under what circumstances you came to “NOVAAGRO”. What did your work here start with?
Maksym Pylypenko: First it was “Agrosvit”. I came there as an economist in 2012. After working there for 3 years, in June 2015 I switched to the TH “NOVAAGRO” where I assumed the position of the head of the financial department. At first, I was engaged in finance, then we broke new ground — the mineral fertilizers and seed distribution department. And in March 2016 I became its head.
Latifundist.com: “NOVAAGRO” is a member of the same companies group. And what is the inner structure of the trading house itself, because you have several business areas?
Maksym Pylypenko: Our trading house is divided into three departments, each with its own chief. Our main area is grain processing, export, flour and bran sale in the home market, grain and oilseeds trading, seed material and mineral fertilizers trade.
Latifundist.com: Which of these areas do you consider to be the most successful and profitable?
Maksym Pylypenko: It’s hard to say. In fact, the indicators vary from year to year. There were times when flour exports and wheat processing were in the lead. This year among all our business areas, perhaps, grain trade takes the first place.
Latifundist.com: What is the reason?
Maksym Pylypenko: The reason is the market conditions and the world prices. As of today, according to analysts, we in Ukraine have failed to receive the harvest of wheat and grain-crops we have counted on. Alongside with that, our main business rivals in grain trade — Russia, North and South America — have not gathered the best harvest as well. Due to this, the world price on grain (in fact, as well as on all resources on the Chicago Stock Exchange) shows growth. In Ukraine the prices on raw materials are also rising. Alongside with that, processed products go behind these prices, because there is a certain time lag.
Let us take the flour production within a certain time period. A new season begins — we get a new crop. However, the flour consists partially of the old and the new crop. Accordingly, the cost of the new one at first takes a smaller percentage in the cost price. In a month the percentage is already more. Correspondingly, as I have mentioned, there is a certain lag. And the flour price at the beginning of the season lags behind the market value of grain-crops. Alongside with that, when the grain price falls, the flour cost remains unchanged. And only after a certain period a little drop in prices occurs.
The mentioned above happened this year as well — for the time being, flour does not show the same dynamics as raw materials do. In the mass media, from processors and manufacturers, we hear that there occurs an imbalance in prices, a shortage of food-grade wheat, of flour. In general, everything is linked to this.
Latifundist.com: How do you estimate the Ukrainians purchasing power? According to some experts, it shows downward dynamics. And the forecasts are discouraging. What do you believe to attract customers with in a highly competitive environment?
Maksym Pylypenko: Flour is a raw material for a socially significant product, i.e. for bread. Its consumption, in fact, is relatively stable. It can vary from the age category. Young people consume less bread, older people consume more. But the population of Ukraine is aging, and in general the consumption of bread and bakery products in our country keeps the same level. Competition always happens, and it’s good. But to say that erosion of the population purchasing power affected the flour market is an exaggeration. This is one of the goods that is always in demand. Yes, the price issue is now the main one. But I believe the market will put everything in its place.
Latifundist.com: What are your company and produced by NOVAAGRO products’ competitive advantages?
Maksym Pylypenko: Among them there is stability and quality. It can be confirmed not only by our Ukrainian buyers, but also by consumers worldwide. Last season of 2017/18 we became leaders of the flour export in Ukraine. We have no problems with quality. Alongside with that, we are able to provide a flexible approach to payment issues for our products. That is, we use all mechanisms, including all sorts of delays. Therefore, the company stays quite firmly in the market ground and is moving forward.
Latifundist.com: Half a year or so has passed since our last conversation. Has the geography of your products export deliveries changed within this time? What are new business areas and for what products?
Maksim Pylypenko: As I said, the flour export price lags behind the cost of raw materials. Therefore, we have not expanded our geography yet. All our main customers have remained the same. And there is nothing new as to this field, although we are working on it. This unbalance between home and export prices of flour must disappear. Then we will move on. We keep track of the events throughout and are engaged in negotiations. In general, our products are standardized and there are no special innovations, we do not spring any surprises. Our buyers demand high quality and delivery within the terms agreed. Here are the main points which we focus on.
Latifundist.com: Earlier in the interview you gave to our periodical it was noted that the TH “NOVAAGRO” plans to finish this year with the sales volume of UAH 1.4 billion. How close are you to this result?
Maksym Pylypenko: We have exceeded the target. The marketing year is over, and we are now summing up the results. I think the sales will equal UAH 1.5 billion. That is, we have exceeded our plans by almost 10 %.
Latifundist.com: What volumes of food grain, wheat in particular, does the TH “NOVAAGRO” need to hit the planned targets?
Maksym Pylypenko: This year the planned purchases volume is about 300 thousand tons.
Latifundist.com: What this year is remarkable with? And what are your plans and prospects for the future?
Maksym Pylypenko: This year is an ambitious one. Our group has gained special powers. Hrakovskyi, Velykoburlutskyi and Orelskyi elevators were added to Koviahovskyi elevator. The total storage capacity is about 260 thousand tons. We signed loan agreements with “Kredobank” for UAH 50 million, we increased the limit with “OTP Bank” from UAH 125 million to UAH 200 million. We are engaged in negotiations with several other banks. Therefore, we plan to increase our sales by 50% and bring it up to UAH 2.5 billion.
Latifundist.com: At the present moment you are launching a new trademark for groceries. Tell us the background? At what stage are you now?
Maksym Pylypenko: Under the trademark “Daryslava” we will sell our own production: flour and buckwheat. In the future, we plan to expand the line and produce pea and corn grits. Now we have moved from the development to the trademark registration. We have a logo, sketches and models too. We hope to get all the documents in the nearest future and start producing and packing products under this trademark.
Latifundist.com: Why did you choose this name?
Maksym Pylypenko: Daryslava is an ancient Slavic woman’s name. We focus on the fact that the woman, who is strong in spirit, sets an example for everyone. Historically, in our culture, the woman has a special role and significance. She is a source of inspiration and strength. She is a progenitress of everything. We selected from women’s names. And as luck would have it, a consonant name — giving power, dominating, going forward. This meets our aspirations and ambitions.
Latifundist.com: Products under this TM will be focused on the home market or will be exported?
Maksym Pylypenko: This trademark was created for the home market. The name itself is clearer for our people. And that’s why with this trademark we plan to work in Kharkiv, Sumy and Lugansk regions.
Latifundist.com: So far, just in three regions? But in the future will you plan to expand?
Maksym Pylypenko: Yes. We hope so. For all that, “Daryslava” obliges (he smiles – ed.)
Latifundist.com: And what is the price policy?
Maksym Pylypenko: It is somewhere in the middle and slightly above the average price range. This is not an economy class, but closer to the upper price range.
Latifundist.com: What does it depend on? On the product quality?
Maksym Pylypenko: Yes. We have our own capacities for grits. This is the Vovchanskyi grain plant, where we can control to full extent the quality at each stage. We produce flour at Novopokrovskyi Plant. It has already gained a certain reputation. Here, we can as well monitor the compliance of all quality index and we can guarantee the buyer products of the highest quality. This is related to our desire to work with this brand in the market, within this price range and with these customers.
Latifundist.com: How important are ratings for the TH “NOVAAGRO” and you personally?
Maksym Pylypenko: For us, first and foremost, satisfaction with ourselves, with our result, our customers’ satisfaction with us as partners is highly important. A place in the ranking list is like an additional reward, a bonus. As a statement of our efforts’ effectiveness. But, first of all, we are fighting for our buyers interests.
Latifundist.com: When the head of the company says that the company is all right and it has reached the target, it is the very point where drop in production begins. Do you agree with this statement? And do you have a plan according to which you are going to develop step by step?
Maksym Pylypenko: We have plans, and, as I have already said, they are rather ambitious — to increase sales by 1.5 times. It does not even occur to us to be satisfied with ourselves. Following the results of each season and marketing year we see and feel a certain disappointment or satisfaction with our results. We analyze both what has not been done, what could have been done. And we wish to correct some nuances with each season.
We do not make plans for decades, because it is difficult taking into account the Ukrainian realities. And it would be too early. Taking into account the whole market situation, we have a plan for three years. We intend to develop and grow. Especially, there is room for growth. We see possibilities and new horizons, so we can keep on moving.
Latifundist.com: What is your approach to the company management? Can you call yourself a democrat or, on the contrary, a dictator?
Maksym Pylypenko: I’m a democratic person. If the personnel is selected correctly and corresponds to your human qualities, life principles and goals; you treat them decently, then people will treat you the same way. If you make efforts for your personnel’s growth and development, then they will do their best for this and, accordingly, for the company which they work for. Therefore, honesty, openness, decency in dealing with employees is our priority. And I hope for their similar attitude towards the company.
Latifundist.com: And what about the personnel’s motivation?
Maksym Pylypenko: Our motivation system meets the modern realities of the market and we are second to none of our business rivals in remuneration of labor. We approach the employees’ results individually and encourage them according to the efforts invested in the total result of the company. The personnel turnover is minimal.
Latifundist.com: Is it hard to be in charge?
Maksym Pylypenko: You just expect a certain effective output from a person and the tasks set to be accomplished. You think, if I am set a task and I accomplish it, then the other person will do the same. And in fact, it’s far from the case. After unjustified expectations, sometimes disappointment occurs. All people are different, different requirements, different desires. And everyone has their own “top”. Someone needs something, and someone requires nothing. And someone just pretends that he needs something.
I have to deal with such moments, sometimes restrain myself. One gets used to, one learns. This is difficult, especially at first. As, however, in any case. When you start something new, it’s not easy. The main thing is to start. While taking off the plane jolts. The crucial thing is to take off.
Latifundist.com: Thank you for the interview!