McDonald’s Supplier Expands

KIEV, Ukraine -- Agrosolutions, a Ukrainian subsidiary of OSI International Foods GmbH, has launched cattle-raising operations in the Kyiv region that will provide McDonald’s with its first meat-producing farm for its operation in Ukraine.

OSI International Foods is the German subsidiary of U.S.-based OSI, the principal meat supplier for McDonald’s globally. OSI is one of the largest privately-held food companies in the world, with an annual turnover exceeding $2 billion from operations in 85 countries around the world.

In mid-April, McDonald’s opened a new restaurant in Kyiv, making it the fast-food giant’s 22nd restaurant in the capital and its 55th in Ukraine, since launching its operations in the country in 1997.

McDonald’s said in an April 13 press release that the Agrosolutions farm, located in Kyiv region’s village of Dulitske, currently raises 1,000 head of cattle and plans to double that number by the end of this year. Eventually, Agrosolutions aims to raise the number of cattle at the farm to 10,000.

For comparison, according to the State Statistics Committee, Ukraine’s cattle population numbered about 7.1 million head of cattle as of the end of March.

According to McDonald’s, Agrosolutions, which leases the Dulitske site from a local farmer, has modernized two of four facilities at the site and is currently modernizing the remaining facilities at a cost of $1 million.

“It is planned to complete the reconstruction of the entire farm in 2006, and starting in 2007, to expand the practice of raising cattle for quality meat on other farms,” McDonald’s said in its press release.

The start-up of the Dulitske cattle farm follows an earlier move by OSI to make inroads in the Ukrainian meat production market. The company began grinding out beef patties for McDonald’s at Vinnytsya region’s Kozyatyn Poultry Plant, its first Ukrainian meat-processing line , via its Ukrainian subsidiary Eska Food Solutions, starting in May 2003.

Eska Food Solutions supplies McDonald’s with all of its beef needs in Ukraine. Initially leasing the Kozyatyn plant’s premises to install a processing line in the Soviet-era plant, a project that cost the company $1.7 million, OSI obtained permission from Ukraine’s Antimonopoly Committee at the start of this year to acquire more than 50 percent of the shares in the plant, giving it a controlling stake in the plant.

According to McDonald’s, the Kozyatyn plant has processed more than 120 million hamburger patties made from “100 percent beef” for McDonald’s Ukraine, since launching the line at the plant in the spring of 2003, and produces 190-220 tons of processed beef a month. That works out to about 2,200-2,600 tons of beef a year.

For comparison, according to the State Statistics Committee, Ukrainian farms produced 177,200 tons of meat by live weight in March and a total of nearly 2.4 million tons last year.

According to the State Foodstuffs Department, Ukrainian meat-processing facilities produced nearly 46,000 tons of high-quality meat products in February and a total of nearly 565,000 tons in 2005.

Hartmut Schimetschek, director of OSI International Holding, said at the time of the acquisition of its stake in the Kozyatyn plant that the move was part of OSI’s strategy to develop an integrated supply chain for beef in Ukraine.

The company’s recent expansion on Ukraine’s meat-producing market comes as the Ukrainian Agriculture Ministry is upbeat regarding growth for the industry.

Agriculture Minister Oleksandr Baranivskiy has forecast at least a 10 percent rise in Ukrainian meat production this year, as well as a significant drop in meat imports into the country. Meat exports, he said, would outweigh imports in 2006.

At a Cabinet of Ministers meeting on April 12, Baranivskiy said that in 2005, Ukraine imported about 195,000 tons of meat compared with the 300,000 tons it imported the year before. The Agriculture Ministry has forecast that meat imports into Ukraine would halve to 100,000 tons of meat this year.

As for exports, Baranivskiy said Ukraine would export between 120,000 and 130,000 tons of meat this year.

Source: Kyiv Post