The world's largest French fries producer McCain plans to build a factory in Russia. The target location is the Tula industrial region, some 200 kilometers south of Moscow.
According to the Russian news platform Kommersant, McCain has already set up a project structure for this. With its first factory in Russia, the world market leader can benefit from relatively cheap raw materials and save considerably on logistics costs. However, the question is whether the Russian potatoes meet the required quality.
Process locally
Last month, McCain Foods Rus LLC was said to have been founded with the aim of processing potatoes locally. Sources report that McCain is working out plans to build a factory in the city of Uzlovaya. Some of the conditions investors would have agreed to are: no import duties, no VAT payments until 2065 and a 10% income tax rate for the first 2 years.
It is not the first time McCain has explored the possibility of building a factory in Russia. Earlier there was talk of a factory in the Bryansk region with a capacity of approximately 150.000 tons per year. However, those plans failed at an early stage. In 2019, meat concern Cherkizovo talked about a possible collaboration with McCain for the production of fries, but that plan was also brushed aside.
Russia wants to be self-sufficient
The new project plan aligns with the Russian government's ambitions to be more self-sufficient and play a more dominant role in global agricultural exports. The Russians regularly complain that the processing of potatoes in their own country is far below standard. It is therefore expected that potato softening in the country will will take a flight.
French fries production in Russia only really got going two years ago with the establishment of Belaya Dacha, a joint venture in which Lamb Weston/Meijer owns a quarter of the shares. The plant in Lipetsk has a capacity of 2 tons of finished product. As a result of the corona crisis and the collapsed demand for chips, the factory had to Closed 3 months early than the planned temporary closure in the summer. Nevertheless, Belaya Dacha notices that the Russian market for chips is growing. However, the company does not venture a forecast for the next 2 or 3 years.
Threat to the Netherlands?
According to Euromonitor International's forecasts, sales of potato products in the Russian retail sector will grow by almost 10% this year. McCain is the largest player in this sales segment with a share of over 20%. The main sales channel for chips, the catering industry, also seems insatiable. According to customs data, Russians imported nearly 2019 tons of processed potatoes in 100.000. The Netherlands is the main supplier.