RFC finding workarounds to Chinese blockade of Russian seafood

Published on
September 20, 2021
RFC has signed milestone agreements with the Far East and Arctic Development Corporation (FEDC) and Sber.

Russian Fishery Company isn’t letting a sudden blockage of the Chinese market stall its ambitious growth plan.

In the past month, the Vladivostok, Russia-based fishing powerhouse has signed several significant partnership agreements that will expand its fleet and has realigned its own supply chain to more effectively ship its seafood products to more markets.

In early September, it signed milestone agreements with the Far East and Arctic Development Corporation (FEDC) and Sber (previously known as Sberbank).

The FEDC, a development institution, will assist RFC in obtaining the free port resident status in Vladivostok, giving the company preferential status in construction permitting, operational activity applications, and in its relationships with federal and regional authorities. In exchange, RFC will locate nine of its 11 new fishing “supertrawlers” – collectively valued at RUB 63 billion (USD 864.9 million, EUR 737.7 million), in Primorye, in Russia’s Far East.

“There is a long-standing and fruitful cooperation between the RFC and the FEDC. Thanks to the support of the corporation, the RFC is successfully implementing projects in Primorye that make a significant contribution to the social development of the region through the creation of new jobs and the provision of additional tax deductions,” RFC General Director Viktor Litvinenko said.

Work is advancing steadily on RFC’s fleet of supertrawlers, which the company expects to be Russia’s largest and most technologically advanced fishing vessels. The first vessel has already undergone field tests, with three additional trawlers already set afloat and currently in the process of having their onboard factories assembled. Work has also begun on three more of RFC’s vessels, which are all being constructed at Admiralty Shipyards in Saint Petersburg. The agreement signed in September with Sber guarantees USD 400 million (EUR 337.7 million) in financing for the last four of the series of 11 supertrawlers.

“We are closing the financial package for the whole program of our new building,” RFC Chairman Gleb Frank said in a press release.

Each new vessel is designed to catch up to 60,000 metric tons of fish annually and will be equipped with modern “deep waste-free processing” so that their entire catch can be processed into higher-value products such as fillets and surimi, which RFC recently began marketing via KVEN, a seafood producer in Russia’s Far East, as part of a company focus on value-addition.

“Russian Fishery Company is Sber’s long-term partner, and this is not our first agreement,” SberBank First Deputy Chairman Alexander Vedyakhin said. “We are happy to invest in a company that intensively develops fishing fleet in the Far East and is one of the large employers in the region. Apart from the new supertrawlers’ power and fishery efficiency, it is worth noting that they comply with the sustainability principles Sber is committed to.”

RFC also recently announced it had streamlined its shipments to Europe, the United States, and Southeast Asia, now shipping directly from Vladivostok, whereas previously they had been sent through South Korea and China. The move saves costs and also avoids a major bottleneck encountered by all Russian seafood firms lately: delays at Chinese ports, primarily due to enhanced COVID-19 mitigation measures and an acute shortage of shipping containers that have sent costs sky-high, according to RFC First Deputy General Director Savely Karpukhin.

The logistical shift – made possible by subsidies provided by the Russian government as a means to support the country’s food exporters – allows RFC to “avoid the risks associated with the closure of foreign ports for Russian products in the context of the coronavirus pandemic,” Karpukhin said.

Thus far in 2021, RFC has already shipped more than 1,000 containers directly from Vladivostok on to their final destinations, and Karpukhin said the program will be ramped up through the remainder of the year. Additional logistics diversification will include the use of rail both domestically and to other European destinations, beginning with Germany, Holland, and Slovakia.

“We strive to the maximum possible use of the capabilities of the home port as a logistics hub. This gives us a possibility to reduce the delivery time of products to consumers and ensure the products safety control, as well as to avoid the risks associated with the closure of foreign ports for Russian products in the context of the coronavirus pandemic,” Karpukhin said. “Shipping costs through Vladivostok have become competitive thanks to a state program of support and subsidies for transport costs, carried out by the Ministry of Agriculture. We highly appreciate the program to support exporters of agricultural products and expect that it will be extended to 2022 and beyond. By helping to increase the turnover of domestic ports, especially in the Far East, the program will undoubtedly contribute to the creation of new jobs in the region, an increase in tax payments and, as a result, to the development of Russian ports and an increase in their competitiveness."

A greater turn toward the domestic market is another major focus for RFC. Additional subsidies from the Russian government for a program sending pollock and salmon  by rail from the country’s Far East with the intention of lowering retail prices, announced by Russian Prime Minister Mikhail Mishustin in July, have aided RFC’s efforts to market its pollock in the country’s major metropolitan areas, including Saint Petersburg and Moscow.

A new partnership with the ROK-1 group of companies, with a collectively processing capacity of more than 60,000 metric tons (MT) of seafood products annually, will aid RFC’s efforts to sell its pollock in the domestic market. RFC’s frozen-at-sea pollock and its pollock processed at its own Russian Pollock facility in Primorsky Krai, built in 2019 and with a 100-MT daily capacity, will be further processed by ROK-1, into products sold via ROK-1’s Svoya Rybka brand. The “long-term partnership agreement” calls for ROK-1 to market at least 10,000 MT of RFC-sourced products by 2023, including portioned and piece fillets, loins, mince, fillet and mince medallions, breaded products, and an expanded line of semi-finished products, ready-made meals, and pet food.

“Pollock is an ecologically pure wild white fish, unique in terms of the content of valuable nutrients, which, unfortunately, is underestimated by Russian buyers,” Karpukhin said. “The objective of our partnership with one of the leading Russian fish producers is to open for Russians the true taste and benefits of high-quality pollock products and to ensure the growth of sales of this fish in the domestic market. This product is indispensable for adherents of a healthy diet, easy to cook, hypoallergenic, and recommended for people with diabetes. Therefore, we are confident in the good prospects of our products on the Russian market. "

The partnership intends to market its pollock products through Russia’s largest retail chains, including Magnit, Perekrestok, Pyaterochka, Karusel, Lenta, Vkusville, as well as through large catering chains, e-commerce, and delivery services, including meal kits.

“Together with our partners from RFC and Russian Pollock, we highly appreciate the potential for growth in consumption of various, high-quality, easy-to-cook products based on pollock fillets on the Russian market. High-quality consumer experience is one of the key factors in consumer choice of food products, especially in the context of a pandemic,” ROK-1 Director-General Alexander Starobinsky said. “We expect that in the near-future, leading retail chains will join our partnership.”

Photo courtesy of Russian Fishery Company

Contributing Editor reporting from Saint Petersburg, Russia

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