People in the Know: Lettuces and Development

Belaya Dacha (White Dacha) is one of the few exceptions. This year the company will be 90 years old. It owns greenhouses, trade and logistics complexes, hundreds of hectares of land and plans to keep developing further. The founder of the company, Viktor Semyonov, tells us why the company has become engaged in development and the results of their experience.

How did your company manage to exist on the Russian market for 90 years?

It is true, not many companies, especially agricultural companies, have such a long history. In 1918 a few workers from the Ukhotomsky reaper factory founded an association, which was later named Belaya Dacha. Perhaps we were lucky. They didn’t even make us change our name to something like Rise of Communism or Red Path. In 1958 our company created the first biggest greenhouse complex on 512 hectares. In 1965 the first bio laboratory was opened by Belaya Dacha, we refused to use poison at a time when nobody even thought about doing this.

We were one of the first to switch over to cost accounting. Even though this was a principle of economic independence and the company could only keep 10% of the profit, cost accounting taught us a lot. When perestroika started we managed to start operating under new work structures and found other financial sources. For example, Belaya Dacha started using western systems of drip feeds, which allowed us to receive twice as much vegetable yields as other companies. Agro complexes that followed our steps have survived, but others did not. In 1990 McDonald’s started buying lettuces from us and we are still the exclusive supplier of lettuces to McDonalds in Russia and Belarus.

In the middle of the 1990s reorganization was carried out and the Belaya Dacha group of companies was formed.

In which areas is the group mainly developing?

Our strategic area of development is the production of lettuces and fresh vegetables, in which the company Belaya Dacha Trading is involved in. Now, due to in an increase in the volume of our contracts we don’t have enough of our own raw materials and that’s why we have started developing technological outsourcing. We have signed contracts on the supply of lettuces and vegetables with farms in Lipetsk, Kuban, Kaliningrad, the Crimea, Spain and others. Our won production bases will continue operating in the Moscow region, but they will be more science and technology centers. Our goal is to cover the whole European part of Russia in 10 years.

What is the share of profit from lettuces from your total profit?

About 20-25% of our profit is from producing and supplying lettuces and fresh vegetables.

Another important area is the construction of garden centers under the Belaya Dacha Garden Center brand. Our first garden center measuring 10,000 sq.m was built last spring as part of Mega Belaya Dacha.

At that time you said that the company planned to build 20 such centers.

Now we are planning to open 30 garden centers in the European part of Russia. The next center will open in St. Petersburg in the Bugry shopping center. The contract has already been signed. Another of our companies, Belaya Dacha Tsveti (Belaya Dacha Flowers) will be supplying the garden centers with fresh cut flowers. Incidentally, every second/third flower in Moscow’s flowerbeds are from our farms. Next year we will start building greenhouses for growing flowers in Stupino.

Another company called Russkiye Gazony was part of Belaya Dacha. Now you’re website has no information about this company and this company told me last autumn that they had separated.

Yes, we sold our share last year. We had a negative relationship with the Canadian partner Roman Zhardanovsky (Canadian businessman and owner of Romalex Holding Ltd – Vedomosti), and we didn’t want to continue cooperation.

Is this situation related with the fact that last august your office was shot at?

I think so, yes. It was a set-up. Time has passed and we’ll find out who was responsible for it.

You previously had a project concerning the development of 5,000 hectares in the Ramensky area, which belonged to Russkiye Gazony.

We are not involved with this land anymore. Someone else is. I am even happy that this project self liquidated. It was clear that a whole lifetime would not have been enough to complete this project. And I was also always afraid that these 5,000 hectares would divert our efforts from real projects, our main business, which we have been engaged in for a long time. We could have drowned with this project and lost we had.

Belaya Dacha group owns a number of logistics complexes and is the co-owner of Mega. Why did you decide to become engaged in development?

Development is a quite new direction, which we started being engaged in only about 10 years ago. Initially we were just saving our pig farm, which was located next to the MKAD and we moved it to the Podolsky area. Now Mega Belaya Dacha is on the spot of the former farm. Like other agricultural companies we faced the problem of using land next to actively developing Moscow. The majority of companies have sold their land, but we chose a different option started building.

Was the idea successful?

The first project, which was a warehouse complex measuring 5,000 sq.m was quite difficult for us. Our partner Vsemirny Bank, which provided us with a loan, also stipulated the contractor we had to use, which became bankrupt before the contract started. The next company didn’t even have a license to carry out work in Russia. We had to do everything ourselves. As the team had already been formed we decided to keep developing in this area and build another warehouse complex.

At the moment Belaya Dacha owns a complex that consists of 4 class A terminals measuring a total of 110,000 sq.m. construction of a fifth terminal measuring 30,000 sq.m will be completed in 2009. together with the Mega Belaya Dacha complex and our production the group of companies provides more than 30% of tax contributions to Kotelniki’s budget.

In the mega project you partner was IKEA, which normally constructs on its own land itself. How did you become partners?

Initially we refused to sell our land next to the MKAD to IKEA because we were planning to build a shopping and entertainment complex ourselves and instead offered to become partners. Negotiations lasted more than six months until Mr Ingvar Kamprad arrived. He liked our company, the social part, and we signed the agreement.

Among your partners are Heinz, European Bank of Reconstruction and Development (EBRD), Raiffeisen Bank and others. Has the situation in partnerships with western companies changed?

In our projects we have the same partners, EBRD, Heinz. Of course we are looking for new ones. For example, for a project in the Tver region we are looking for operators of Yacht-hotels.

What are the current plans in the field of development for Belaya Dacha?

This year we are starting a big project in Kotelniki called Belaya Dacha Park. On 120 hectares there will be a multifunctional complex comprising of low-level housing, offices, and retail premises. When creating the concept we were oriented by the suburbs of London. It will be a city park for those who want to use a city’s infrastructure but feel like they are in the countryside. People will be able to live, work and rest in the same place without needing to leave.

The project should take 5-6 year as and will be constructed in four phases. The first phase (2-3 years) measuring 40 hectares will have premises of a new format for Russia – big box stores. The second phase will involve the construction of 3-5 storey buildings with lots of green around them. We are thinking about putting car parks underground on the roofs and creating a park. The third and fourth phases will be offices. The complex has been planned in such a way that that on the outskirts there will be retail premises and in the center there will be housing. The expected volume of investment in this project is $1 billion.

Can you name the approximate price for the housing?

It is too early to say but it will be business class.

Who is your partner in this project?

Heinz, we have equal shares. But during construction we are giving leadership to Heinz. Their share is 51%. After the completion of construction all the real estate will be in shared ownership.

For this project, as far as we aware, you are reorganizing the existing transport infrastructure.

Yes, this is necessary because the roads cannot cope with the stream of cars. Unfortunately today businesses have to create the infrastructure themselves, you can’t expect the government to do this. For example, with Mega, together with IKEA, constructed the exit from the MKAD. We spent 300 million rubles. Now we are engaged in the development of a bridge over the rail tracks through Kotelniki and it will connect to the MKAD (in the area of the 14th km) and Novoryazanskoye shosse. Our company has financed the design works on the development of the six-lane bridge, which cost 20 million rubles. But the budget of the Moscow region has not allocated any money yet and we cannot build ourselves as just the construction of the bridge itself is estimated to cost 1.5 billion rubles.

You also have another project outside the city.

The Pukhlemsky Stvor recreational complex project is in the most beautiful part of the Tver region, 140 km from Moscow. Before it was just the village of Pukhlema, which disappeared under water after the creation of the Ivankovsky water resevoir. This place was noticed by former president Boris Yeltsin during his visit

Here there will be a yacht club with 100 moorings, a yacht hotel with 40-50 rooms, 50 residences, a SPA hotel and restaurants. We are currently looking for a financial partner for this project. Construction will start next year, the main volume of construction is planned to be completed in 2010.

The volume of investment?

The figure is being calculated but in case will be more than $100 million.

Another project, a multifunctional BMW center, with a total area of 10,000 sq.m will start to be built in 2009 and will be constructed within a year. Outside Podolsk we plan to build 130,000 sq.m of class A warehouses, the expected completion date is in three years time.

How has the financial situation changed for you since the crisis?

We have experienced difficulties. We never chased quick money, the main thing is that money invested in the projects will be recouped. Although we have a good reputation among western financial institutions, the conditions of loans has changed. Before 25-30% of your own funds for a project were enough, now banks require you to have 30-35%. But the period of the loans has not changed. We can still get loans for 20 years.

Loans have become more expensive up to 16-18% per annum.

for us this is not a realistic figure, we cannot realize projects under such conditions. Before the crisis we were taking out loans at 6.5-7.5%, now the rates have increased significantly and the situation is far from stable.

Viktor Semyonov was born in 1968. in 1980 he graduated from Timiryazevskaya Agricultural Academy, as a Agriculturist. He worked for the Moscow region collective farm Belaya Dacha. In 1988 he became the head of Belaya Dacha. Under his management the enterprise became the Belaya Dacha group. In 1998 he became the minister of agriculture of the Russian Federation. He is a deputy of the State Duma. He is a member of the United Russia party, and is the deputy chairman of the committee on regulations of the State Duma. In 2000 he created and headed the Association of Industrial Unions. He is chairman of chamber of trade and industry committee for enterprise in the agricultural sphere. He is married with two children and his hobbies are travelling, fishing and horse riding.

Belaya Dacha was established in 1918 as Trud. The formation of Belaya Dacha Group started in 1993. now it is a holding uniting several business directions: investment and development, and the production of lettuces and vegetables.

It has realized the following projects: Mega Belaya Dacha shopping and entertainment center (in partnership with IKEA), Belaya Dacha garden center, a logistics center in Kotelniki in the Moscow region, and the Belaya Dacha Trading lettuce factory.

The following projects are currently being realized: Belaya Dacha Park (multifunctional complex in Kotelniki), Belaya Dacha residential complex, Pukhlemsky Stvor (Tver region), a logistics complex in Romantsevo and a multifunctional car center.

The shareholders are Viktor Semyonov and Vladimir Tsyganov. Its net profit in 2007 was $20 million.