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How one Ukrainian company survived, and thrived, through a year of war
New York Times
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LVIV, Ukraine — It was exactly a year
ago, and Ukrainian pet food maker Kormotech had concluded its annual meeting.
The mood was buoyant. Business was booming, the factory was running 24/7, and
sales were projected to grow by double digits. “We had a beautiful budget,”
Rostyslav Vovk, the company’s founder and CEO, recalled almost dreamily.اضافة اعلان
The next morning, air sirens sounded.
Russia had invaded. Vovk called his top managers to meet at a nearby hotel, avoiding the company’s windowed seventh-floor headquarters in Lviv. They had a plan for what had been considered a very unlikely risk — Russian aggression — but it soon proved wholly inadequate.
“We were not ready,” Vovk said. He closed the plant. Raw materials could not get into the country, and deliveries headed abroad could not get out. Staff from the besieged eastern part of the country needed to be evacuated. Employees were joining the military. And the company’s biggest export market, Belarus, was a close ally of Russian President Vladimir Putin.
War-time productionLike leaders at tens of thousands of companies throughout Ukraine, Vovk and his team were suddenly confronted with a new and bewildering responsibility: keeping a business going through the chaos and danger of war.
For many, the task has proved impossible. Before the war, Ukraine’s private sector, including its huge steel and agricultural industries, accounted for 70 percent of the country’s gross domestic product, said Elena Voloshina, head of the International Finance Corp. in Ukraine. She said that 83 percent of businesses experienced losses related to the war. Forty percent suffered direct damage, such as a factory or store decimated by a missile, and 25 percent were in what is now occupied territory.
Kormotech employs 1,300 people, some of whom had to be evacuated from the eastern part of Ukraine.
Last year, Ukraine’s overall output plunged by nearly one-third, wrecking the country’s economy and hampering its ability to battle Russian forces.
Kormotech, a family-owned business with 1,300 employees worldwide, does not produce weapons or drones. It is not involved in supplying critically needed electricity, transport, or fresh water to ravaged cities. But it employs people, produces income, earns foreign currency from exports, and contributes tax revenue that the government in Kyiv desperately needs to pay soldiers, repair power lines, and buy medical equipment.
A year later, Vovk and his management team have found reason to again celebrate. Vovk was back in his offices getting ready for the latest annual meeting with his staff — and some of their dogs, which are fixtures around the office and often serve as product taste testers. Despite the odds, business grew more than expected.
Backup factories and inventoryKormotech had a few things going for it. The company’s plant was outside Lviv in the westernmost part of the country, near the Polish border, one of the safest parts of Ukraine. The two factories in Prylbychi were able to reopen less than two weeks after the war began.
An earlier decision to start an additional factory in Lithuania, which opened in 2020 and was operating around the clock, turned out to be a boon. It could continue smoothly producing and delivering tonnes of Kormotech’s Club 4 Paws, Optimeal, Miau, and Gav brands.
ImprovisationStill, Kormotech’s supply chain was disrupted. Before the war, roughly half its raw materials, like meat and chicken meal, came from abroad. Now border crossing delays and rising import prices had prompted a search for domestic producers. It found two that had never produced pet meal before and taught them what to do.
As it turned out, the local producers, less than 64km from the plant, were not only cheaper but also did not have to be paid in precious foreign currency. Instead of buying 500 tonnes of meal from abroad, the company now buys 100 tonnes.
Kormotech stepped up its purchase of Ukrainian grains and corn as well. The war and Russian blockade caused a drastic drop in grain exports, spiraling food prices, and a global hunger crisis. But it also meant that domestic businesses like Kormotech could buy at a discount.
Delivery issuesManufacturing the product was one hurdle; getting it delivered abroad was another. At a time when Ukraine has barred men younger than 60 from leaving the country, the trade ministry provided exemptions for delivery drivers.
But the wait at the borders could extend from a few days to a few weeks. And with seaports mostly blocked, exporting remained an expensive and tricky problem.
‘Made in Ukraine’Domestic demand for the company’s products stayed steady, but finding new export markets was another challenge. Belarus, which has allowed Russia to stage attacks from inside its border, represented 25 percent of Kormotech’s export market. The management team decided to pull out but needed to replace those customers.
Supermarket chains, particularly in the Baltic countries and Poland, were eager to step in and replace Russian-made goods with Ukrainian ones.
Workers at the Kormotech factory in Prylbychi, Ukraine, on February 10, 2023.
“For the first time in my life, ‘Made in Ukraine’ was a premium,” Vovk said. Previously, when the company appeared at international pet supply exhibitions, he said with a laugh, people were so unfamiliar with the country’s products, they would ask if the letters “u” and “k” referred to “the UK”, for the United Kingdom.
Even so, goodwill extended only so far. Buyers wanted assurances that Kormotech’s products would keep flowing. So the company provided guarantees, setting up a warehouse in Poland with backup stocks of its 650 different products, outsourcing some production to facilities in Germany and Poland, and drawing up last-resort plans to move production out of Ukraine.
The enormous growth in both the European and US markets means that the company’s sales are expected to increase to $155 million this year from $124 million. The main obstacle to expanding even more is capacity.
Read more Lifestyle
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The next morning, air sirens sounded.
Russia had invaded. Vovk called his top managers to meet at a nearby hotel, avoiding the company’s windowed seventh-floor headquarters in Lviv. They had a plan for what had been considered a very unlikely risk — Russian aggression — but it soon proved wholly inadequate.
“We were not ready,” Vovk said. He closed the plant. Raw materials could not get into the country, and deliveries headed abroad could not get out. Staff from the besieged eastern part of the country needed to be evacuated. Employees were joining the military. And the company’s biggest export market, Belarus, was a close ally of Russian President Vladimir Putin.
Last year, Ukraine’s overall output plunged by nearly one-third, wrecking the country’s economy and hampering its ability to battle Russian forces.“We would make decisions,” Vovk said of that first week after the invasion, “and then the next morning, we would change all the information.”
War-time productionLike leaders at tens of thousands of companies throughout Ukraine, Vovk and his team were suddenly confronted with a new and bewildering responsibility: keeping a business going through the chaos and danger of war.
For many, the task has proved impossible. Before the war, Ukraine’s private sector, including its huge steel and agricultural industries, accounted for 70 percent of the country’s gross domestic product, said Elena Voloshina, head of the International Finance Corp. in Ukraine. She said that 83 percent of businesses experienced losses related to the war. Forty percent suffered direct damage, such as a factory or store decimated by a missile, and 25 percent were in what is now occupied territory.
Kormotech employs 1,300 people, some of whom had to be evacuated from the eastern part of Ukraine.
Last year, Ukraine’s overall output plunged by nearly one-third, wrecking the country’s economy and hampering its ability to battle Russian forces.
Kormotech, a family-owned business with 1,300 employees worldwide, does not produce weapons or drones. It is not involved in supplying critically needed electricity, transport, or fresh water to ravaged cities. But it employs people, produces income, earns foreign currency from exports, and contributes tax revenue that the government in Kyiv desperately needs to pay soldiers, repair power lines, and buy medical equipment.
A year later, Vovk and his management team have found reason to again celebrate. Vovk was back in his offices getting ready for the latest annual meeting with his staff — and some of their dogs, which are fixtures around the office and often serve as product taste testers. Despite the odds, business grew more than expected.
Backup factories and inventoryKormotech had a few things going for it. The company’s plant was outside Lviv in the westernmost part of the country, near the Polish border, one of the safest parts of Ukraine. The two factories in Prylbychi were able to reopen less than two weeks after the war began.
An earlier decision to start an additional factory in Lithuania, which opened in 2020 and was operating around the clock, turned out to be a boon. It could continue smoothly producing and delivering tonnes of Kormotech’s Club 4 Paws, Optimeal, Miau, and Gav brands.
The war and Russian blockade caused a drastic drop in grain exports, spiraling food prices, and a global hunger crisis. But it also meant that domestic businesses like Kormotech could buy at a discount.After a helter-skelter start, Vovk and his top managers reorganized. The company, which sells its products in 35 countries including the US and Europe, had a little wiggle room because they had avoided just-in-time practices that eliminated backup inventory — a cost-cutting approach that had stymied so many companies worldwide during the pandemic. Kormotech routinely kept stock in its warehouses — at least a month and a half’s worth in Ukraine, two months in other countries in Europe and two-and-a-half in the US.
ImprovisationStill, Kormotech’s supply chain was disrupted. Before the war, roughly half its raw materials, like meat and chicken meal, came from abroad. Now border crossing delays and rising import prices had prompted a search for domestic producers. It found two that had never produced pet meal before and taught them what to do.
As it turned out, the local producers, less than 64km from the plant, were not only cheaper but also did not have to be paid in precious foreign currency. Instead of buying 500 tonnes of meal from abroad, the company now buys 100 tonnes.
Kormotech stepped up its purchase of Ukrainian grains and corn as well. The war and Russian blockade caused a drastic drop in grain exports, spiraling food prices, and a global hunger crisis. But it also meant that domestic businesses like Kormotech could buy at a discount.
Delivery issuesManufacturing the product was one hurdle; getting it delivered abroad was another. At a time when Ukraine has barred men younger than 60 from leaving the country, the trade ministry provided exemptions for delivery drivers.
But the wait at the borders could extend from a few days to a few weeks. And with seaports mostly blocked, exporting remained an expensive and tricky problem.
“For the first time in my life, ‘Made in Ukraine’ was a premium.”“No one knew where to go or how,” Vovk said. The first truck sent to Azerbaijan, he said, cost more than $8,000 — before the war, it was roughly $2,000.
‘Made in Ukraine’Domestic demand for the company’s products stayed steady, but finding new export markets was another challenge. Belarus, which has allowed Russia to stage attacks from inside its border, represented 25 percent of Kormotech’s export market. The management team decided to pull out but needed to replace those customers.
Supermarket chains, particularly in the Baltic countries and Poland, were eager to step in and replace Russian-made goods with Ukrainian ones.
Workers at the Kormotech factory in Prylbychi, Ukraine, on February 10, 2023.
“For the first time in my life, ‘Made in Ukraine’ was a premium,” Vovk said. Previously, when the company appeared at international pet supply exhibitions, he said with a laugh, people were so unfamiliar with the country’s products, they would ask if the letters “u” and “k” referred to “the UK”, for the United Kingdom.
Even so, goodwill extended only so far. Buyers wanted assurances that Kormotech’s products would keep flowing. So the company provided guarantees, setting up a warehouse in Poland with backup stocks of its 650 different products, outsourcing some production to facilities in Germany and Poland, and drawing up last-resort plans to move production out of Ukraine.
The enormous growth in both the European and US markets means that the company’s sales are expected to increase to $155 million this year from $124 million. The main obstacle to expanding even more is capacity.
Read more Lifestyle
Jordan News
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