LVIV, UKRAINE — As Ukraine continues to battle for the country’s sovereignty over Russia, Kormotech, a Ukrainian manufacturer of premium and super premium pet food products, is advancing on its own front. The company is no stranger to adversity, having faced several crises over the last 20 years, and is leveraging its experience and expertise to continue serving pets across the country and in more than 33 markets globally. In fact, Kormotech is celebrating its 20th anniversary in 2023.
In an exclusive interview with Pet Food Processing, Rostyslav Vovk, chief executive officer at Kormotech, detailed the company’s continued success in the face of tumultuous times, its plans to accelerate growth in coming years, and its humanitarian efforts to “Save Pets of Ukraine.”
Robust resiliency
Founded in 2003, Kormotech is a family-owned business in its second generation. The company operates three plants across Ukraine and Lithuania with a combined annual capacity of over 80,000 tons. Amid the ongoing Russia-Ukraine war, Kormotech reported 12% revenue growth and a 1.9% increase in capacity in 2022, compared to 2021.
In the words of Rostyslav, “resilience is in our DNA.”
"We continue to grow despite challenges and are moving toward victory,” he said. “During the last year, we strengthened the presence of our brands in export markets while becoming a leader in the Ukrainian market.”
According to Vovk, a normal year-over-year growth rate for Kormotech is typically between 20% and 30%. Recent growth for the company was supported by an expanded presence in European export markets.
“Kormotech is living through its fourth crisis already,” he said. “The first was a financial crisis in 2008. The second was in 2014, when the war really started and we lost more than 30% of our sales and refocused to European markets. The third was COVID, of course. And now, we have war. From all these crises, we have come out much stronger, bigger, and more resilient.”
The company has been working to diversify its risk over the last 10 years — starting in 2014, continuing through the COVID-19 pandemic, and into the official invasion of Ukraine by Russia in early 2022.
“We are winning in the market because we are opening new export markets and growing stronger in Ukraine,” Vovk said. “In 2018, we were out of capacity. So, we started not only selling our own products, but also products produced by our outsourcing partners.
“In our strategies and our SWOT analyses, we’re always thinking about crises, even the war — which really started in 2014 — and then the pandemic,” he added. “We thought, ‘Let’s diversify the business and not only produce in our own facilities, but let’s find partners who can help us if we run into problems.’ That has helped us a lot.”
While war rages in Northeastern Ukraine, cities in the western part of the country — like the Lviv region — face electricity shortages and airborne attacks, but have been spared the same level of destruction. Pictured here is damage to a shopping center in Kyiv. (Source: ©MISU – STOCK.ADOBE.COM) When Russia invaded Ukraine, Kormotech halted production due to concern for its employees.
“We were lucky because all our facilities are located in the Lviv region, which is in the far west part of Ukraine near the Polish border,” Vovk said. “There is no war in the city, so our facilities were operational. When we faced problems with electricity shortages, we were prepared. Now, all facilities, logistics warehouses, factories and offices are equipped with industrial generators. Even today, when we have a rocket attack and there is no light in the city, our factory is working on those industrial generators.”
In addition to outsourcing some manufacturing, the company’s plant in Lithuania has allowed it to continue producing wet pet food. The company recently implemented a new production technology at the Lithuania plant — a power heater — to begin manufacturing wet pet food formatted to look like shredded meat.
“Even in this wartime, we are increasing our capacities in Ukraine and Lithuania,” Vovk said. “We are investing more than €12 million — half of it will be for Ukrainian facilities and half will go to Lithuanian facilities — because we see strong growth and potential in the wet pet food production, specifically of pouches. Our capacity will be nearly doubled next year compared to what we have now.”
The company’s Lithuania plant is currently running at full capacity, with warehousing for the facility located in Lithuania, Poland and the United States. The company’s Lithuania plant was in part funded by a €10 million loan (roughly $11.1 million USD based on currency conversion rates at the time) from the European Bank for Reconstruction and Development (EBRD) in late 2019.
The company also planned ahead to ensure it can move exported product out of Ukraine.
“We have stocks worth one and half months of sales at our main warehouse in Lviv,” Vovk said. “Our products are also in the stocks of our distributors. For product produced by Kormotech — our branded product — we always have around two or two and a half months of sales worth of stocks available.
“We decided a couple of years ago to keep our export stocks in Poland,” he added. “We rented a warehouse there, and now two months’ worth of export sales in product are housed in Poland. Most of our international clients are now getting product from our warehouse in the European Union, rather than directly from our facilities in Ukraine. We are sending our international partners product, but not like it was before the war. Before, it would have happened in seven days; now, it’s in 10 or 12 days because of the situations at our borders.”
Vovk commended Kormotech’s supply chain team for effectively working around raw materials issues exacerbated by the war. For example, the company is now working with Ukrainian national producers for some raw materials that it had previously sourced from European partners.
“There is huge inflation on raw materials, logistics, and everything else,” Vovk said. “Unfortunately, we must increase the price of our finished products — but everybody is increasing their prices, so we are not unique in this. From another point of view, we have some ‘plusses’ from this war. For example, we are purchasing grains produced in Ukraine for much cheaper than people in Europe or the United States, because of the logistics problems. We aren’t experiencing those logistic problems — that’s why prices for grains in Ukraine are much more reasonable compared to for our competitors. That’s a small, small plus.”
Putting people first
Kormotech has gone to great lengths to ensure its operational resiliency. Alongside these efforts, the company also prioritized the mental health, safety, and wellbeing of its team members.
Upon Russia’s invasion of Ukraine, Kormotech swiftly began offering psychological support for its employees. According to Rostyslav, more than 90 people worked with the company’s HR specialist, who is a professional psychologist. The company also went above and beyond to secure the financial stability of its employees amid this uncertainty.
“Every employee is valuable to the company,” Vovk said. “That’s why we guaranteed the preservation of jobs to all employees, even those who moved abroad or couldn’t work in the beginning. We paid 100% of all salaries over a six-month period and, after that period, we helped them find another job if they were unable to return. Very few people left the company this year. Most everybody is able to work remotely. For example, I’m in France right now; some of my team is in Ukraine, some are in Poland, some are in Lithuania. Thanks to COVID, we can all work more remotely without problems.”
Rostyslav Vovk, chief executive officer of Kormotech. (Source: Kormotech) According to Vovk, roughly 57 of the company’s employees are currently fighting for the freedom of Ukraine. On top of the salaries they are receiving from the Ukrainian government as members of the military, these manufacturers-turned-soldiers continue to receive their salaries from Kormotech as well.
“We understand that they are fighting for us, for our land, for our nation, and for our company,” Vovk said.
The company employs more than 1,000, adding 260 new employees — one in the United States, roughly 40 in Lithuania, and more than 150 in Ukraine — over the last year.
A sight for strategic markets
Kormotech currently exports products to more than 33 markets, with strategic focus on several key countries. One of these is the United States; the company’s Optimeal pet food brand launched in the US market in 2021. In March 2022, Kormotech exited the Belarus market and shifted its focus elsewhere. Sales to the company’s export markets — excluding Ukraine — grew 20% year-over-year in 2022, and product volume shipped to these export markets, in tons, was up 13%.
According to Vovk, Kormotech’s market share in Ukraine has only increased, now sitting above 30%.
“Ukraine is our home market,” he stated. “That will always be our home market, and we need to be No. 1. There are four markets we’ve chosen strategically and for which we have developed specific three-year business plans, which include salesforce and marketing investments.”
Kormotech debuted a new super premium brand — Optimeal Beauty — at Zoomark 2022 in Italy, and presented another premium brand at Interzoo 2022. According to Vovk, these two brands will be a “focus for winning the market” in the company’s four strategic export markets: Romania, Moldova, Latvia, and Lithuania. With the help of these product innovations, Kormotech aims to be in the top three to five pet food brands in those four markets, he added.
“There is one other country that we see as strategic for us: the United States,” he said. “We have a special team there and are already in 200 brick-and-mortar shops in Chicago and New York.
“If you want to be a big company and if you want to win globally, you need to win in the United States. I'm not speaking about being a leader there, or even being in the top 10 in the United States. But we have our KPIs and goals for that market, which we will definitely achieve.”
Save Pets of Ukraine
On March 2, Kormotech introduced its Save Pets of Ukraine initiative, aiming to provide support to pet owners, animal care volunteers and shelters in the region.
“On the second or third day of the war, we gathered and decided we wanted to create the Save Pets of Ukraine initiative,” Vovk said. “We need to help pets because we are focusing on pets... Many people were running from the war to Europe, and a lot of them, unfortunately, did not take their pets with them. We have a lot of pets who are on the streets or in shelters. So, we took 200 tons of our product and sought partners throughout Ukraine who could distribute these products for free.”
Fourteen days later, on March 16, 260 volunteers and shelter groups received aid from the initiative, and more than 94,500 kgs (roughly 208,300 lbs) of pet food was provided to pets and owners in need in Kyiv, Kharkiv, Zaporizhzhia, Dnipro, Zhytomyr and other communities across Ukraine. Donated pet food products were also sent to the railway station in Lviv and various border service checkpoints.
On March 17, Kormotech announced its partnership with several pet industry organizations — including Greater Good Charities, Phillips Pet Food & Supplies, the American Pet Products Association, Pets Around the World and Matrix Partners — to bolster the initiative. These companies joined forces to provide emergency aid to animal welfare groups and pet owners in Ukraine through pet food, medication and critical supply donations.
Greater Good Charities is one supporter of Kormotech’s Save the Pets of Ukraine initiative, alongside U-Hearts Foundation, Phillips Pet Food & Supplies, the American Pet Product Association (APPA), Matrix Partners, and Pets Around the World (PAW). (Source: ©Greater Good Charities) Knowing Kormotech couldn’t tackle this enormous issue by themselves, the company went on to partner with U-Hearts Foundation, an independent nonprofit based in Lithuania. Vovk noted the Lithuania-based foundation is not a part of Kormotech, but the company has worked closely with U-Hearts to facilitate aid throughout Ukraine and find partners across the world to support its Save Pets of Ukraine initiative.
“This initiative gathered more than 800 tons of product, of which 200 tons has been Kormotech product and 600 tons has been donated by U-Hearts Foundation partners,” Vovk said. “If we calculated all that we had gathered, it would be worth more than $3 million USD. I am thankful every day to all the partners who are with us and who are helping us — all the volunteers, donations and everything else. We have calculated that we’ve helped more than 200,000 pets, and it’s not only food. Food is a basic thing, but we also do vaccinations and help find homes for pets.”
Aside from its charitable efforts, Vovk also noted the company seeks to support pet adoptions across Ukraine and, in tandem, further the narrative that pets are not presents or toys to be taken for granted – they are part of the family.
“This is a huge part of the job that we need to do in the coming years, because the main goal of our company is to change the mentality of Eastern European people [around pet ownership],” he said. “Many of them don’t consider pets as part of the family — it’s not like in the United States or Germany or elsewhere. We want to be one of the reasons that mentality is changing.”
The Save Pets of Ukraine continues today, and Kormotech is seeking additional partnerships and donations so the program can continue supporting Ukrainian pets in need.
“We as a company do not need any help… but I hope to spread information about the Save Pets of Ukraine initiative, because we need donations,” Vovk said. “We are donating a lot on our side, but it’s impossible to cover the need through only one company. Pets are suffering, and we need to help them.”
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