Efficiency and innovation are the basis for success in agribusiness

Alex Lissitsa (pictured above), is the CEO of IMC, an integrated agricultural business company, and president of the Ukrainian Agribusiness Club, an association representing the interests of over 100 leading Ukrainian agro-food companies. Galina Tsvintarnaya of Raiffeisen Bank Aval, Ukraine, asked him about his experiences, the story behind his business, and its success.

Galina Tsvintarnaya (GT): IMC has been operating since 2007. How did you get started?

Alex Lissitsa (AL): Yes, we started our farming business in 2007. The basic idea at that time was to organise a supply of high-quality milk for further processing. You know, Ukraine has always had a problem with high-quality milk, so we decided to start a new business exactly in that direction.

The initial name of the company was Industrial Milk Company. Now we have a different name: IMC (Innovations. Management. Commitment.). We believe that it described our business well.

GT: Today, IMC is among Ukraine’s top 10 agricultural companies. What are the main factors behind your success?

AL: There are different ratings and rankings for agricultural companies in Ukraine, but I think that quite an important factor for us is to be not the largest company, but the most efficient. And efficiency also means high-quality products, which we deliver to different companies in the world. I do believe that currently IMC is one of the top three Ukrainian companies in terms of efficiency and productivity in agribusiness. My team has done a great job over the last five-six years to achieve this position.

GT: And when did you join the company?

AL: I joined the company in 2012. I started as a member of the board, non-executive director, and since 2013 I’ve been the CEO.

GT: As far as I know, your main activities are currently the cultivation of grain and oilseed crops, storage of grain and oilseed crops, and dairy farming. Is that right?

AL: Exactly. The main segments of the business are still farming and production, storing and exporting of different goods, so exactly what you say: we have grain, oilseed and a little bit of milk, which we supply to Ukrainian companies, but about 80-90 per cent of production is exported.

GT: So IMC is an export-oriented company?

AL: Absolutely!

GT: And who are your global competitors?

AL: You know, the world has become so global that it is actually not easy to say, who really is your competitor in the market. But if we do not speak about Africa, China or Asia, where the competition is huge, then we can assume that the global market leaders we compete with are US, Argentinian and Brazilian companies, which are actively fighting for their positions in agribusiness. I think that in the global world neither companies nor countries, but global networks are competing among themselves. And that is actually a sign of the future: those networks of companies will be dominating in the global agricultural sphere.

GT: Which instruments are accessible for the Ukrainian agribusiness in the global market?

AL: Well, Ukraine’s agribusiness has thrived over the last 10 years. First of all due to large companies, which have brought innovations to the country and particularly to its agrarian sector. If you look at the developments of the Ukrainian agribusiness over the last 10 years, you’ll see that Ukraine belongs to the top three countries worldwide in terms of productivity increase in the agrarian business (Ukraine, China and Brazil). That means that Ukraine adopts innovation quite well and has access to different markets, and thus also different innovative stocks. This also helps our companies to be more efficient. I think Ukraine will be among the leaders in global agribusiness in the future.

GT: As far as I know, IMC shares are traded at the Warsaw Stock Exchange. Are they well-traded?

AL: IMC became public when we started trading on the Warsaw Stock Exchange in 2011.  Our shares are well-traded, and we are happy with their market value. But our success is not the key factor here. Investors also look at the country. While investors are quite happy with our shares, liquidity is not that high because of the country profile and because of the current war in the east of Ukraine. I think that the market development for IMC and other companies from Ukraine will be completely different, if the war ended. Peace is the key for success.

GT: So there are some difficulties for the market development in today’s political and economic environment. How do the current conditions influence the development of IMC?

AL: Over the last five years, the Ukrainian government has done a lot to improve the business climate here. I’ve been in business in Ukraine for a long time, and I think that now is the best time for doing business here. There is practically no corruption regarding land issues, VAT issues and other matters in agricultural business. And I also hope that the newly-formed government will complete the land reform, which is quite important for us. IMC has a good experience of working with regional governmental bodies, and the reform of regional administrations has contributed much to the improvement of the situation in rural areas.

GT: What are your company’s main strategic priorities now?

AL: We concentrate, as usual, on efficiency. And we do believe that higher efficiency can only be achieved with innovation. In the agricultural world efficiency and innovation mean that we need to be prepared for change every day and in every part of our chain (in the management chain, the supply chain), and that all the processes should be analysed and audited. For this purpose, we actually have two positions in the company, one of which being my deputy on efficiency. I think we are the first company in the agribusiness in Ukraine to have a manager on efficiency. The second position is the so-called CINO – chief innovations officer with his team. He is looking around the world for new things, which could be introduced in the company. And we also have a highly motivated team of researchers. I am sure that if we want to be competitive in the future, we should be competitive in innovation. That is the key for our future success. And we do believe that we’ve already taken huge steps exactly in this direction.

GT: Do you remember any extraordinary situation, a kind of a force majeure in the history of your company?

AL: Force majeure in agribusiness happens from time to time. I think, that we had a force majeure situation three or four years ago, when our loan from Prominvestbank, which belonged to the Russian VEB (Vnesheconombank), was sold to another Ukrainian bank. We were a little bit shocked by the situation and were looking for a new opportunity. In that situation, the EBRD helped us with refinancing of the loan. Another area, where we are quite dependent and need to maintain flexibility, is climate change.

GT: Which new technologies are expected in the global agribusiness in the next years?

AL: In my vision, instead of GMO (genetically modified organisms) different types of products will be produced with the use of alternative technologies. I do believe that alternative plant-based meat will become more popular than animal products. I hope that animal production will decrease and plant production increase. I also believe that the number of vegans, vegetarians and flexitarians will be increasing as well. Consequently, this means that people will become more climate-oriented: not only in the sense of living, but also in the sense of consuming products. This is exactly the trend that we follow in agribusiness now.

GT: Will the agrarian sector be served by robots or by people in the future?

AL: It depends. Robots already fulfill a lot of roles right now. Even tractors in Ukraine are driven by robots, not people. So yes, robots will play a big role, but at the same time we need creative people, who are able to analyse data and make decisions. Robots cannot replace people in situations that require thinking outside of the box.

This article was first published at Discover CEE.