For sale: Joint Russian-German food facility producing frozen vegetables and frozen meat semi-finished products. Everything is owned.

Presentation of the company
LLC “SP Elan”.

Russian Federation. Omsk, Druzhino village.
July 2020.

Joint Russian-German food facility
producing frozen vegetables and
frozen meat semi-finished products.

Content

1.Brief description of the project
2. Market of frozen vegetables and food in Russia
3.Location and advantages of Omsk
4.Company history
5.Company property and assets
6. Technical condition of buildings, structures and equipment
7. Financial performance
8. Staff
9. Manufacturing and business
10. Raw materials
11. Ecology
12. Development opportunities
13. Selling price

Appendix 1 – photos and videos about Elan company.

Project Description.

Dear Sir/Madam:

My name is Alexander Sinyanskiy, I am a professional business advisor on the Russian food market. In the process of selling the property of SP Elan LLC I officially represent the company owner’s interests in Russia since he permanently resides in Germany.The company SP Elan LLC is offered for sale. It has been operating on the Russian market for over 19 years. Since the moment of foundation until the present, the company has been working continuously.

Founded in 2001 as a joint Russian-German company for the production of frozen vegetables and frozen Russian semi-finished meat products – dumplings (pelmeni), blini, cutlets. Elan company is located in Russia, in the city of Omsk. All of Elan’s main assets (land, buildings, equipment, vehicles, etc.) are owned by SP Elan legal entity.

The situation on the market of frozen vegetables and
semi-finished meat products in Russia.

When Elan company started operating in 2001, the frozen vegetables market was still very weak and underdeveloped in Russia. The Russians did not have the culture of eating frozen vegetables and fruits. According to official data at that time, the average consumption of frozen vegetables per one inhabitant of Germany was 40 kg per year, in Russia it was about 2-3 kg per year.

By 2020 the situation on the frozen vegetables market in Russia has changed a lot. Now frozen vegetables can be bought in every food store in Russia. They have become popular and are in demand. Russians understood the benefits of frozen vegetables, fruits and berries. According to official statistics, sales of frozen vegetables are growing steadily in Russia by 5-8% per year.

Consumers in Russia have become more interested in healthy food; healthy food has been a strong trend in the last few years in Russia. Vegetables, just like porridge, are historically the basis of Russian cuisine. Russians usually eat vegetables several times every day.

Frozen Russian semi-finished meat products– dumplings (pelmeni), blini, cutlets are the second most important line of activity for Elan company. The company can produce up to 100 tons per month. Such food is also part of the food culture of Russians, it has good sales all year round and is not subject to seasonal fluctuations.

Now there are many foreign companies supplying frozen food to Russia. For example, there are a lot of frozen vegetables and fruits from China, Poland and Egypt. However, the Russian government limits the supply of such food by customs duties up to 20% and promotes “made in Russian” products. Therefore, now in Russia, consumers are more likely to choose food grown or produced in Russia.

Moreover, sanctions imposed on Russia in 2014 affected the exchange rate of the US dollar and the Euro. Over the last past 5 years, the Euro and the US dollar have doubled (grew almost 100%) against the ruble. So, foreign food has become became even more expensive. Russian food products have hardly changed in price, since almost all food producers in Russia have switched to Russian (local) raw materials. The market of frozen vegetables, as well as frozen berries, mushrooms and fruits is a very stable and promising market in Russia for many years to come.

World food trends come to Russia with a delay of 3-5 years. Therefore, only in the last few years the market for frozen vegetables has become interesting for buyers. There are all signs that this segment of the market will continue to grow.

Historically, the geography of Russia is very extensive, so it has always been normal for Russians to use frozen food since frozen food is easy to store during a long winter in Russia, it is also safer to transport for long distances across Russia. It should also be noted that there is a serious growth of interest in frozen dough products (for example, pizza, pies, bread) as well as frozen ready-to-eat food.

We recommend the new owner of Elan to focus on producing better quality food. Shopping interests have changed in modern Russia, and ordinary Russians prefer to buy better quality food, not just something cheap.

Location and advantages of Omsk.

Elan Company is located in Russia, near the city of Omsk, in the village of Druzhino, about 6 km to the border of the city of Omsk and 21 km to the center of Omsk.

About 146 million people live in Russia, total number of main cities is 1,115 in 85 regions, but only 16 cities in Russia have a population of over 1 million people. The city of Omsk is included in this list. The population of the city of Omsk and the Omsk region is about 1,992,000 people. Omsk is one of the main economic regions in Russia and Siberia.

It is very important to know that there are two more cities near the city of Omsk with a population of over 1 million people. The city of Tyumen is at a distance of 625 km, it is the gas and oil capital of Russia with a population of 3.6 million people, and the city of Novosibirsk at a distance of 650 km with a population of 2.7 million people.

The city of Omsk has river routes to supply products to the Arctic Circle, as well as good rail links and highways. A particularly good highway connects Omsk with Moscow and St. Petersburg. And it is slightly less than 2,500 km, which is very short distance by the standards of Russia.

Advantages of Elan’s location in Omsk:

1 – labor force is 50-60% cheaper than in Moscow

2 – less taxes

3 – lower prices for electricity and gas

4 – raw materials for the production of various foods are cheaper, better quality and more affordable

5 – better ecology, which makes products healthier for consumers

6 – Omsk is located in the heart of Siberia, so all products can be labeled “Made in Siberia”. In Russia, this is a sign that this product is natural and of high quality.

7 – Omsk in Western Siberia is in the middle of Russia, so Omsk has the advantage of logistics, as it is near equally away from all parts of Russia. Elan products have almost the same delivery time to anywhere in Russia.
For Russia, which is the first country in the world in terms of area, the possibility of the same logistics to all regions is a very big advantage.

8 – Omsk region is historically an agro region in Russia. The basis of its economy is agroindustry: cultivation of grains, vegetables, and meat products. The price for raw materials in Omsk is always one of the lowest throughout Russia. The reason for the constant good harvests is the favorable and even climate of the Omsk region.

9 – Omsk is one of the most cultured and educated regions of Russia. There are several universities and institutes in Omsk, and they have an exceptionally good reputation throughout Russia. Residents of Omsk are considered one of the most cultured and educated in Russia.
In the attachment to this presentation I will include a link to a short film about the city of Omsk so that you can get to know this Russian city better.

10 – Omsk region has one of the lowest crime rates in Russia.

11 – One of the largest communities (diasporas) of Germans historically moved to Russia is in Omsk region. For many years, the German government supported ethnic Germans in Omsk with money. Before the outbreak of the global pandemic Covid-19, direct flights flew from Omsk to Munich.

12 – Omsk is located just 200 km from the border of Kazakhstan. First, it is the richest country of the former CIS countries with a population of 18.6 million people. Secondly, it is in Kazakhstan that Russian companies buy fruits that grow poorly in Russia due to cold weather. Also, prices for some vegetables in Kazakhstan are better than in Russia (for example, bell peppers or onions).

Do not forget that now part of the New Silk Road connecting China and Europe passes through the territory of Kazakhstan. This way is the cheapest and fastest way to supply Elan’s products to China, the Gulf countries and Europe.

Elan’s production is located near the city of Omsk, and this gives several additional advantages. Firstly – cheaper labor force than in the city of Omsk by 15-20%. Secondly – located in a village, the company can receive various government support. In Russia, for companies that own food and agribusiness in rural areas the interest on loans is better, the number of benefits and preferences from the state is more numerous.

The location of the Elan company allows it to be well accessible both by car without traffic jams and by public transport. It is very convenient for the company employees for the company’s partners.

A little bit of history of Elan company.

When the company was launched in 2001, Elan was one of the first companies in Russia to produce frozen vegetables. Not only German equipment was used, but also German technology. Initially, the main direction of the company was frozen vegetables, frozen vegetable mixes and frozen meat semi-finished products – dumplings (pelmeni), blini, cutlets. Additional types of production were frozen fruit mixes, fish products, vegetable semi-finished products, baked goods, etc.

The company had its own branches in Moscow and St. Petersburg and its own fleet of trucks. The company’s turnover was about 5.3 million Euros per year. Elan company has more than 100 awards and certificates of honor, both Russian and international, for the quality of products. Photos of some of the awards can be found in the Appendix to this presentation.

Company property.

The main value of the company and its advantage is that the company was created according to European standards. As much as possible was acquired as property, not rented as it is customary in Russia. The owner of the company, like a true German, invested money in a business that would work not just for a year or two, but for several decades.

You can find out a complete list of what is owned by the company and what is on its balance sheet during a personal inspection of the plant. Also, upon request, I can send you a separate file.

The most basic assets that Elan company currently owns:

– Fenced land 2 hectares. With a strong and reliable concrete fence. This is very important for Russia.
– two main buildings (the first building measures 18.8 * 30.1 meters, the second 18.9 * 97.4 meters).
The first building is occupied by the office and a vegetable production line. The building material is brick sheathed with siding.

In the second building there is a garage, a vegetable warehouse, a workshop for the production of frozen semi-finished products. The building material is concrete.

Vegetable warehouse (vegetable storage) has the volume of 500 cubic meters. There are enough boxes for storing vegetables. You can place from 300 to 400 tons of vegetables at a time.

Also owned by the company:
– two electric loaders
– Mercedes van car (1.5 tons)
– car for sewer pumping
– its own water tower and well.
– refrigerated container and 4 refrigerated wagons with a capacity of up to 250 tons of frozen raw materials or products
– 3 boiler rooms
– own gas pipeline
– a checkpoint building and a store building at the entrance.
– its own sewerage system and treatment facilities
– its two electrical substations for 600 and 200 watts. This is more than what is needed now for production needs.
– its own repair area, where the technical service immediately repairs all arising production faults.
– its own refrigerating chambers of various sizes, temperature conditions and purposes, in total 10 items with the capacity to store up to 150 tons of products or raw materials.
– fully serviceable and working technological equipment for the production of semi-finished meat products. Now everything is used every day for production.
– fully working and necessary office equipment – tables, chairs, cabinets, computers, printers, telephones, etc.
– the heart of Elan’s production is the German line for washing, cleaning, blanching and freezing vegetables.
Productivity from 350 to 2,000 kg per hour of frozen vegetables (depends on the type of vegetables)

Technical condition of buildings, structures and equipment.

The company was founded on the place of a former Soviet starch plant, which was very well built with good materials and good standards. Everything is in a good working condition for its age. There is no need to do global or major repairs. In May 2020, we completely renovated and changed the roof on one building (500 sq. m).

The Chief Engineer has been with the company for over 10 years and is really very good at his job and production.

The adjacent territory is also in good and sound condition – covered by concrete slabs, asphalt is laid on top. No repairs are required. The adjacent territory at the entrance to the plant is also completely intact. You can personally see in more detail in the photo and video in the Appendix to this presentation.

All equipment of the workshop for semi-finished meat products is in full operation, now it works every day and produces about 15 tons of products (pelmeni) per month.

The vegetable line of German production, when the company was launched, was brought directly from Germany. Now it can sort, wash, cut, blanch and pack vegetables. The last part of this line – the freezing tunnel (freezer) is unfortunately not working properly. This was the reason for the decline of Elan’s production since the owner did not want to invest in new equipment with the current Russian management of the company.

The main problem of the freezer tunnel is the cold production unit. Everything else is in working order. There are two solutions:

The first one is simply to buy a unit (engine) for cold production (shock freezing). In Russia the average cost of such equipment produced in Germany, Holland is from 4 500,000 rubles (approximately 55,000 Euros).

Option two is to buy a complete freezing tunnel. Imported used one costs about 2.5 million rubles (about 31,000-32,000 Euros), imported new one (not Chinese!) from 8 to 15 million rubles (100,000-200,000 Euros).

Financial performance

In fact, the company has been unprofitable for the past 7 years. The reasons are simple. Firstly, Elan is the only business of the owner located in Russia, and secondly, it is not the owner’s core business.

The owner was not actively involved in the company initially. The main part of the operational work in Russia was performed by his Russian co-founder. Then, unfortunately, the hired Russian directors did not manage to ensure good sales and profits.

The main task was to keep the production in working condition and to keep it “alive”. The local director juts wanted to be paid and do nothing since the owner covered the company’s losses from his personal money for all these years. Therefore, the company has no debts – neither in wages nor in taxes; the company owes nothing to anyone. Everything was paid with German scrupulousness.

The current average loss of the company for the year is 400,000 – 500,000 rubles per month (5,000 – 6,500 Euros). The main expenses are official salaries of top managers, taxes and utility bills for electricity and gas.

The accounting is legal, official and transparent. Everything is according to the laws of the Russian Federation. Any checks by auditors on your part are completely permissible.

At the moment, I was hired to help and assist in the sale of the company. I am the only professional business advisor on the Russian food market and now I also performs the duties of a Crisis manager to eliminate losses. Therefore, by the time you start reading this presentation, the monthly loss problems will be completely resolved.

Staff

In its best years, Elan had up to 125 employees. Now the staff consists of 27 people, including the hired director. The current staff is ready to stay and work with a new owner.

The company is fully staffed – technologist, engineer, accounting, production, loaders, security, etc. All are in their work formalized according to the labor law of the Russian Federation; the salary is complete legal. Only citizens of Russia, all residents of Omsk, work at the company. No special work permits are required.

On average, people work for the company for about 5-10 years. All are adults and responsible people. They do their job professionally and with high quality. Since Elan is located in the countryside, it is very easy to find and hire inexpensive seasonal workers when needed.

For additional information, the official salary at Elan for the chief technologist and chief engineer is 50,000 rubles (approximately 630 Euros) per month. An average worker in a workshop receives an average of 23,000 rubles (280 Euros) per month. This is a fairly good level of salaries for Omsk and especially for rural areas.

As mentioned above, if Elan were in Moscow, salary costs would be at least two or three times higher. In Omsk region, one of most economically developed regions of Russia, there are many production facilities, as well as higher and secondary vocational educational institutions. In the case of production expanding and increasing the range, it will be quite easy for the new owner to find high-quality and professional staff.

Manufacturing and business.

Now the company works as a contract manufacturer for the Agromir company (Omsk), produces a range of frozen semi-finished products – dumplings (pelmeni) and cutlets. The volume is about 15 tons per month.

The existing equipment allows you to easily increase productivity up to 80-100 tons per month. Its own production is now about 4 tons per month (Russian dumplings (pelmeni and cutlets) for 3 clients.

Due to the malfunction of the freezing unit, unfortunately frozen vegetables are not produced. The vegetable line is not working now, but in working condition it has the productivity from 350 to 2,000 kg per hour.

Elan has a very good reputation as a food manufacturer in Russia. It was awarded several times at exhibitions as a trustworthy supplier. You can see photos of certificates of honor in the application.

Good personal and business connections with all past buyers of frozen vegetables are still there.

Since the hired Russian directors were not interested in the development of Elan, the website of the company and its social networks were not maintained. No advertising was delivered, no new customers were attracted. Elan did not participate in any exhibitions. This is also one of the reasons for the decline in financial performance and losses of the company at the moment.

Using the best international and European practices and experience in marketing and advertising, it will be quite easy for a new owner to get a good share of the Russian market. Attracting foreign technologists will create the most modern food novelties for the Russian market.

With a potato price of 5 rubles (0.06 Eurocents) per kg, the cost of a finished blanched-frozen cube of potatoes is 22 rubles (0.27 Eurocents) per kg. The average wholesale selling price is 43-45 rubles (0.55 Eurocents) per kg. On the shelves of Russian stores, such potatoes cost about 120 rubles (1.5 Euros) per kg.

It must also be said that corporate tax in Russia is one of the smallest in Europe, only 20% (last year it was 18%)

Purchase of raw materials and supplies.

Of course, any food production cannot operate without raw materials. Let me briefly describe the most important raw materials for Elan and the availability of these raw materials.

The most important types of raw materials to produce Elan’s products are, firstly, vegetables (potatoes, carrots, beets, cabbage and onions), and, secondly, flour and meat for the production of frozen semi-finished meat products.

Let us look at each raw material group one by one.

Vegetables – Omsk region is one of the most developed agro-regions in Russia. Therefore, it fully provides itself with vegetables. As I said earlier, the prices for vegetables in Omsk region are among of the lowest ones in Russia.

For example, after the harvest in 2019 the prices per kg were as follows:
Potatoes cost on average 5 rubles (0,06 euro)
Carrots – 5 rubles (0,06 euro)
Onion – 6 rubles (0,07 euro)
Cabbage 8 rubles (0,1 euro)

After the harvest, prices for vegetables in Russia usually grow by 50-80% for the rest of the year. For this, Elan immediately provided for a vegetable warehouse of 400 tons. Now, the warehouse is in good condition. But we recommend that a new buyer upgrades the equipment to improve the microclimate in the warehouse.

As I said earlier, Omsk region borders with two other very developed agro regions – Tyumen and Novosibirsk. In case of no harvest in Omsk region, you can easily buy vegetables in those regions. The prices are about the same.

Since Omsk is located only 200 km from Kazakhstan, it is very profitable to buy southern vegetables and fruits there. For example, apricots, plums, melons, peaches, cherries, etc. Russia and Kazakhstan are members of the Customs Union, therefore, when delivering any food from Kazakhstan, you will not need to pay any taxes or customs duties. Costs for delivery from Kazakhstan to Omsk are about 6-7 rubles (0,07 – 0,09 eurocents per kg).

All products that cannot be produced in Siberia or in the south of the country can be obtained duty-free and very cheaply in the southern republics of the former CIS countries (for example, Kazakhstan, Uzbekistan, Turkmenistan, Kyrgyzstan, Tajikistan).

Raw materials for frozen semi-finished meat products flour and meat (beef, pork, chicken) are one of the main agricultural industries in the Omsk region.

A lot of wheat is historically grown here, and the price of wheat is one of the lowest in Russia. Flour from Siberian wheat is of very high quality and is supplied to many other regions of Russia. Due to the fact that the Omsk region is located in the southern part of Siberia, there are always good harvests every year. The average price of flour is 3 rubles (0.04 eurocents) per kg.

Meat (beef, pork, chicken) – Omsk region has a very good feed base for farm animals. Therefore, many cows and pigs are raised here. There are also about 10 poultry farms for growing chicken.

At present, Elan’s production operates entirely on local raw materials.

Environmental safety and sustainability.

Unlike Europe, Russia has less stringent environmental laws and standards. Elan already has a relatively high level of ecology thanks to its own water source and an own suitable special sewerage system.

During its work, Elan has not had any fines or claims from the environmental services of Russia. All treatment facilities operate in accordance with the standards of the Russian Federation.

Since gas is very cheap in Russia, Elan has its own system of gas pipes. This allows the maximum use of natural gas as the most economical and environmentally friendly source of energy.

However, i recommend the future owner of Elan to consider investing in the construction of a plant for the extraction of starch from wastewater.

Development opportunities.

For the new owner, we recommend paying attention to the following possible development options for Elan:

1. Further expansion of contract manufacturing and launch of new types of food.

2. Purchase of extra land next to Elan to grow vegetables by yourself (Dutch or European system). The average price of agricultural land for growing vegetables in Omsk region is on average 100,000 rubles (1,200 Euros) per hectare.

3. Creation of a joint venture with Kazakh or Kyrgyz partners to grow fruits and southern vegetables.

4. Construction of a greenhouse on a free area of about 1 hectare by Elan. For the purpose of growing lettuce or mushrooms.

5. The repair of the freezer installation and the launch of the line for the production of frozen vegetables and fruits, as well as vegetable and fruit mixtures.

6. After the start of operation of the freezing line, it is possible to start the production of frozen pizzas, pies and dough. At present, similar products are not produced in Omsk.

7. With the freezing line, it is possible to increase the production of an assortment of frozen semi-finished products under its own brand.

8. Sign a supply agreement with foreign food chains operating in Russia – Metro cash and carry (Germany), Selgros (Germany), Auchan (France), Spar (Holland). These food retail chains have a very good reputation with Russian shoppers and operate more honestly than similar Russian food chains.

9. Production of food products (frozen vegetables, wild berries, wild mushrooms, reindeer meat) under the brand “Made in Siberia” and export these products to foreign markets (Europe, China, Southeast Asia, the Persian Gulf countries). To start exporting abroad, Elan only needs to get additional licenses in accordance with the laws of the Russian Federation.

10. If you already have a food production facility in your country, then Elan is an excellent opportunity to localize your business in Russia. It is very easy to convert production to any new food production since all additional processes (logistics, storage, packaging, etc.) are fully in operation.

All these development opportunities are very easy to be achieved in the shortest possible time. Their relevance and prospects are confirmed by myself, Alexander Sinyanskiy, a business advisor on the Russian food market.

Selling price

The selling price of the company is 1,200,000 Euros. ( Please pay attention -the Owner is very-well motivated to sell the company, so he is ready to discuss a good discount or payment by installments for 5-6 years)

At the same time, 200,000 Euros of this amount you will have to invest in a freezing line.

The sale is planned by changing the owner of the LLC or by re-registering all the property to your company. The current Russian LLC has no debts, loans or encumbrances, all reports were submitted on time, taxes were paid in full.

In the Appendix to this presentation, you can see some photographs of Elan company, as well as links to a video about Elan company and the city of Omsk.

Also, i how business adviser is constantly stay on the territory of Elan company and can conduct an online presentation at any time convenient for you.

Contacts:

In Germany:
Contact person: Prof. Dr. Siegfried Köhli. Owner
Address: Ankerstraße 2; 06108 Halle.
Amtsgericht Halle / Saale.
Mobile\ WhatsApp: +49 (0) 175 7227108
Tel: +49 3452 323110
Skype: skoehli1
E-Mail: siegfried.koehli@bbi-bildung.de

In Russia:
Contact person: Alexander Sinyanskiy. Business advisor on the Russian food market.
Directly at Elan’s address. Russia, Omsk, Omsk, s. Druzhino, Proizvodstvennaia Street 2a/1
Mobile, WhatsApp, Viber, Skype, Telegram + 7-988-2860-888
Email: mail@alexandersinyanskiy.ru
Web: www.alexandersinyanskiy.ru

Appendix

Checkpoint

Building number 1. On the second floor there are office rooms, on the first floor there is a line for freezing vegetables.

Line for the production of vegetables. Located on the ground floor.

Example of auxiliary premises for a vegetable line

Director’s office. As an example of renovation in office premises and the internal state of offices. Everybody has the same furniture in the office.

Building 2 in which there is a garage, a workshop, a workshop for the production of frozen semi-finished products and a vegetable store.

Garage inside.

Vegetable storehouse for 400 tons

General photo of the territory and the water tower.

Refrigerated wagons. All are working properly

Appearance. The 3 largest mobile operators in Russia – MTS, Beeline and Megafon – are renting space for their towers. This is the official additional income every month.

Packaging for frozen vegetables and semi-finished meat products by Elan.

Elan products quality awards. A small part out of 62 awards and diplomas is on the table.

Extra two videos. 

Elan company aerial view

And a small private film about the city of Omsk. This is a unique film because it was not filmed by professionals, but by people who simply love their city. You don’t need to know Russian language  to understand what the film is about.

Best Regards
Alexander Sinyanskiy
Business Adviser on the Russian Food Market
www.alexandersinyanskiy.ru  

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