American Archer Daniels Midland enters Russian market with a joint venture

Archer Daniels Midland
Archer Daniels Midland

Russian “Aston food and food ingredients” (part of the “Aston” group of businessman Vadim Vikulov) and the American Archer Daniels Midland company (ADM) signed an agreement on a joint venture for the production of starches and syrups, as per company report. ADM will have 50% of the shares of the starch division of “Aston” based in the Ryazan and Vladimir regions. Thus, ADM is the last of five global traders of agricultural products to acquire assets in Russia. The top five also includes Cargill, Bunge, Glencore and Louis Dreyfus, all of them have long had assets in Russia – factories , terminals, elevators, etc.

For example, Bunge acquired elevators in the Krasnodar region and the Voronezh region and a grain terminal in Rostov-on-Don in 2004-2005. In 2008, the company put into operation an oil extraction plant in the Voronezh region, which produces sunflower oil under brands Oleyna and Ideal.

Cargill in the 1990s bought a glucose-treacle plant “Efremovsky” in the Tula region, then built an oil extraction plant in the Volgograd region, an Elevator in the Voronezh region, etc.

Glencore jointly with Ukrainian Kernel in 2012 purchased a grain terminal in Taman port from the group of companies “EFKO”.

In 2015, the Russian division of Louis Dreyfus bought a grain terminal in the Rostov region.

ADM is an international agro-industrial Corporation, one of the world’s largest suppliers of food and agricultural products, the largest processor of maize, also produces food ingredients, animal feed, products for industrial and energy purposes.

ADM has customers in more than 170 countries around the world. The company consists of 500 procurement centers, 270 enterprises manufacturing food ingredients, 44 innovation centers and the largest logistics network.

ADM – one of the world leaders in the production of starches and sugar substitutes, its impact extends to the markets of Europe, the Middle East and North Africa, quoted in a statement by the President of ADM in Europe, the middle East and Africa Pierre Duprat.

“We are now joining Russia’s growing food and beverage industry,” says Mr. Duprat. “Aston is a key player in this important market, and we look forward to bringing together our expertise and capabilities to help the new collaborative business grow.”

“Aston” is one of the largest Russian manufacturers of food products and food ingredients, one of the largest exporters of agricultural products and vegetable oils. The company was created in 1997 with head office is in Rostov-on-Don.

The starch division of Aston has been developing since 2011, when it acquired group “Russian Starch”. It consists of two corn processing plants: “Ibredkrahmalpatoka” in the Ryazan region and Novlyansky starch-treacle plant in the Vladimir region.

The report says that the deal between ADM and Aston will be closed before the end of the second quarter 2018, after receiving the approval of the Federal Antimonopoly Service.

ADM – traditional public American agro-industrial company, to whom it is important to work in emerging markets. For a long time such markets were China and Mexico, but Russia was traditionally bypassed by ADM. This may be due to some risks, and the company’s expectations of exceptable levels of profits in Russia as in other countries. Now, by creating a joint venture, it will try the Russian market. This is how ADM usually enters new markets.

ADM shares in the joint venture is a small asset, but it can give the company an idea of whether to continue investing in the Russian market. Then it can either quickly come out of the joint venture, or increase the share and will look for new opportunities for investment.

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