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3,580.00 ₽+0.22 %
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Cherkizovo Group is Russia's largest meat producer: chicken, pork and processed meat products. The company is built vertically — from growing grain and producing feed all the way to the sausage plant. Its shares trade on the Moscow Exchange under the ticker GCHE.
In livestock farming, feed makes up the bulk of production costs, and grain is an exchange-traded commodity with a volatile price. That is why vertical integration here is not an elegant business model on paper but a form of protection: the company grows its own grain and makes its own compound feed, so a rise in market grain prices hits it less hard than competitors who have to buy it.
The second line is the depth of processing. Selling a whole carcass means getting a commodity price. Selling a finished product under your own brand means getting a brand price, which depends far less on exchange quotes for meat.
The industry carries a particular risk that other kinds of production do not face: animal disease outbreaks, or epizootics. An outbreak at a site means culling the livestock and a quarantine, not just a halted production line.
Raising and processing chicken — the group's largest business line.
Pork production, part of which goes to the group's own processing.
Sausages, semi-finished products and ready-made products under the group's own brands.
Own grain and compound feed mills — protection for production costs.
Strengths and weaknesses describe the business itself. Opportunities and threats describe what may happen around it.
The company raises and processes meat — chicken and pork — produces sausages and semi-finished products, and also grows grain and makes compound feed for its own livestock operations.
Because feed makes up the bulk of the cost of producing meat, and grain is an exchange-traded commodity whose price swings sharply. Its own crop farming makes production costs more predictable and protects the company when grain prices rise.
Animal diseases. An outbreak at a site means not a halted production line but the culling of livestock, a quarantine and a ban on shipping products out of the region. This is a risk that ordinary manufacturers do not face.