The agricultural sector was one of the first to feel the consequences of the full-scale Russian aggression in Ukraine, which began on February 24. The war forced farmers to become the guardians of food security. We met with Viktor Ivanchyk, co-founder and CEO of Astarta. We talked about how the agro-industrial sector maintains the status of the Ukrainian economy driver, the prospects of the industry, and sustainability under the conditions of war and food security.
Yulia Lipovetska, Director of ERP Systems and Information Technology Services, KPMG Ukraine, conducted the conversation.
–KPMG International recently released its annual report, 2022 CEO Outlook. According to it, 85% of global CEOs are confident in their organisations’ growth over the next three years. According to preliminary results of the study among Ukrainian CEOs, 77% of them are confident in the viability of their companies over the next six months, and 53% of Ukrainian CEOs expect their companies to grow over the next three years. How would you explain such cautious business optimism in Ukraine?
-This optimism of business is entirely consistent with the mood of society. I even expected more optimistic indicators. After all, since the beginning of the full-scale war, I have not met people who do not believe in our victory. People are fully mobilised, charged, convinced that the victory of Ukraine is inevitable and of need to do everything to bring it closer. At the same time, business people are natural optimists – they believe in their companies and their future success. It is an axiom.
For 8,5 years of war, Ukrainians have developed a fairly strong immunity to external challenges, even military aggression. And this gives us additional confidence that we will definitely succeed in the months and years to come. The prospects in the business areas in which Astarta operates are bright: the agro-industrial sector is among the global leaders. This is the area where investments are sought after and investors are looking around.
–The situation in Ukraine and the world is changing very fast. What business strategy has Astarta chosen under the conditions of martial law?
-Since 2014, when the war in Ukraine began, we realised that only business diversification and reliance on our strength would allow us to build a sustainable and successful business. Diversification for our company is the based on combination of focus on domestic and foreign markets, development of deep processing of agricultural products, digitalisation, energy efficiency and replacement of fossil fuel energy with renewable one. For this purpose, we built a biogas facility ten years ago, where organic residues of sugar production are processed into biogas.
In my opinion, self-reliance and mutual support are part of the national character of Ukrainians. That is why, since 2014, various social groups of society have been active and created hundreds, perhaps thousands, of humanitarian and volunteer projects, and charitable organisations to help civilians and the army.
Today, business interests are largely subordinated to the state’s interests and assisting those in need. We do everything to maintain food production, continue to pay taxes to the budget, preserve jobs and create new ones if we need to strengthen our teams. It is the key to the sustainability of our business and the strategy of the entire Ukrainian business.
–The war has once again proved that Ukraine is a key player in the global agricultural market. What should change in the agrarian policy for our country to finally use its full agricultural potential?
-Due to the blockade of the Black Sea ports and thus main export destinations, we faced the problem of agricultural products stockpiling on the territory of Ukraine. All companies, including Astarta, started looking for new transportation routes through the Western borders and the Danube.
In the short term, we have found a solution for partial exports. But in the long term, we have to process these products in Ukraine – to create jobs here, build modern facilities for deep processing and production of final food products that we can supply to foreign markets. To do this, business, government, public and industry associations must join forces. Everyone at their level should move this process forward: from small enterprises and individual entrepreneurs to large agricultural holdings.
Since the first days of the full-scale war, we have additionally established a small canning production line: our employees, at their initiative, began to produce canned products to supply the military and temporarily displaced persons. Now, together with international partners, we are systematically developing and scaling up this activity, applying modern approaches and technologies, and creating hundreds of jobs for people who lost them.
But in addition to creating products for emergencies, we have the potential to produce high-quality Ukrainian dairy, meat and cereal products, which have every chance to enter foreign markets. Today, the attention of the whole world is focused on Ukraine. Ukraine and its people are fighting for universal global values, moral and humanitarian principles, for the right to exist. And, of course, Ukrainian businesses should set an example of how to make products to ensure food security but with sustainable attitude towards resources used. And in this sense, our activities under extreme conditions can be applied in the future in many countries globally.
–How does your company manage to retain people? What are you focusing on now? How do you support them?
-People are the main and most important asset for the company. From the first day of the full-scale war, we have established regular communication with all employees and managers. First, we focused on the safety of employees and their families, then – on the preservation of assets and ensuring sustainable continuous operational processes. We introduced psychological support programs.
At the same time, we began to help with housing, food, and solving fundamental household problems for temporarily displaced persons who were passing or staying in the communities where we operate. These are the Poltava, Vinnytsia, Khmelnytsky, Zhytomyr, Chernihiv and Ternopil regions. And such humanitarian aid has become a mission for our team. Without exaggeration, thousands of employees joined this voluntarily, at the call of the heart.
When we realised it was serious and, unfortunately, for a long run, we began to think through long-term measures.
Agricultural production and processing needs experts with specific knowledge and skills, so they have to continue their work. Ukrainian legislation allows us to reserve employees critical for operations. However, about 300 Astarta’s employees were mobilised into the Army. The Company helped them with everything they needed: personal protective equipment, fatigue, and medicines. We continue to pay salaries to the mobilised employees while they are in service. I am sure that we will pay them until the victory of Ukraine and they return to their workplaces. In addition, we provide psychological and material assistance to the families of those who went to defend the country.
Of course, we also help workers and managers who are employed by us. We control, review and redistribute responsibilities to maintain the balance of functions and workload of each employee. We have increased salaries. We continue training and development programmes, prepare successors and develop an internal personnel reserve. Again, this is psychological assistance that makes one feel confident and optimistic.
–How is the direction of digital technologies relevant now?
-Today, using digital technologies is the key to success in everything. Our achievements at the front prove this – the Ukrainian military is fighting with tablets in their hands, using modern technologies of warfare: troop management, logistics, communications, and specific military operations – and without this, it is impossible to win a current war. I am proud that our military is so quickly and effectively mastering modern methods of warfare. And this saves hundreds of thousands of lives of both military and civilians. And it is impossible without it.
Similarly, the prospect of the agro-industrial sector is impossible without modern IT technologies. We realised this ten years ago, and for the last five years, we have been actively creating and developing a comprehensive digital system for Agrichain business management. Therefore, IT technologies are necessary and will qualitatively change how we do business in the near future.
–How does the work on the Agrichain IT project continue under martial law?
-Despite the war, the Agrichain project continues to develop, taking into account current needs. Moreover, the specialists have increased the pace and have developed six new projects. We started developing new modules, AgriChainMachinery (machinery and equipment management) and AgriChainLogistics (logistics, inventory and product management).
Over the past few years, we have been working on creating our internal system based on artificial intelligence. It is based on a digitised database that we have accumulated for almost 30 years of business. The data is analysed using algorithms, and we use the result to make current management decisions in logistics.
Just in September, we started cooperation with the American company “Planet Labs”, a leading company in Earth observation from space. We integrated their application into the AgriChainScout system, and now the condition of crops, the level of vegetation, and the quality of seedlings in the fields of Astarta will be recorded by satellites equipped with a high-power telescope. And this gives much information for reflection, evaluation, and analysis.
I pointed out only three key points we are working on, but all those modules developed over five years have been implemented and are constantly being improved. We share our developments with partners. And this is a competitive advantage of Ukrainian companies over international ones. Therefore, I am convinced that these technologies are the future. They cannot be postponed for the post-war period, it must be done today and as quickly as possible.
–Astarta was among the first to join the UN Global Compact and began publicly reporting on its progress in this area and subsequently publishing sustainability reports according to GRI standards and ESG criteria. How has the degree of importance of ESG issues changed after the start of a full-scale war for business and your company in particular?
-The principles of sustainable development have become our company’s philosophy, even before Astarta’s IPO. These are the essential values we implement and are guided by when making everyday and strategic decisions.
Of course, the problems have become more acute with the outbreak of war. Millions of people have lost their security, housing, and some of their relatives and friends. The constant bombardment of cities and towns by Russian missiles and shell mining of territories is a colossal tragedy for people and a massive environmental disaster.
Therefore, the issue of maintaining humanitarian and food security is in the foreground for us today. And we are doing everything in our power to improve the conditions for the people who suffered the most. First of all, as a food company, we have been and are being asked for food. And we provide such assistance. We cooperate with many international partners – the Embassy of Switzerland in Ukraine, the International Labour Organization, the Ministry of Foreign Affairs of Denmark, the Federation of Employers of Ukraine, the UN World Food Program, the German Development Bank DEG, Raiffeisen Bank, charitable organisations “Caritas” and “Life-Saving Center”, charitable foundations “Dreamland” and “Samaritan’s Purse”, “Soddiya”, Vodafone. We jointly provide food, personal protective equipment, hygiene, and medicines to the population in need.
I am impressed by the involvement of our compatriots abroad, particularly the community of Ukrainians in Portugal led by Roman Curtis. A small group of volunteers of “Ukrainian Refugees UAPT” organised several cargo flights to Warsaw with a total weight of over 100 tons of humanitarian aid for the population of Ukraine. Another example is the organisation “Cleaveland Maidan Association”. Its co-founders, Alexander Sharanevich and Andrey Voetsky, live in the United States of America and have their own successful businesses. In 2014, after the annexation of Crimea and Donbas, the guys came to Ukraine and started volunteering. And with the outbreak of a full-scale war, they flew dozens of 30-40 kg bags with products that people in Ukraine needed.
All humanitarian efforts of Astarta and international partners are united in the Common Help UA project. It has been operating since mid-March, and to date, more than 700 thousand Ukrainians have been affected by the hostilities, and almost 400 social and medical institutions in Ukraine have received assistance. The total amount of aid already exceeds UAH 411m. This is the participation, without exaggeration, of thousands and thousands of people in Europe and the United States in solving the problems we are discussing today. And all this, of course, is included in the goals and values of sustainable development, which are especially relevant for Ukraine today. Therefore, this topic has yet to leave our top destinations. On the contrary, it has become the most important in the company’s activities.
–What are your aspirations and focuses for the next year to cope with the difficulties in business amid the war and after the victory of Ukraine?
-Today everything personal is subordinated to the general – the desire of all of us to achieve victory. Therefore, our current, medium-term and strategic goals are correlated with these main factors.
The company needs to preserve all its production processes. In spring, we sowed even on the temporarily occupied lands. Now, in the extreme conditions of war and adverse weather, we are harvesting, and the processing season is underway. In the conditions of gas, electricity, fuel shortages, and inflation, we understand that businesses should solve these problems independently, where possible. And all our internal reserves and efforts should be mobilised to achieve these things because it is important for the state to direct all resources to help the military.
Therefore, we are not only looking at preserving our operational processes; we are looking into the future and how to restore those investment projects that we planned before the war. We must be ready at a low start by developing business plans to start these processes with a victory if possible. I am confident that we can do this, and the Ukrainian economy and Ukrainian entrepreneurs will quickly restore their assets and reach a high level of competitiveness in the world market.