Sister and brother Olena and Rostyslav Vovk created an advisory board for their family business, the biotechnology group Enzym Group and the cat and dog food manufacturer Kormotech, in 2024 and intend to transform it into a full-fledged supervisory board, Olena Vovk said.
“An advisory board is already an element of pure corporate governance. As of now, it is an advisory board that follows all the principles of a supervisory board. This is a transitional stage that should be completed after one term – formally moving from an advisory board to a supervisory board,” she said at the VII International Corporate Directors Forum organized in Kyiv last week by the Corporate Governance Professional Association (CGPA).
Vovk clarified that the advisory board began active work at the beginning of this year, and she and her brother had been preparing and assembling it for two years.
The business co-owner noted that the board has three main tasks, the first of which is the development of both businesses.
“Both businesses are developing in their own way and require certain expertise, which my brother and I already understand that we do not have and our management teams do not have either. It is better to get this expertise from the market, from experienced independent directors,” she explained.
Vovk emphasized that Enzyme and Kormotech are very active in international markets, so independent directors should be people with experience in these markets, and ideally, with an understanding of the Ukrainian context. For example, she clarified, Enzym exports 55-60% of its products.
“In addition, each of them has their own functional expertise, which is very necessary for us as owners, and also necessary for our teams, i.e. they play a certain role of coaching, an outside view of the areas that we need to pump up, or improve, or even open,” added the co-owner of the company, who oversees Enzym’s business, handing over the CEO position to former COO Andriy Tsehelyk, while her brother heads the Kormotech business.
At the same time, she noted that the advisory board does not develop a strategy for the business, but rather coordinates it and helps management teams improve it.
Vovk said that another task of the advisory board is to ensure business security, as both the main business units – Enzyme and Kormotech – are very ambitious, so it is necessary to balance the investment cycles of each business, because “there is only one pocket.”
The third task of the advisory board is to help build professional corporate governance so that future generations of the family can act as responsible shareholders. According to Ms. Vovk, the chairman of the board is a representative of a large Finnish family company with extensive experience in transferring business between different generations.
In addition, she said that the general governance scheme of Enzyme and Kormotech also includes a shareholders’ agreement signed between the owners, a family council and executive boards at each business unit, which have also undergone significant changes recently, including the creation of committees to better respond to market changes and implement development plans.
Vovk recalled that the business was originally founded by their father, Orest Vovk, director of the Lviv yeast plant, in 1993, and was taken over by his children Olena and Rostyslav after his death in 2014.
“In fact, we have been in the process of forming a corporate governance system for our family business almost all this time,” Vovk stated.
According to her, they, as shareholders of a family business, delegate some of their rights to their families so that future generations are aware of the responsibility they will have and participate in discussing and resolving business issues.
Vovk clarified that at this stage, she and her brother are active in the business and understand very well what is happening in the operations, and the children do not plan to enter the operations now.
She also emphasized that the family council should also select and approve the head of the advisory board.
As reported, in 2023, Kormotech’s turnover increased by 22.5% to $152 million from $124 million in 2022. The share of exports increased to 31% from 28% a year earlier.
In 2023, Enzym’s revenue increased by 32.3% to UAH 1 billion 838.15 million, while operating income increased almost 2.3 times to UAH 385.99 million.
The European Bank for Reconstruction and Development (EBRD) is providing Kormotech, a leading Ukrainian pet food producer, with a financing package to increase exports and geographic diversification by building a second pet food plant in Lithuania, the EBRD press service reports.
According to the release, the total cost of the Kormotech project will be EUR63 million.
The allocated financing package is a EUR40 million A/B syndicated loan, of which EUR20 million will be provided by the Dutch SDG-focused asset management fund ILX Fund.
The bank has previously provided EUR 15 million to Kormotech Group, a long-standing EBRD client, for the construction of its first plant in Lithuania, which began operations in June 2020. The bank also provided a EUR3.3 million loan to the company to replenish working capital during the Covid-19 pandemic in 2020.
The EBRD loan is accompanied by grant financing, including a grant from the Japan-EBRD Cooperation Fund, which partially covers the costs of external lawyers. The grant funding will also partially cover the cost of new workplace equipment that will create new livelihoods for groups that need more attention, including women and people with disabilities. This component is being implemented as part of the EBRD’s new program aimed at stimulating capital investment.
The loan is provided to the Group’s holding company Vengast Investments Ltd (Cyprus) and its subsidiary in Lithuania, Kormotech UAB.
The EBRD is the largest international financial investor in Ukraine. Since the beginning of the war in 2022, the bank has provided EUR 5 billion to the Ukrainian economy and agreed with shareholders to increase capital by EUR 4 billion, which will allow it to continue lending at current levels during the war and further increase volumes during the full-scale recovery phase.
Kormotech is a global family-owned company with Ukrainian roots that has been producing cat and dog food under the Optimeal, Club 4 Paws, Woof! and Meow! brands since 2003. The company has production facilities in Ukraine and the EU, with a product range of over 650 items. Its focus on exports and geographic diversification helps it withstand the impact of Russia’s war against Ukraine.
The new project will also help Kormotech strengthen its human resources and skills development efforts in light of the current challenging situation on the Ukrainian labor market, including creating new employment and training opportunities for women, veterans, and other groups that require more attention. It will also enable Kormotech to improve energy efficiency.
In 2023, Kormotech’s turnover increased by 22.5% to $152 million from $124 million in 2022. The ratio of sales abroad and in Ukraine in tons is now 31% to 69%, respectively (in 2022 it was 28% to 72% in Ukraine).
Kormotech brands grew most dynamically in the markets of Romania (+35%), Poland (+11%) and Moldova (+11%).
Kormotech is a leader in Ukraine, one of the world’s top 50 pet food producers and one of the top 21 most dynamic pet food brands. The ultimate beneficiaries of Kormotech are Olena and Rostyslav Vovk.
Kormotech, Ukraine’s largest producer of cat and dog food, has started exporting its products to the Korean market, the company’s press service told Interfax-Ukraine.
As specified in the report, since June 17, Kormotech’s Optimeal and Club 4 Paws brands have been presented on 12 Korean specialized Internet sites.
South Korea’s pet food market ranks third among East Asian countries, after China and Japan in East Asia. In terms of money, it is three times larger than the Ukrainian market. The share of sales of specialized food for cats and dogs is 50% to 50%.
“The South Korean market is unique in that 67% of petfood sales are made through online channels. This is the highest figure in the world, according to Euromonitor reports. Therefore, one of the challenges in cooperation with South Korea is to gain experience in building and developing online sales in the premium and super premium market,” said Eduard Babenko, Head of Strategic Business Unit Ukraine, Moldova and Southeast Asia at Kormotech.
Kormotech started negotiations with a distributor, Korean company Careside co. Ltd last year, and a cooperation agreement was signed in the fall. At the end of May 2024, the distributor received the first two containers of dry and wet food Optimeal and Club 4 Paws, which is about 24 tons of products.
You Young Kook, CEO of the Korean company Careside co. Ltd. expects that experience in international markets and resources will help the Ukrainian manufacturer to succeed in the South Korean market.
“Kormotech pet food contains high quality ingredients and undergoes rigorous quality control. This is a significant advantage, especially for demanding Korean pet owners. It is impressive to see how the company is constantly deepening its expertise in understanding the approaches to pet food formulation and their impact on the health and quality of life of pets. And most importantly, the efforts it makes to develop a culture of care and companionship with pets,” said You Young Kook.
According to Vladyslav Mazurkevych, Kormotech’s Asia Export Market Development Manager, super premium and premium cat and dog food lines are already available on the following 12 e-commerce sites in South Korea: Naver, Coupang, TM, WM, G-market, Auction, 11th St., Lotte On, Interpark, SSG, CJ on style, GS Shop.
“By the end of this year, we want to start cooperation with pet stores and veterinary clinics so that customers can look at the product, inspect it, and feel it,” Mazurkevych explained.
In 2023, Kormotech’s turnover increased by 22.5% to $152 million from $124 million in 2022. The ratio of sales abroad and in Ukraine in tons is now 31% to 69%, respectively (in 2022, it was 28% abroad and 72% in Ukraine).
Kormotech, a leading Ukrainian manufacturer of cat and dog food, will expand its production in Kėdainiai, Lithuania, investing more than EUR60 million in four production stages to be commissioned in 2025-2028, the company’s press service told Interfax-Ukraine.
“Lithuania is now our window to the world. Our plant in Kėdainiai has become a reliable support for us – it always operates at 100% capacity, while in Ukraine we have to take into account the risks of shutdowns due to the war. We aim to further expand our capacity in Lithuania by building four additional production lines by 2028,” said Rostyslav Vovk, CEO and co-owner of Kormotech.
Kormotech launched its first foreign plant in Kėdainiai, Lithuania, in 2020. Currently, more than 170 specialists from Ukraine and Lithuania work at the wet feed production facility with a capacity of more than 20 thousand tons per year.
“Our successful experience of building and operating in Lithuania, favorable conditions in the free economic zone, support from Invest Lithuania and our well-established network of partners and suppliers led us to the decision to expand the enterprise,” emphasized Vovk.
Kormotech plans to launch the first new production line by 2025, adding a line each year until the four production lines are fully operational in 2028. As the expansion project progresses, the company will be interested in finding qualified engineers, technologists, and other highly specialized professionals in both Ukraine and Lithuania. With the new expansion project, Kormotech will double its current workforce in Lithuania, adding 200 new jobs in five years.
According to Elius Civilis, Director General of Invest Lithuania, the Lithuanian state agency, Kormotech’s expansion shows that Lithuania is open to foreign investors and creates truly favorable conditions for them.
“In Kėdainiai, Kormotech has built a modern, highly automated plant employing local specialists of various competencies. The company’s decision to expand its facilities and double the team size demonstrates the quality of both the local business infrastructure and talent,” emphasized Chivilis.
In Ukraine, Kormotech is constantly expanding its production capacity. During 2022-2023, the company invested about $14 million to modernize dry feed production and expand wet feed production by almost 70%.
“We plan to build new production facilities in Ukraine immediately after the war ends,” said Vovk.
Kormotech is a global family-owned company with Ukrainian roots that has been producing high-quality cat and dog food under the Optimeal, CLUB 4 PAWS, Woof, Meow! The company has production facilities in Ukraine and the EU. The product range includes more than 650 items.
The company is among the TOP-60 global pet food manufacturers and TOP-20 most dynamic pet food brands. Kormotech sells products of its own brands and those of its partners in 40 countries.
Currently, the company employs about 1300 people in five countries – Ukraine, Lithuania, Poland, Romania, and the United States.
Invest Lithuania is a non-profit agency under the Ministry of Economy of the Republic of Lithuania. Its mission is to attract foreign investment. It serves as a point of contact for foreign companies and accompanies international business at every stage of the process of starting a business in Lithuania, providing information on recruitment, tax benefits and financing options.
Kormotech, Ukraine’s largest manufacturer of cat and dog food, will implement a number of investment projects in Ukraine and Lithuania, where it has production facilities, as part of the development of its production capacities in 2023-2024, said the company’s beneficiary Rostyslav Vovk during a Business Breakfast with Forbes Ukraine on Wednesday.
According to him, Kormotech completed a 25% expansion of the company’s factory in Lithuania in the second quarter of 2023. In addition, in the third quarter, it will put into operation a new line at a factory in Lviv region for the production of wet fodder.
“EUR8m was invested in it (the new line at the factory in Lviv region), which allowed us to expand the plant’s production capacity by 65%. If earlier its capacity was 17,000 tons (of fodder – IF-U) per year, now it will be 27,000 tons,” he said.
In addition, according to the information of the company owner, at the end of 2023 Kormotech will start construction of a new factory in Lithuania, in which it will invest more than EUR60 mln.
“This factory will have the same capacity as our two factories in Ukraine. It will be plus 40 thousand tons. We should reach the launch of the first line in the middle of 2025,” Vovk emphasized.
Kormotech, Ukraine’s largest producer of cat and dog food, is setting up a venture capital fund that will invest in the development of petcare and petfood startups, the company’s press service told Interfax-Ukraine.
The UK-based Kormotech Ventures division will search for relevant startups and invest in innovative areas of the company’s development in international markets.
“We were once innovators when we were the first to produce cat and dog food in Ukraine. It is important for us to maintain these fundamental things – flexibility and openness to new knowledge. We want to preserve and multiply the bold entrepreneurial spirit with which we created Kormotech 20 years ago, and with which we became leaders in Ukraine and became one of the top suppliers in strategic export markets,” said Rostyslav Vovk, CEO and co-owner of Kormotech.
Kormotech Ventures will focus on finding innovative startups that are looking for seed investments in the pet care industry in Europe and the US. The company will also fully manage investment projects as a majority shareholder.
It is specified that the core of Kormotech’s business will remain unchanged – the development of high-quality pet food production and expansion of its presence in the pet food markets in Central and Eastern Europe.
The first investment of Kormotech Ventures was the acquisition of a controlling stake in Rocketo, a Lithuanian startup producing organic dog food by gentle drying at low temperatures.
Rocketo is scaling up its presence in the UK market by developing a multi-channel distribution system. In particular, in addition to direct sales through its own online store, Rocketo has been included in the Future Brands program of the Sainsbury’s retail chain and will present its organic dog treats.
“As a family business, we strive to increase the value of our partners’ products and share our experience in organizing business processes, as well as the potential of our best specialists, which will be involved in the structure of Kormotech Ventures,” added Vovk.
Kormotech LLC is a leading Ukrainian manufacturer of pet food for cats and dogs, ranked 51st in the global pet food ranking and 7th in the ranking of the fastest growing pet food brands. Kormotech sells products of its own and partner brands in 40 countries.
The company’s facilities include two dry and wet food production plants in Lviv region and a plant in Lithuania. The company produces products for cats and dogs under its own brands Optimeal, CLUB 4 PAWS (TM “Meow!” and “Woof!”) and private label. The product range includes more than 650 items.
In 2022, Kormotech’s turnover increased by 12% to $124 million from $110 million in 2021. The goal for 2023 is to reach a turnover of $150 million and increase the export/Ukraine ratio to 30%/70% from 24%/76% previously due to the synchronized growth of markets, the statement said.
The ultimate beneficiaries of Kormotech are Olena and Rostyslav Vovk.
