MHP could be the last supplier of food protein, in particular poultry, to the people of Ukraine. While the army continues to fight the Russian invasion, MHP and its drivers are still shipping food around the country despite the dangers.
According to MHP’s executive chair, Australian John Rich, MHP has transformed its purpose.
“What MHP in Ukraine has done is turn itself into a humanitarian operation. If we fail the biggest distribution of food in Ukraine fails.”
MHP Ukraine is part of a larger group with production facilities across the Balkans and trading operations in the Netherlands and the Middle East. Group turnover for 2020 was $1.94bn. In Ukraine MHP runs an integrated business producing up to a million tonnes of poultry a year, farming a million acres for grain and distributing to around 2,000 of its own shops.
MHP is one of a number of companies that have continued to operate despite the Russian invasion. Last week heard from Maxim Timchenko, chief executive at DTEK, one of Ukraine’s largest energy companies. As the war effort continues, companies like MHP and DTEK have grown in importance.
Rich spoke to Board Agenda from the company’s Slovenian base, where most of the Ukrainian management has moved. That said, production and delivery staff remain in Ukraine, as do some of the finance team.
A changed business
The rest of the company is operating close to normal and, according to Rich, remains profitable. But the Ukraine business, with up to 25,000 employees, has changed out of recognition.
Poultry production used used to be split evenly between domestic supply and export, most of which went to the Middle East. Now around half of MHP’s poultry output is sold directly to the Ukrainian army while the other half is distributed pro bono to the population, even into conflict zones. It all rests on the drivers making their way from distribution centres to the company’s shops and villages around the country with around 2,200 tonnes of poultry every day.
Rich says he is “extremely proud’ of his employees. “I can’t express myself,” he adds. But the drivers are “critical in the whole process”.
“You can produce as much poultry as you can but unless you distribute it, it’s failure. We’re providing the distribution but its very dangerous,” Rich says.
Fuel, generally in short supply, is making its way to MHP. “But at the end of the day the drivers have to drive the trucks, distribute [poultry] and come back alive. That’s our problem.” Rich admits that contact has been lost with some drivers, though he points out the cause may be communications.
‘Rational business decisions’
Maintaining a clear picture of production and events on the ground is crucial for MHP. Currently Rich remains in contact with staff through the mobile phone network. He holds up three phones and says he’s working through at least 20 WhatsApp groups to gather information from across the country and support the war effort.
His approach may be informed by experience; Rich has lived though other major shocks to business. In 1998 poultry businesses he ran in Indonesia were burned to the ground during major civil unrest. He says the key to coping is “acceptance”, one of the five stages of grief.
“Getting to acceptance psychologically is the most important thing so that you can make rational business decisions and rational business decisions are all about protecting your company, your investors and your bondholders.”
However, in the current crisis Rich emphasises other priorities. “Our key focus has been looking after our people, feeding the people of Ukraine and feeding the army. All these things have been critical in the effort to help protect the country,” he says.
The industry has rallied round to help. Feed, vitamins and minerals necessary for poultry production have been donated by suppliers and even competitors. But Rich is clear that although MHP is committed to its current effort for Ukrainian security, it is financially “unsustainable” and donor support is needed. Much of the aid has gone towards helping refugees, medical help and other much needed supplies. “We need a system where a donor buys our poultry at cost and we distribute,” he says.