Family Dairy Farms is a compelling investment project meant to set up a national network of family businesses in the sector and currently comprises 172 family farms properly equipped to operate as running businesses.
- A proposed flexible scheme of a small farm with 10 to 50 cows allows to radically change the existing milk production patterns.
- The project promotes small farms and supporting businesses and gives farmers a chance to sell the produced milk at competitive prices
- The Project is supported by Governments of Canada and Sweden and by UNDP via its Family Dairy Farms: Wellbeing of the People and Rural Sustainable Development project
- Financial models have been formulated with the support from from Baker Tilly.
PROJECT DURING THE WAR
Since the beginning of the russian aggression, the project’s farmers faced problems such as reduced milk sales, purchases by dairies, lower purchase prices, power outages, rising prices for feed, veterinary drugs and fuel, men went to the Armed Forces, and the maintenance of farms remained on the shoulders of women.
- During the war the project specialists stopped the opening of new farms and focused on helping previously opened farms to solve all current problems: organizing the sale of milk, providing feed and veterinary drugs, providing psychological and material support.
- However, the crisis has demonstrated the benefits of the project’s business model. Small farms are more mobile to relocate to safer areas, less vulnerable to shelling due to their location in different areas, they do not require a large amount of land, do not suffer from a lack of staff released for evacuation, and if they are destroyed or damaged, the consequences are less large-scale, as on industrial farms.
- The project is a real support for the economy of Ukraine – for the first half of 2022, all participants of the project paid more than UAH 5 million in taxes to the budgets of various levels.
- The project’s activities contribute to the employment of Ukrainians: 5 participants received grant approval under the state program ‘Own business’, which provides for the creation of an additional 10 jobs. It should be noted that the number of grant applications is increasing.
- The project specialists also organized the attraction of charitable contributions to support farmers, and as a result received more than UAH 400,000. This has been a huge help in purchasing seeds for sowing and fuel.
Why Invest Into Family Dairy Farms?
Make a ChangeParticipate in Ukraine’s largest project in impact investment, meant to revive rural areas and promote farming and production cooperation
Gain income and maintain the economyParticipation in the project is not only a guaranteed income, but also a real support for the Ukrainian economy in the time of need.
Join the CommunityThe project joins people with similar values, knowledgeable of traditions and supportive of socially targeted projects
As practically proven, an investment into a large agribusiness takes 8 to 10 years to generate returns. In a country with a volatile economy such as Ukraine it is too long a term. Our assessments and experience prove that family dairy farms can provide dividends twice as quicker. We strongly believe that a family business equipped with proper tools and technologies will care more about its farms than a paid worker would. A small farm is less vulnerable to environmental problems or natural disasters than a large agribusiness.
Our assessments supported by a research conducted by renown IFC and FAO demonstrate that Ukraine has a potential to grow its milk-producing market as determined by the following factors:
- Ukraine’s milk consumption is presently twice as low as that in the rest of Europe. Milk factories report a considerable deficit of quality milk.
- By 2030, the world milk market will increase by 250 mln tonnes. Ukraine has a reasonable chance to contribute considerably to that increase.
- Ukraine is in World Top 5 countries with the lowest cost of milk production.
- With new quality requirements, 1 mln tonnes of milk currently provided by individuals will need to be replaced by milk of the required quality – either from family farms or from large agribusinesses.
The project is, of course, not all about money. We do our good to make people in rural areas learn how to turn their farms into real businesses. But this is not all we care about.
When a family receives stable revenues with promising prospects, they do not have to consider an option of leaving their farm. They team up to manage the business that generates profits.
As a result, people become less dependent on the state and run the business of their own. Stronger businesses creates a stronger business environment with cooperatives, sector clusters and recreational areas.
The project encourages people to grow. Helped by various tools, they become more aware – and less wary – of risks and changes. Enabled with new social skills, they begin to think bigger.
Presently, Rivnenska, Khmelnitska, Ternopilska, Zhytomrska, Lvivska and Volynska oblasts in western Ukraine have family dairy farms. We plan to expand massively and are currently in talks with many milk plants and farmers all around Ukraine. We also consult them on the way they could join the projects. We expect that investments will also be generated from all over Ukraine.
The project introduced a rigid screening procedure for all participating farms. Before becoming part of the project, the farm and its owners need to demonstrate their determination and compliance with the set requirements.
We rigorously assess both the existing infrastructure of the farm, and the background experience and business practices of its owners. We need to make sure that the people we are about to involve are psychologically ready to make a change and, as a family, demonstrate a unified vision of the path ahead and commitment to take it.
Assisted by our experts, the family works out a business plan and understanding of how the farm is going to grow and how the family is going to manage its small business.
First and foremost, we are. By launching the project back in 2017, we have invested over US$1 mln. into the network of existing and new farms and management. The project has already repaid a third of investment made as dividends, most of which have been re-invested. Our business model proved to be effective.
The project receives investments from farmers and partnering milk plants, which also provide the required equipment for the farms.
Over the last two years, the national and local governments have granted us over UAH1.5 mln as subsidies. We look forward to more subsidies in the years to come.
The project is supported by international donors. In 2019, the project received a grant of UAH1 mln. from the UN Development Program.
We are supported by a wide range of people, government agencies and public organizations. We have entered into cooperation contracts with all oblast state administrations. Our experts participate in governmental working groups that draft laws to support farmers. Governments of Canada and Sweden support the project with consultations and direct donations.
The project is managed by a team of professionals with the extensive background in agribusiness and administration.
Each new participating farm is offered a wide spectrum of consultations from construction to equipment to accounting to veterinary services to optimal nourishment for cows to comply with quality requirements to selecting and reproducing the stock. We hold seminars for farmers and are always ready to answer any questions they may have.
It is essential that we also provide an operating market of milk for our farmers that offers them competitive prices.
In other words, we do our utmost to turn each participating farm into a flourishing and profitable business.
All investments are protected by Ukrainian law that provides for a strict bankruptcy procedure. As an investor and part of the growing community, each individual understands its potential risks, but also enjoys dividends no other investment project can provide.
Our project has many stakeholders, including foreign governments and banks, that work as additional guarantors and controllers to protect the interests of all participants.
Our existing network of thriving 167 family dairy farms grows constantly and guarantees the success of the project.
We re-invested UAH1 mln. of the generated dividends into development.
The project depends heavily on the pace with which the network of 5,000 farms is reached. To minimize risks, we set up a network of partners operating by a franchise and promote the projects all around the country.
We see no apparent political risks for the project. With its strong social component, the project is certain to receive support from any government, present or future. The project involves support from foreign governments.
Lack of stock required for the project can be considered as one of the potential risks. We are working on the issue by launching reproduction programs in specialised production farms.
You invest into a running business. This is not a start-up. We proved our efficiency by setting up a network of 164 fully operational farms with new participating farms joining weekly. To validate the efficiency of the proposed business model, we contracted Baker Tilly, and to have a reliable management we contracted Saenko-Kharchenko JSC. The project is transparent for all its partners who are always able to control its day-to-day operation.
It is crucial that we do not invest into a single large facility or region, but rather into many farms in many regions, thus decreasing risks of narrowly-targeted investment.
As part of the project, our business is being regularly revalued. By keeping our progress under the radar, we monitor all the developments and keep our investors well-informed to ensure that the Family Dairy Farms remain stable and transparent as a business.
To make financial assessments, we contract well-known companies to help us analyze the running business and its assets and review the original business model. At its first phase, the project contracted Baker Tilly, a leading auditor, to shape the business model. As the project progresses, we now realize that the model omits some opportunities that would increase the profitability and bring the payment of dividends closer in time.
Assisted by experts from the Lviv Business School, we have modified the business plan to incorporate these new opportunities and better reflect revenues for the investors. The new plan adds a franchising scheme for family dairy farms along with setting up dairy clusters.
The research conducted proves that an individual family dairy farm would prosper within a larger cluster that would bring together 40 to 50 farms with a total of 2,000 cattle and create a diversified infrastructure to support milk production. Among other benefits, the cluster would allow the following:
- produce niche dairy products: cheeses, jogurts, etc.
- keep a herd of 200-500 cows
- maintain a dairy hub
- offer veterinary services
- provide education and training
- set up coop stores
- grow and store the fodder.
We plan to re-assess the running business annually to then review the business model to enhance profitability.
In March 2021, the first assessment of the business showed its value of UAH176 million.
It is important to remember that each reevaluation of the business plan may result in changes in the expected capitalization of each share and dividends. As the project progresses, the values increase.
It is with great pleasure that we can now confirm that the reassessment of the business following the completion of its first phase showed that the envisaged interests were correct while also demonstrating that the first dividends would be paid by the end of 2022, two years earlier than the original plan. New investors who will make contributions before the end of 2021 will see their share increased 7-fold in 2024 to 2030.
This is good news that inspires us to proceed with our ambitious plans to reach 5,000 farms with 20,000 employees and 10% share of nation-wide milk production by 2026.