You're reading: CEO Watch: Chumak president works overtime to cope with economic turbulence

Carl Sturen, the 41-year-old Swedish president of leading food producer Chumak, has lived half of his life in Ukraine during which he saw little change in corrupt ways of doing business.

Lately, he’s been working double-time trying to ensure that business operations remain despite Russia’s war and trade sanctions on Ukraine.

“50 percent of my time is spent on new additional problems,” Sturen said at the Kyiv Post’s fourth annual Tiger Conference on Dec. 2. He was one of the speakers on the conference’s new economy panel.

Based in Kakhovka in Kherson Oblast, Chumak has for years been one of Ukraine’s top producers of ketchup, tomato paste, mayonnaise, pasta and sunflower oil, among other food products.

But times were not as tough when Sturen and his relative, Johan Boden, started their food business 21 years ago. The two branched out of their family vegetable business back in Sweden after an unsuccessful attempt to set up a business producing cucumbers in Estonia.

“We were advised to go to Ukraine,” Sturen said. Using family knowledge in the food production industry, the two Swedes started Chumak – together with Tetra Pak owner Hans Rausing – which later became one of the greatest success stories in the Ukrainian food industry.

But sluggish reforms, Russian sanctions and war, are compromising the company’s properity, Sturen said.

“I do not think that reforms are happening quickly enough,” he told the Kyiv Post. “Much more could be done.”

Valued-added tax is one of the main pains because tax collection is simply not functioning, according to Sturen.

“To be able to pay back VAT you have to be able to collect VAT,” he said. “And if the tax authorities are not able to collect VAT in the required amounts, then they don’t have enough money in the system to pay VAT back to exporters.”

VAT refund problems account for 12 percent of the complaints that the Business Ombudsman Council receives, the second largest category after tax and customs inspections.

“(2014) was a very tough year,” Sturen said about Chumak. “We have a large majority of our sales in Ukraine. And when the local currency goes from Hr 8 to Hr 24 (to the U.S. dollar), then of course it’s very difficult to have a healthy company, from a financial point of view.”

The previous year saw the company barely break even. This in part had to do with some of Chumak’s raw materials being imported, whereas most of the company’s sales are domestic, such as to grocery stores and to the McDonald’s fast food chain.

Chumak does export as well, however. The Baltic States, Belarus, Israel and the United States are some of the company’s export destinations. Central Europe is next on the company’s list.

“We used to export quite a lot to Russia, but with sanctions on some of the categories, we can’t (now),” Sturen said.

He declined to say how much the company lost in financial terms, as Chumak is a privately-owned company – in 2008, Dragon Capital and East Capital Bering Ukraine Fund bought Rausing’s 70-percent stake in the company. Still, the company harvested around 70,000 tons of tomatoes and produced about the same amount in finished products.

Because of the hryvnia’s devaluation, this year isn’t looking better. “And this year the average rate is Hr 23-24. So this year is going to be worse for sure,” the Swede said.

Another serious problem is the moratorium on the sale of agricultural land. He wants a private land market, but one that is heavily regulated.

“I think we need a lot of regulations,” Sturen said. “It sounds strange right – a business guy speaking about regulations.”

His reasoning is that for big farmers there should be agreements with the local farmers whose land plots are mixed in among the fields the company cultivates. If one of the farmers in the middle of a group of fields decides to grow strawberries instead of tomatoes, for example, then it will be a big problem. Sturen explains: “How can you then buy large tractors, how can you manage intensive agriculture, if you split (the land) into small pieces?”

When asked how such a large company like Chumak has coped with corruption throughout the years, Sturen said: “We’ve been trying to stay in businesses that aren’t that sexy and (don’t bring) that quick money. Corruption is usually more attracted to where there is quick money and big money.”

Sturen now has two companies to worry about – Chumak and Vindkraft Ukraine, a wind power development and investment company – both of which are located in Ukraine’s southern Kherson Oblast, which borders the Russian-annexed Ukrainian territory of Crimea.

But for Sturen, Ukraine is his second home, and despite the problems, he has no plans to leave for now.

“(I’d leave) if I didn’t want to live in Ukraine – no one is forcing me to live in Ukraine,” Sturen said. “I have my whole social life in Ukraine, and I have no plans to leave.”

Many well-to-do Ukrainians don’t feel the same though, Sturen said.

“I see, unfortunately, that a lot of Ukrainians who have the opportunity or the money, or both, actually thinking about living elsewhere. And that’s a big problem… It’s very, very sad because you have (currently) prosperous and future business leaders of Ukraine thinking about going elsewhere… You’d prefer to see people moving to Ukraine, and not vice versa.”

Carl Sturen

Age: 41

Nationality: Swedish

Job: President and co-founder of Chumak food company

How to succeed in Ukraine:

“We never made a distinction among nationalities. I’ve seen so many businesses come here and say: ‘now we’re going to teach you Ukrainians to do it our way… the way we do it in my country’… Yes, unfortunately corruption is big in Ukraine, but at the end of the day you have to pick a few people who you trust… I’ve seen so many foreigners come here almost paranoid about everything being corrupt, everybody stealing.”

Kyiv Post staff writer Ilya Timtchenko can be reached at [email protected].