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Company Spotlight: Chumak's swift rise to glory

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May 18, 2000, 5 p.m. | Business — by Anna Kozmina
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Condiment maker becomes a household name after just 4 years in Ukraine ially. According to Ukraine's state quality standards regulations for the food industry, people here could only smear “tomato sauce” on their fries, not ketchup. Then, in 1996, the newly set-up food company Chumak successfully lobbied for the term “ketchup” to be officially adopted, and started producing the first Ukrainian ketchup. Today, the company has grabbed more than 40 percent of the domestic ketchup market. That encapsulates Chumak's recipe for good business: start from nothing, add a dash of Western capital, a pinch of luck, mix in four years of hard work, and serve up one of Ukraine's most successful companies. Oh, and go heavy on the business acumen – in the shape of Swedish investors Johan Boden and Carl Sturen. The two set up the company in 1996 with an initial investment of just $4.1 million. Today, Chumak's authorized fund – including turnover capital – is worth more than $40 million. As well a yielding profits for its founders, the company is spicing up the economy in Kakhovka, in Kherson region, where it is based. “It was the first and the biggest investment in Kherson region at that time,” said Chumak's marketing manager Laryssa Metla. “And Chumak's success inspired others to invest. Big companies like UMC realized that there was some sense in investing in the region.” Chumak produces a total of 28 products, including various kinds of ketchup, mayonnaise, cooking oil and canned fruits and vegetables. The company owns four processing plants, a transport sub-company and a trading sub-company. Chumak also has an agricultural center that grows vegetables, assists the company's suppliers - local farmers - in planning and growing crops, as well as providing them with seeds. But only four years ago there was nothing but overgrown fields and a half-constructed factory where Chumak's base of operations now stands. Boden and his nephew, Sturen, come from a family with three generations of experience in the food business. In search of a site to launch a business, the two had traveled widely. When they came to Ukraine in 1994, they immediately recognized the tremendous potential of the country's famed black earth. “I believe that Ukraine can eventually become Europe's biggest food supplier,” said Boden. Boden's partner Sturen spent a year travelling around Ukraine regions, visiting 30 canning plants. Finally, the two settled on Khreson oblast - one of the most fertile regions of Ukraine - as the site of their future business. The actual site of the Chumak plant, the village of Kakhovka, is located in the center of the oblast's irrigated lands. Boden and Sturen first attempted to renovate an old canning plant in the village, but soon ran into problems. “Everything about the manufacturing [process] had to be changed, and the [local] personal resisted all innovations,” said Metla. So Boden and Sturen decided to start from scratch. The two privatized an abandoned construction site, when only the foundations of a new plant had been laid. Initially, Chumak was formed as a joint venture between the Swedish partners and the State Property Fund. The company is in the process of buying out the SPF's 24 percent share in the joint venture, with the aim of becoming a closed joint stock company. In May 1996, Chumak planted its first fields of cucumbers, which at that time totaled 30 hectares in size. Today Chumak boasts the biggest cucumber field in Europe - 28 hectares - and a t total of 200 hectares is under cucumber cultivation. For 18 months, Chumak has been supplying the McDonald's restaurants all over Ukraine with pickled cucumbers. But Chumak's first real success was its 1996 “invention” of Ukrainian ketchup. “At that time, the shops in Ukraine were filled with imported products, and virtually no strong domestic brand was present,” recalled Boden. In building its brand image, Chumak borrowed romantic images from Ukraine's past. It products' labels feature a wooden wagon, and the company's name strikes a pleasant chord in the Ukrainian ear - chumaks were Cossack salt merchants who plied a trade route from the Black Sea through Kherson to the north, traveling in wagons. The products themselves are purely Ukrainian. “Our policy is to produce high quality products out of locally-grown vegetables based on old Ukrainian recipes,” said Boden. Chumak's glass jars are similar to the one's traditionally used for preserved vegetables in Ukraine, but are of much higher quality and have twist-off lids rather the hermetically sealed tin caps used by other domestic producers. Chumak's ketchup is designed to appeal to the Ukrainian palate: less sugary and vinegary than Western brands, the ketchup is flavored with a traditional Ukrainian blend of spices and unrefined Ukrainian sunflower oil, with its rich color and aroma. Chumak is also the only big domestic company that produces tomato juice from fresh tomatoes, rather than concentrate. The juice is squeezed from the freshly picked fruit for only two months of the year. “We use the nature's gifts with love and care, trying to preserve the natural taste and the vitamins,” said Boden. Before launching a new product, Chumak conducts consumer polls, samples competitors' products, and regularly holds exhibitions to show off the latest product from Chumak's labs. The Western-style marketing approach has brought dividends - last year Chumak was voted one of Ukraine's most recognized brands in a poll organized by newspaper Kievskie Vedomosti. Chumak's ketchup is also the best in the Russian market, according to research published last year by “Woman”, a Russian magazine. Chumak's biggest ketchup competitors are Torchyn Produkt (in terms of local market share) and Heinz - the leading quality producer in the world market. Chumak's mayonnaise has many small competitors, but it is a national leader in quality. This year, Chumak received a Duzhe Dobre national quality certificate for its mayonnaise and sunflower oils. “Chumak is not only a company, it is a philosophy,” said Boden. “In Kherson region we have become one of few enterprises people can trust.” Chumak's very existence provides a boost to the local, and even the national economy. “Chumak honestly pays all taxes, which make no small contribution to the state budget,” said Metla. “We consciously buy all construction materials in the region - even if we have to pay little more - to support local producers,” she added. At the height of the farming season, Chumak employs more than 7,000 people, including field workers. The company employs around 900 workers on a regular basis. “Kakhovka is a small town, and if even one member of each family works for Chumak, it guarantees a stable income for the family,” said Metla. Chumak was the first company in the region to provide hot water, showers, free meals and even Internet access for its workers. Also, the company has for three years has been general sponsor of the Tavria Games music festival, which is held in Kakhovka. But Chumak's horizons aren't limited to Kherson oblast - the company sees a nationwide market for its products. “There are 50 million people in this country. They all wake up each morning and want to have breakfast,” said Boden. “Knowing that, we see enormous potential for growth.”
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