Andrei Sinitsyn started the potato business back in the 1990s: he traded in the markets, lost his harvest and found himself on the verge of ruin several times. But a long-term contract with Lay’s and the desire to introduce modern technologies into the economy made it possible to grow a company in the outback with 415 million rubles of revenue per year.
“Sometimes I got tired and scolded myself:“ That’s why I need all this? I would open a little gas station, some little motel, that’s it! I would have lived quietly. ” But then again the strength comes, you rest and think, like in a joke: “It seemed to fall for only a few seconds, but how many stupid things came to mind”, – describes the difficult relationship with his own potato farm, spread over 3000 hectares in the village of Vladimir region, the founder of the company “ MelAgro “Andrey Sinitsyn.
Today his potatoes can be found in every 20th pack of Lay’s chips in Russia. To achieve such productivity, the entrepreneur mastered the fashionable Scrum management system and invested 30 million rubles in “smart technologies”, spied on the fields of the United States: drones, climate-controlled greenhouses and digitalized tractors that help to plant, water and harvest 30,000 tons from the fields. potatoes per year – one and a half times more than the average economy in the country gives.
How a 52-year-old farmer and a father of six children built a business with almost 100 million rubles in profit a year, why did he find himself on the verge of bankruptcy several times and why entrusted the care of the harvest to drones?
“Potatoes do not squeak”
Andrei Sinitsyn was born in 1968 in the small town of Melenki, Vladimir Region, where many have a subsidiary farm. Neighbors raised pigs for sale and owned a large house and car – a luxury by Soviet standards. Sinitsyn was captivated by such wealth, and he also decided to raise pigs.
But the parents did not appreciate the venture. They insisted that after eight grades, Andrei studied at a local school as a locksmith and while away the years before the army at the Melenkovsky linen mill. After serving in the construction troops, Sinitsyn began to realize his dream of his own business – in the late 1980s, he took 13,500 rubles on credit to build a house.
Then according to the state program“Housing-2000” villagers could get money for 50 years at 1%. Another 2,000 rubles was given by Andrei’s mother. On his hands were about 60 average monthly salaries – with this money he built a house, a pigsty and bought ten animals. “I immediately fell in love with the piglets. I just lived with them, ”the entrepreneur recalls. Soon there were twenty pigs, and because of the characteristic odor, “a humanitarian catastrophe began” near the house – it was necessary to look for a new building.
After the collapse of the USSR, the pigsty at the local foundry and mechanical plant remained idle, which Sinitsyn bought in installments (for how much, he does not remember). The business was going well: the money from the sale of meat and piglets for breeding was enough to pay off the loan, improve the house and buy a GAZ-53 truck.
“It’s like gambling. A person has lost something, then he tries to win it back and raises it – here I have the same thing with business “
Soon, Sinitsyn had a “new love” – potatoes. In the early 1990s, fields from the former state farm lands were empty. They began to “distribute the land for a song,” and an acquaintance of the entrepreneur, who also raised pigs, suggested growing potatoes. At first Sinitsyn rejected the idea (“I love piglets, and I don’t need anything else”), but the thought of a new business “did not let him sleep at night.”
As a result, Sinitsyn rented 2 hectares of land from the state for free (they were then allocated to villagers for free), exchanged a Samsung video recorder for a used tractor and began to deal with potatoes in his free time from pigs – he grew 20 tons and put the harvest for seeds. The next year, it expanded to 5 hectares, bought a two-row planting machine, a plow, hilling and digging equipment, and began selling the crop in local markets.
In 1994, the 26-year-old entrepreneur, out of pity for animals, stopped raising pigs: “The potato does not squeak when we fry it.” He sold the animals and bought a combine harvester with the proceeds. “I was taken to the local ‘league of agricultural workers’ – I was like the son of a regiment. [The heads of state farms] are all so cool, and now a little farmer appeared in the area. Everyone wanted to help me, ” – recalls Sinitsyn.
The main sales channel at the start were district hospitals; Andrey sold the rest of the crop in Moscow markets and in the courtyards of residential buildings, where he traded directly from the car. Over time, wholesale buyers appeared – Sinitsyn even supplied his potatoes to Azerbaijan through intermediaries.
The 1998 crisis, according to the entrepreneur, only strengthened his position: imported goods became unavailable to buyers, and the demand for products from Russian manufacturers and their prices began to grow.
On the way with Lay’s
In 2000, word of mouth led Sinitsyn to a reseller who was looking for a supplier of raw materials for the production of Nash Champion chips near Moscow. Ordinary potatoes were not good – they had little starch and a lot of sugar, so chips from these varieties did not hold their shape and turned black when fried. Sinitsyn has not planted a “chip” potato yet, but decided to try it.
The reseller was ready to buy “any quantity” of raw materials, and the entrepreneur, tired of traveling around the markets, decided to take the risk and give the entire crop to one customer. He took out a loan secured by a household to buy storage facilities with good ventilation and a refrigerator. On postpaid basis I bought seeds of a suitable variety “Saturn” and leased new equipment. The scheme worked: the reseller took the entire 2001 crop.
Inspired by his success, Andrey took on lease a few more units of equipment from the Samara company Eurotechnika. The total amount of debt and loans by that time reached € 120,000. The entrepreneur was confident that he would quickly return the money. But the drought of 2002 prevented: the potatoes were born small, not suitable for chips. A representative of Our Champion refused to pick up the goods (the Bridgetown Foods company, which owns this brand, did not respond to Forbes’s inquiry at the time of publication). Sinitsyn was on the verge of bankruptcy. He suggested that creditors take the equipment back against the debt, but the company agreed to a deferral.
Then the entrepreneur decided to take another loan in order to establish an irrigation system and continue to be prepared for drought. “It’s like gambling. Sometimes I watch in films: a person has lost something, then he tries to play it back, raises it – here I have the same thing, ”explains Sinitsyn. He drilled a well, bought a pump and a watering machine, and rented a few more fields. A new wholesale buyer was also found – near Vladimir they were going to build a plant for the production of Chip N Go chips. With the plant, he agreed on an exclusive partnership. The advance payment for the order was enough to make ends meet.
” I started to hate my company because I was unsuccessful.”
To celebrate, the businessman planted all the seed supplies. They were supposed to produce more potatoes than the warehouses hold – 3,000 tons, but Sinitsyn hoped that the crop would immediately move to the buyer’s storehouses. In the fall, it became clear that the plant was not built on time. The entrepreneur had to sell the surplus – 300 tons.
Sinitsyn took samples of potatoes and went to his former partner at the Our Champion plant. On the way I passed Kashira, where the PepsiCo plant is located, which produces Lay’s chips (Frito Lei Manufacturing LLC). According to Neil Starrock, President of PepsiCo in Russia, Belarus, Ukraine, Transcaucasia and Central Asia, the company produces chips only from local raw materials and works with 50 Russian suppliers. Sinitsyn drove to the plant for good luck.
According to the entrepreneur’s recollections, the agricultural manager Martin Mentfurd took the samples, took them to the laboratory and returned a few minutes later and said that he was buying everything. The year turned out to be rainy, part of the harvest from old PepsiCo suppliers was lost, so the company needed raw materials. Two days later, PepsiCo had the potatoes, the money was in the entrepreneur’s accounts. The parties did not disclose the amount of the transaction. Sinitsyn never made it to Our Champion.
A few weeks later, it became clear that the plant near Vladimir, with whom Sinitsyn had agreed to supply the bulk of the crop, would start up only in a year. The company did not demand to return the prepayment, but could not help with the sale of the potatoes reserved for it. Sinitsyn tried to negotiate a supply with PepsiCo, but the corporation needed a new batch only in February. The entrepreneur agreed to this option, keeping the harvest in warehouses, and received 4 million rubles. “Eighth of March I paid off all the debts and was the happiest man in the world”, – he said.
Thus began a long-term partnership with PepsiCo. The parties do not disclose the details of the partnership, citing trade secrets. The revenue of Sinitsyn’s enterprise for 2003, according to its own data, amounted to 8.45 million rubles, profit – 649,000 rubles.
“I cried and sold for a pittance.”
Cooperation with Lay’s helped Sinitsyn to reach a new level: the holding, at its own expense, transported suppliers to factories in the USA, Belgium, France, Poland. So Andrey got acquainted with foreign agricultural practices.
In 2007, Sinitsyn began planting potatoes using American technology – the difference is in the method of furrowing, hilling, collecting and sorting. The yield doubled with the new approach. Revenue for 2007 amounted to 85 million rubles, one and a half times more than a year earlier.
Sinitsyn bought up the fields of the former state farm of the village of Bolshoy Priklon – now he had 3,000 hectares at his disposal. The entrepreneur increased his turnover, increased his staff and liabilities, and again fell into bondage: at the peak, his debts on bank loans reached 180 million rubles. The company grew to such a size that manual controls began to malfunction.
The entrepreneur’s personal life also went wrong – he divorced and renamed the company Svetlana (in honor of his ex-wife) to MelAgro (the first part is the abbreviated name of his hometown of Melenki).
“ What color to paint the fence, I decided, what nail to buy – too. The earth began to part under me “
“It was an illusion that there are many deputies around me, and they are doing something. In fact, as gear ratios, they simply convey my information. What color to paint the fence, I decided what nail to buy – too. The ground began to part under me, ”Sinitsyn recalls. Business “went down” along with labor productivity.
To get out of the dive, the entrepreneur threw himself into animal husbandry – he wanted to breed cows and goats. But this took up a lot of resources and did not give tangible profit. Due to oversight and improper handling of the land (the fields were not allowed to rest – they were planted every year), the potatoes were infected with bacteria. “ I started to hate my company because I became unsuccessful,” the entrepreneur admits. In 2009, the entire crop fell ill. Sinitsyn was unable to fulfill his obligations to PepsiCo and lost the contract.
The company was saved by a chance – 2010 turned out to be a dry year, many potato suppliers were left without a crop. And Sinitsyna was rescued by the irrigation system. He again managed to sell the crop to PepsiCo, but without a long-term contract – at a market price about one and a half times higher than usual. In 2011, he was offered a contract on the old terms, but Sinitsyn refused – he decided not to enter into an agreement for a fixed volume in the hope that PepsiCo would again buy the potatoes at a higher price.
However, the bet did not work – the next year was fruitful. PepsiCo was doing well with supplies, and Sinitsyn had no other major distribution channels. He “cried and sold potatoes for next to nothing.”
or the next two years, the entrepreneur also relied on luck and weather unsuccessfully, losing 50% of his profits. In 2014, he decided to “obey” and renew his long-term contractual relationship with PepsiCo. This helped to reach stable indicators: revenue for 2015, according to SPARK, amounted to 226 million rubles, profit – 38.4 million rubles.
“ I was on the field. I looked at the state of affairs around, and it hurt in my soul. I suddenly thought that I just don’t know how to lead, that’s all, ”the entrepreneur recalls the moment of crisis. He found the “root of trouble” and was relieved when he admitted a mistake – he did not have a control system.
Sinitsyn completed a nine-month course at the Moscow School of Business Owners and a dozen programs with private consultants in finance, management and other areas. In total, he invested about 5 million rubles in his business education.
The knowledge gained helped to rebuild the organizational structure – now Sinitsyn’s potato empire works according to the Scrum methodology . The executive director is responsible for all operational affairs, the chief agronomist became the product director, and the chief engineer became the technical director. Departments and a clear hierarchy appeared. Every winter, Sinitsyn arranges strategic sessions: he flies with top managers to Turkey or Cyprus for ten days, where everyone “turns off their phones and discusses company affairs.” Then the strategy is released to the heads of departments, who turn individual parts of it into concrete plans. Plans turn into tasks for employees.
“Palych, why don’t you fucking sit? Normally, we plant it – we plant it and forget it “
Perestroika ended in 2017. The new approach helped Sinitsyn completely free himself from the “operating system” and devote time to the strategic development of the company and the implementation of technologies that he saw during his trips to the United States.
Andrey automated field management – he bought automatic equipment control systems that are built into old ones and tractors. Today, all equipment is equipped with on-board computers that read satellite signals using GPS and GLONASS systems, and create digital copies of fields – virtual models with boundaries and routes.
Tasks for the day are predefined and loaded into the on-board computer, the driver only needs to enter the name of the field – and a map will open in front of him. As soon as he starts the tractor on the route, he starts to move, independently change gears and turns around at the border of the field. The machine operator only makes sure that “everything works and keeps the engine speed.” Technical “filling” Sinitsyn cost 23 million rubles, he took the money from his personal savings.
The approach to planting potatoes has also changed. Prolonged rains erode the fields, pits appear on them, in which water accumulates. This leads to spoilage of 30-60% of the crop. Sinitsyn began to “scan” the fields using a tractor with a special system that takes readings every 8 meters of the way – latitude, longitude and height of furrows. Based on this data, a map is built on which flooded areas are visible. If you change the direction of planting, then the water will flow differently and the crop will not die.
At first, MelAgro employees were not enthusiastic about the innovations, they said: “Palych, why can’t you fucking sit? Normally, we plant it – we plant it and forget it, ”the entrepreneur recalls. But 2017 turned out to be a rainy year, and thanks to a new approach, Sinitsyn managed to save the crop from decay – the machine operators no longer argued. The company’s revenue that year, according to SPARK, amounted to 218 million rubles, profit – 20.5 million rubles. About the same as a year earlier, despite the fact that the planting area was 20% less due to the “curly cutouts”.
Another innovation is aerial photo monitoring. Once a week, a drone flies over the fields – a 900-gram unmanned vehicle, which cost 1.2 million rubles. He makes six spectral images of the field per hectare, and special software processes the data, shows the condition of the plants. For example, you can see which areas are lacking moisture and send an unmanned sprinkler there.
Every day, the tubers are sampled in the laboratory at the farm. “Before, I didn’t know what would happen in the fall. Very often it happened: you walk all summer and think that your business is good, but the cleaning begins, half of the area has been removed, and you realize that you have squandered everything again, you will not collect it again, again you will find yourself in the economic clutches, ”Sinitsyn says. Now he knows everything about the condition of the seedlings at any time and can predict the result.
The harvested potatoes are stored for a long time – in special rooms with climate control. And the fields are resting – in the years free from planting potatoes, wheat and perennial grasses are grown on them, which are sold to local production and fodder for livestock. According to Andriy Savchenko, executive director of SK Ventures, which invests in agricultural startups, this approach helps to improve land productivity and be more sustainable in the market. In total, Sinitsyn spent another 7 million rubles on these innovations, also taken from his personal savings.
The fruits of investment
Thanks to automation from 1 hectare, Sinitsyn now receives 40 tons of potatoes – 3-4 times more than when working in the old-fashioned way. And 1.6 times more than the national average, cited by the Ministry of Agriculture.
For the market, this approach is new: data from the Ministry of Agriculture say that only 10% of land in Russia is processed using digital technologies. “Agriculture is a mature industry. The market has long been formed and is so conservative that most entrepreneurs do not even think about introducing any technical innovations and, perhaps, are not even aware that there are effective and affordable technologies, ”says Ilya Kobyakov, investment manager of the venture capital fund TealTech Capital.
“Russia is in second place in the world in terms of supply of fresh water, in third place in terms of provision of land resources suitable for agriculture, and is in the top 10 in terms of provision with mineral fertilizers. This is a very large market, ”reminds Savchenko of SK Ventures.
Revenue of MelAgro in 2018 amounted to 286.6 million rubles, profit – 67.7 million. In 2019, the indicators increased 1.5 times: to 415 million and 97.3 million rubles, respectively. According to the Federal State Budgetary Institution “Center of Agroanalytics” (works under the Ministry of Agriculture), the company ranks 12th in terms of revenue among all companies that grow potatoes in Russia.
About 10-15% of proceeds bring corn and grass, and the rest – potatoes for Lay’s. In 2019, Sinitsyn harvested 30,000 tons of the crop. PepsiCo Forbes confirmed that MelAgro remains one of the largest suppliers of potatoes for their chips in Russia. In November, the corporation recognized MelAgro as the best supplier of the plant in Kashira (a copy of the diploma is at the disposal of Forbes).
Since 2016, a part of Sinitsyn’s potatoes, according to a PepsiCo representative, has been sent to the holding’s factories in Europe, the volume of exports has not been disclosed. According to venture investor Pavel Danilov, ex-managing partner of the Agrotech I fund, despite the risk of concentrating on one large client, the strategy for Sinitsyn can be a winning one. “Strong demand from a large and growing company and a good price for a premium product are advantages for a grower who can plan business development and investments in technology,” he said.
Andrey plans to continue experimenting with automation – for example, he wants to organize remote field management and in the next 2-3 years increase the yield to 50,000 tons. MelAgro is a stable supplier in terms of the volume and quality of supplied raw materials. They are not afraid to start something new and are actively introducing innovative solutions in potato growing technology. Until now, MelAgro has performed partner functions at a high level, and if the company continues to supply high-quality raw materials, then we will buy them, ” says Neil Sturrock, President of PepsiCo in Russia.