Ukraine’s seafood business: Impacts of Russia’s war against Ukraine
Sergey Kardash is a co-owner and CEO of Klion Group Company. Having graduated from Donetsk State University as a marketing specialist, he never planned to relate his future life to fish. But…. as a child, he was proud of his aquarium and even managed to breed a Siamese fighting fish. Nothing happens by chance.
This is the fourth in a series of articles in the Eurofish Magazine dedicated to seafood businesses in Ukraine and how they work and survive during the war.
Klion Group’s first day of business was 7 December 2005. At the time the company was involved purely in trading fish and seafood purchased from other Ukrainian importers, but the management had greater plans and visions.
Number one in Ukraine
Very soon, the company started to import directly and later purchased a processing plant built during the Soviet era. The plant was completely modernized and in 2009 production started. Today, its seven processing units produce: frozen products (H&G fish, fillets, steaks, and various kinds of seafood); semi-processed products (minced fish, mixes of fish and vegetables); preserves from fish and seafood; fish roe-based products (salted roe of cod, Alaskan Pollock, herring, pates and spreads, and delicatessen salmon caviar); dried salted fish; smoked fish and seafood; and canned products The product range includes about 250 items and the combined capacity of all the units is 24,000 tonnes per year. The majority of the products are sold under the company’s own brand, Veladis, which was introduced in 2012.
Most of the raw materials are imported from around 40 countries worldwide—with Norway, the UK, Spain, Iceland, the US, Estonia, and Canada being the primary suppliers. Annual imports amount to about 60,000 tonnes, or about 20% of Ukraine’s imports of fish and seafood, which makes Klion Group Company the largest player in the market. Local fish supplies include pike perch, bream, carp, roach, crucian carp, and pike—these species are salt- and dry-cured and traded as snacks, which are very popular among beer-lovers from Eastern and Central Europe.
The distribution channels comprise wholesalers of fish as raw material, selling fish in crates; sales under the Veladis brand – directly to national retail chains, and through distributors to smaller shops, and restaurants; and sales via its own chain of Veladis stores located in Kyiv and Zaporizhzhya. An EU-approval number for the processing complex in 2016 opened new opportunities and new markets— the company now exports to the US, Israel, Spain, Germany, the Baltic states, Hungary, Poland, and other EU countries. Annual exports reach 2,000 tonnes.
The company has cold storages with a total area of 15,000 sq. m, which can stock about 12,000 tonnes of products at –18 degrees C, and its own logistics center. The annual turnover is over EUR140 million. Before the war, the company employed 1,400 people.
Only 50 kilometers from the war
Since the Russian invasion on 24 February 2022, Klion Group has not stopped its activities for a single day. The pressure has been extremely high as the company’s headquarters, the processing complex, and the coldstore are located only 50 kilometers from the frontline. Luckily, the gullies surrounding the area prevented the Russian troops from coming to its doorstep.
In the early days of the war, the company’s priority was to survive, to save the company and its people. Autonomous, comfortable, and safe bomb shelters were built on the facility so that employees could continue to work in safety, and sleep there at night without fear for their lives during air raids. Threats to national food security at the beginning of the war raised the demand for canned products, and Klion opened a new unit for canned fish production, which was distributed through retail chains in need or given away as charity together with the company’s other products.
The Company Klion Group actively supported the Armed Forces of Ukraine (ZSU), the State Border Guard Service, various charity funds and organisations, donating more than 8 million hryvnia (over EUR200 thousand) of products. The company paid for the logistics and organised the distribution to ZSU soldiers of tobacco products worth over EUR9 million, which were produced and donated by an American company specifically for the needs of Ukraine’s army. Klion also provides free storage of frozen products for volunteer organizations. After the destruction of the Kakhovskaya hydropower station, several tonnes of products were donated to the victims.
Last but not least, adds Mr Kardash, we pay taxes—since the outbreak of the war, Klion Group has paid 800 million hryvnia (over EUR20 million) to Ukraine’s State Treasury underlining the role of large companies in the war effort. We are the economic frontline, he emphasises.
The ship still sails, often against the wind
Disruption of logistic chains and temporary restrictions on foreign currencies in the early stages of the war created a lot of concerns about cooperation with partners abroad and fulfilling the company’s obligations. All our foreign partners, says Mr Kardash, understood our difficult situation and none of them put pressure on us.
Logistics remains one of the major problems—before the war, about 80% of the imports were coming through the port of Odessa, but now it is impossible, and the supplies go mainly through the port of Klaipeda and from there they are delivered by road. This route is not only longer—it is also more expensive, as the transport companies increase the prices. Staff are another problem—many Ukrainians have left the country, therefore job rotation, lack of qualified staff, and often the mental condition of people traumatised by the war is a major issue across Ukraine. It is also no secret, adds Mr Kardash, that some people manage to benefit from the war. This, in particular, concerns some bureaucrats who intentionally disrupt business activities and demand bribes. Among other consequences, this results in unhappy customers who do not get their supplies on time and must bear losses.
Despite everything, Klion Group keeps making and implementing plans. In 2022, together with a Spanish partner, the company became a shareholder of an Uruguayan fishing company targeting hake, squid, and other species which are now distributed in Ukraine. The company also continues to expand its own retail chain of Veladis stores —two new ones were opened during the war, and three others are under construction.
Can a war teach anyone anything?
The war taught us to adapt to fears and not to be frightened, says Sergei Kardash. The global financial crisis of 2008 made us fear for the survival of the company. Ukraine’s financial crisis of 2014 which started with the annexation of Crimea and was followed by military actions in the Donbass area made us fear too. We survived both calamities and then started to fear a full-scale war. Now it is here, but your brain adapts, and you respond, taking the necessary steps to cope with what is happening.
The war showed us who is who in our surroundings. Some, whom I’ve always trusted, turned out to be unreliable, while others, whom I’ve never associated with heroism, have proven to be genuine heroes.
In a way, the war tells us not to stop but to continue moving forward—not at breakneck speed, of course—but to keep a reasonable pace… sometimes even to stop and look around and consider where to go next, but always to move forward!
Aleksandra Petersen, Eurofish