Aquaculture

Russia's largest salmon producer acquires algae production company in drive to diversify

Atlantic salmon and trout producers are facing a decline in domestic demand for their products, prompting companies to search for new revenue streams.

Workers harvesting algae for Arkhangelsk algae plant AVK OJSC. The company was acquired by Inarctica, Russia's largest salmon farming company.
Workers harvesting algae for Arkhangelsk algae plant AVK OJSC. The company was acquired by Inarctica, Russia's largest salmon farming company.Photo: AVK/Facebook
Inarctica, Russia’ largest Atlantic salmon and trout producer, formerly known as Russian Aquaculture, has acquired Arkhangelsk algae plant AVK OJSC.

Terms of the deal were not disclosed.

AVK is the only enterprise in Russia involved in the harvesting and deep processing of brown algae from the White Sea, including the species laminaria, fucus and ahnfeltia.
"The new acquisition will allow us to diversify the company's business by entering the growing algae market and developing in the field of biotechnology and algae aquaculture," Inarctica CEO Ilya Sosnov told IntraFish.

Inarctica farms in the Barents Sea in the Murmansk region, as well as in the lakes of Karelia.

The company owns 35 sites for salmon and rainbow trout farming, with total potential production volume of around 50,000 metric tons. Of them, 12 sites are in operation.

In addition, Inarctica operates Murmansk-based seafood processor Tri Ruchja.

The acquisition could become a promising business for Inarctica, but it will require significant investments, said Ilya Bereznyuk, managing partner at Agro & Food Communications.

"Obviously, Inarctica’s new products will be intended for the domestic market, where the consumption of seaweed is not developed and will require large marketing efforts, including financial investments," Bereznyuk told IntraFish.

"In addition, there are no advanced technologies for the extraction and processing of algae in Russia. Neither is there legislation that would regulate all the nuances of algae production. However, the desire of Inarctica to diversify its business is relevant to addressing sanctions-related challenges."

Russian Aquaculture's farmed salmon is now carried under the Inarctica brand.Photo: Russian Aquaculture

Mitigate impacts from sanctions

Russian aquaculture, like other domestic industries, is experiencing the effects of sanctions imposed on the country in the wake of its war in Ukraine.

Atlantic salmon and trout producers are facing a decline in the domestic demand for their products.

According to Russia’s association of aquaculture producers, Rosrybkhoz, rainbow trout farms in the Karelia region saw sales volumes fall by almost 14 percent in 2022. Inarctica sales fell 8 percent.

Russian industry watchers predict a drop in the average per capita seafood consumption by 5 to 7 percent in the coming years, with a further decline in the share of salmon in the demand structure.

In addition, the country’s fish farming companies have faced an acute lack of fish feed after major suppliers from Denmark, Norway and Finland cut business ties with them.

Earlier this month, Inarctica sold its three salmon smolt plants in Norway because of the regulatory restrictions imposed on Russian businesses in Norway.

Last year, the company acquired trout farming plant F-Traut with a production capacity of more than 500 metric tons per year and smolt facilities in the Kaluga region.

In addition, the company has launched a construction of a new smolt facility in the suburbs of Kaluga.

"Quite possible that Inarctica’s acquisition of the AVK could be another step in adapting to sanctions pressure," Bereznyuk said.

In 2021, Inarctica’s sales increased 80 percent to 27,900 metric tons, and revenue climbed 91 percent to RUB 15.9 billion (€231.1 million/$246.1 million).

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Published 16 February 2023, 06:00Updated 16 February 2023, 14:20
Mergers & AcquisitionsInarcticaRussian AquacultureRussiaAlgae