Rainbow Mushrooms

How Alexander Udodov is tackling the challenges of agriculture in Russia head-on

Rainbow Mushrooms is leading the way in mushroom cultivation in Russia. Founded by Udodov, the company is filling the void created by the 2014 import bans, and contributing to the growth and dynamism of the local mushroom production market.

Until 2012 industrial cultivation of champignon mushrooms in Russia was stagnant. It produced less than 8% of the total volume of mushrooms. The import bans implemented on Russia in August 2014 led to an increase in local production of mushrooms, but until 2015 mushroom cultivation in the country remained poorly developed, mainly due to the low-cost imports.

During this period it was impossible for local entrepreneurs to compete freely. Today, however, local businesses are investing millions of dollars in the development of farms and the purchase of equipment for champignons cultivation. Industrial mushrooms cultivation in Russia is one of the few sectors in agriculture showing rapid growth. Over the past two years, mushroom cultivation in the country has doubled. By the end of 2017 it amounted to more than 25,000 tons, and by the end of 2018 it is expected to increase by another 50%. Projections show that by 2020 the country will completely cover its production demands.

Entrepreneur Alexander Udodov decided to meet the great growth prospects and drastically increasing demand for local produce by starting a mushroom growing and production company, Rainbow Mushrooms.

Taking care of agricultural shortages in Russia
When the United States, Canada, the European Union and other western countries imposed sanctions on Russia, the country responded with import bans. While this was taking a firm political stand, Russia’s citizens started struggling with extensive nationwide shortages. Local food producers experienced increased pressure resulting in inferior products. In response to these challenges, entrepreneurs and farmers began coming up with innovative ways to tackle the shortages. Farmers shifted their interests to include lands that have not been cultivated in a long time. Entrepreneurs like Alexander Udodov started looking at new business ventures in the field of import substitution.

Why the mushroom business?
Known as a property expert with a wide and varied investment portfolio, Alexander Udodov is a razor-sharp entrepreneur with a strong interest in developing companies. Around the same time as the import bans were implemented in Russia, the real estate market went into decline. Udodov started exploring options to not only diversify his investment portfolio, but also help tackle the challenges Russia is experiencing by starting an import substitution facility.

In 2015 he teamed up with Oleg Logvinov, a mushroom cultivation expert who knew the market, and had a team of industry specialists at his disposal. Udodov and Logvinov registered Rainbow Mushrooms in early 2015 and began investigating the market and designing a phased roll-out of the company. They built a state-of-the-art greenhouse with the aim of cultivating and mass producing champignon mushrooms, a much needed commodity in Russia. Udodov and Logvinov’s ultimate aim with this project is to cater to at least 50% of the needs for this product in Russia. Construction of the greenhouse started in 2016 and contracts for technological equipment were signed soon after.

Invest, construct, and grow
The current capacity of all mushroom farms in Russia is roughly 35,000 tons per year. Udodov decided to go bigger than his competitors. With 5 billion rubles invested in the project, and an in-house manure and soil production area, Rainbow Mushrooms soon reached production capacity of 11,000 tons per year and anticipates an increase to around 17,000 tons per year by the first quarter of 2019. This level of production will place Rainbow Mushrooms in the lead as one of the top champignon mushroom growing and production facilities in Russia covering around 20% of the market.

Mushroom cultivation is a high-tech industry
As the agricultural industry around the globe started drastically transforming with new technologies, the mushroom industry became one of the forerunners in technological innovation. The Dutch are the trailblazers in automated biological production of mushrooms, and this is the technology that is used by Rainbow Mushrooms. Progressive mushroom cultivation and production companies around the world also build in-house compost production facilities.

Rainbow Mushrooms’ facilities comprise of two buildings in close proximity. One is purpose-built for producing manure and houses bins, a mixing area, tunnels and a laboratory. There is also a loading and unloading zone for convenience. The other building houses cultivation chambers and a refrigerated warehouse. Great care is taken in maintaining a microclimate where the humidity, temperatures and carbon dioxide content is kept at ideal levels.

Alexander Udodov is backed by the state
As with most large-scale production facilities, there are regulations involved, and it is not always in the producer’s favour. "There has been an ongoing battle between mushroom production companies and the Russian state because of a legislative issue that prevents these companies from having the 0% rate on profit tax that fresh vegetable and fruit production companies enjoy. While producers of dried, frozen and canned mushrooms enjoy this benefit, those who produce fresh mushrooms are excluded. The Ministry of Agriculture is working on resolving the matter as soon as possible", they explain.

In the meantime, Rainbow Mushrooms has made some progress by signing an agreement with the Kursk region administration in which it was agreed that the company may avail itself of a three-year property tax privilege. "It is vital that the mushroom industry receives continuous state support."

Looking ahead
Rainbow Mushrooms and Alexander Udodov are optimistic about the future of local mushroom cultivation and production in Russia. "Through the company’s continued success in this venture, there is tremendous potential for future exports."


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