Yuri Kovalchuk is eager to sip "Massandra"

"Massandra" is being sold in Crimea.
Origin source
The oldest and largest wine-making enterprise in the region, once supplying wines to the table of Russian emperors, will go under the hammer with a starting price of 3.6 billion rubles. The amount, according to experts, is underestimated, and the Crimeans themselves fear that the quality of wine will suffer due to the desire of the new investor to reduce the production cost.

Legend price

The first talks about the possible privatization of the legendary Massandra winery appeared back in 2014 after the enterprise, having received a Russian residence permit and passed nationalization, was taken over by the presidential administration. Soon the entire top management was replaced, and instead of Nikolai Boyko, who led Massandra for more than 25 years and then accused of embezzlement, Yanina Pavlenko was appointed to the post of general director. Prior to that, she headed another large Crimean wine-making enterprise - "Novy Svet".

In 2019, Dmitry Medvedev, then the head of the Government of the Russian Federation, signed an order to transfer Massandra to republican ownership. Almost immediately after that, they started talking about selling it on the peninsula, and at the end of May 2020, the Crimean State Council decided to privatize the complex, which includes nine wineries with factories and 11 thousand hectares of land on the southern coast of Crimea from Foros to Sudak, of which 4 thousand hectares are planted with vineyards. An additional bonus for the future buyer will be a unique collection of vintage wines, including over a million bottles. In 1998 she was included in the Guinness Book of Records.

The book value of the company's fixed assets was estimated at 627.4 million rubles. Later, the value of 100 percent of the shares was recalculated, increasing to 3.575 billion rubles. The authorities insist that this is an estimate of the authorized capital and has nothing to do with the sale, but the planned amount of proceeds from the sale of the enterprise at the auction, which they intend to hold by the end of 2020, has already been announced - it is about 6 billion rubles.

The value of assets, according to some experts, is significantly underestimated. The newspaper "Promyshlennye Vedomosti" estimates only the vineyards and lands of "Massandra" at 530 billion rubles, and the collection of the company's wines in a million bottles, which contains, in particular, the rare sherry of 1775, at 50 billion rubles. Forbes provides more modest figures, but they are much higher than the price of shares named in Crimea - 12-15 billion rubles.

In the 2000s, experts of the Crimean Land Commission only estimated the lands of "Massandra" at 6.3 billion euros.

International wine expert, candidate of technical sciences, judge of wine competitions, author of the book “Crimean wines. New history ”Karina Sogoyan believes that the declared value of the assets has nothing to do with the estimated value of the enterprise, and, most likely, it will be revised by the auction.

- There is a BTI cost, but there is a real one. If these are only buildings and equipment, old vines, then maybe 3.6 billion rubles is a correct figure. Land has no price, because it is owned by the state. But I do not think that Massandra will be exhibited with such a starting price. In general, it is difficult to assess, the expert says.

Why sell "Massandra"

The authorities assure that the privatization of Massandra is a forced and vital step that will not only replenish the republic's budget, but also save the enterprise, which requires billions of rubles in investment.

When Crimea became part of Russia, the enterprise produced over 100 brands of wine and bottled about 10 million bottles a year, but it had an outdated material and technical base and vast areas of old vine. A significant part of the equipment was installed back in the 1960s – 1970s, and the wear of the tractor fleet was 98 percent.

In 2017, the company began modernization. To date, more than 300 units of agricultural and automotive equipment have been leased, overhaul has been carried out in several workshops, new equipment for 125 thousand decaliters of wine has been installed at the head plant in Yalta, and a complete re-equipment has been completed at the plant in Gurzuf. In 2019, 225 million rubles were spent on updating equipment and tank facilities.

The result is that last year Massandra produced a record 20 million bottles of wine. In the first half of 2020, growth continued: the company increased production by about 18.8 percent.

However, the millions invested by the state are only part of the required investments. According to the Deputy Minister of Agriculture of the Republic Sergey Petelin, Massandra needs at least another 10 billion rubles, which are not in the budget. The wear rate of the company's technological equipment exceeds 60 percent, and in the next 10 years it is necessary to re-plant two thirds of the vineyards on an area of ​​about 2.5 thousand hectares.

In Crimea, there is a debate about how the new owner will dispose of the land and the unique collection of wines. Of the 11 thousand hectares that Massandra currently owns, only 4 thousand hectares have been planted with "living" vineyards. For growing berries, according to Yanina Pavlenko, another 1.5 thousand hectares are suitable. But whether they will be planted is a question, since the company has been reporting over the last few years about an excess harvest, which “has nowhere to go”. The head of Crimea Sergey Aksyonov also doubted the expediency of using such an amount of land in 2015.

Officials assure that it will be difficult to build up land: firstly, it is in a long-term lease from the state, and secondly, it looks like a permitted use "for agricultural purposes", which means that there can be no capital buildings there. However, after the change of investor, residential buildings have already appeared on the territory of wine-making farms in Crimea.

After businessman Artyom Zuev bought the Zolotaya Balka agrofirm (a champagne factory and vineyards in one of the best terroirs of Crimea), it was decided to build a cottage club village ZB Village on land free from vineyards. At the same time, after the sale, the revenue of the enterprise itself increased significantly - from 756 million rubles to 1.3 billion rubles at the end of 2019.

The sale of assets is supported by the general director of Massandra Yanina Pavlenko. She notes that she does not know potential buyers and even doubts that there will be such because of the EU sanctions. But the names of the likely contenders for the purchase of the legend are already being heard - the structures of the business ombudsman Boris Titov (owned by Abrau-Dyurso) and the owner of the St. Petersburg bank Rossiya Yuri Kovalchuk. The organizations controlled by the bank have already acquired the Novy Svet Crimean sparkling wine factory three years ago.